Tea consumption will be costlier in Bangladesh as the price of the world's second most popular drink after water increased 31 percent in the local market in just two months because of lower production and higher demand.
Prices have gone up at both wholesale and retail levels after its rate rose significantly at the auction level since April this year, according to the National Brokers Limited.
Tea traders blamed rising local consumption and poor supply compared to the increasing demand of the popular drink for the upward trend of prices while tea producers held responsible the rise in production cost for the hike.
Beginning from April, 45 tea auctions are held in Bangladesh every year on a weekly basis. As of October 9, 23 auctions have taken place and the average price of tea has increased by Tk 76 a kg, or 35 percent.
The average price was Tk 216.52 a kg during the first weekly sale on April 24 and it soared to Tk 293 at the 23rd auction on October 9.
A lower production compared to rising demand has pushed up the price of tea, said Shantanu Biswas, chairman of the Tea Traders Association of Bangladesh (TTAB).
“Prices can increase when production does not rise in line with demand,” he said. The country produced nearly 79 million kg of tea in 2017, down from more than 85 million kg a year ago, Bangladesh Tea Board (BTB) data showed.
On the other hand, consumption surged to nearly 86 million kg in 2017, up from 81.64 million kg a year ago.
As of August this year, nearly 43 million kg of tea was produced, up by 0.8 million kg in the same period the previous year, the BTB data showed.
But the TTAB data showed that the country grew only 37 million kg of tea from January to August, down by 2.5 million kg in the same period a year ago.
Market insiders said big players are stockpiling tea fearing that there might not be expected production this year.
At Khatunganj, wholesalers have sold high quality loose tea at Tk 400 to Tk 410 a kg for the last three weeks, up from the previous rate of Tk 350 to Tk 360.
Inferior quality tea is being sold at Tk 320, which was Tk 270 previously.Retailers say local companies have increased prices of different brands of packaged tea by Tk 100 a kg in two phases in the last two months.
These companies have recently fixed the maximum retail price for their best quality half a kg packaged tea at Tk 210 to Tk 220, an increase of Tk 20.
Mohiuddin Mohi, a retailer at Karnaphuli CDA Market, was selling half a kg packet of Ispahani Mirzapore brand tea at Tk 210 against the previous price of Tk 185, Ceylon Gold brand at Tk 210 from Tk 190 earlier and Taaza (400-gram packet) at Tk 180 from Tk 160 previously.
M Shah Alam, senior vice-chairman of Bangladesh Tea Association, said the quality of tea offered at the recent auctions is better thanks to the good rainfall and hence, costlier. Considering a 20-percent labour wage hike and rising electricity and gas prices, tea producers need better prices if they want to do business, he said.
Biswas said it is necessary to ease imports for bringing equilibrium in the market and for tea prices to drop to reasonable levels. Tea imports began to plummet after a hike in tariff last fiscal year.
Around 1.1 million kg of tea was imported in 2017-18 against 6.4 million kg in the previous fiscal year, according to Chattogram Customs House.