Tea pricing and operations
India
Our own production in India was down by 19% against a national reduction of 22%. This was a result of a complete lockdown of all tea gardens in the early weeks of the pandemic followed by cyclone Amphan and an unusually severe monsoon season. The smallholder sector was particularly impacted and our Bought Leaf production was down by 40%. Prices for CTC teas however improved significantly as domestic demand rose and supply fell. In the Dooars, prices were up 32% and in Assam 13%. In Darjeeling however, the loss of the lucrative first flush due to the lockdown resulted in average prices 12% down on the prior year.
Exports were well down on normal years as a result of strong local demand and the very high volumes emerging from Kenya.
Due to the many disruptions to the estate operations as a result of COVID, it was agreed by all parties that wage increases would be suspended for 2020. Interim wage increases for West Bengal has been agreed at 14.8% for 2021 and in Assam the wage increase is subject to a court process.
Packet tea sales volumes in India grew by 16% to 13.1mkg, reflecting our continued marketing efforts. The high price of purchased tea however impacted margins.
The replanting programme continued with 164Ha completed (2019: 239Ha) and a further 62Ha uprooted for replanting at a later date. In 2021 a total of 117Ha of replanting has been completed in the first quarter.
Bangladesh
Our crop in Bangladesh was down by 12% as a result of a very slow start to the season caused by dry hot weather, followed by torrential downpours from cyclone Amphan.
Average prices were down by 17% as tea consumption in Bangladesh relies heavily on the hot tea stalls, many of which were closed for a significant part of the year.
A wage award was agreed in the fourth quarter of 2020 with a 17.6% increase in the daily rate effective from 1 January 2019 with the possible introduction of improved productivity measures later in 2021.
The replanting and extension programme was scaled back in favour of infilling young tea areas which had lost a high number of plants as a result of a very dry start to the year. A total of 105Ha of tea was planted in the year (2019: 161Ha) of which 95Ha was replanting and 10Ha of new planting. A total of 3.8 million bushes were planted to infill existing fields. In the first quarter of 2021 a total of 57Ha of replanting has been completed.
Kenya
Production (including smallholder and managed client volumes) was up by 36% which broke all records and was 11% above our previous best year in 2016. 2021 production volumes in the first quarter are lower than last year, particularly in the West of Rift region. Pricing remains under pressure with average prices in quarter one of 2021 3% below the same period last year.
The greatest gains were seen in the smallholder sector where our 2020 production was up 51% whilst our own estate volumes were up 34%. This picture was reflected across Kenya where smallholder volumes were up 25% overall against 23% from the commercial plantation sector.
Such a huge supply of tea put significant pressure on prices and our average price was down 12% on last year. However, our factories performed well in relative terms, with prices 17% above the average commercial plantation sector auction pricing.
To help control the levels of production and prices, new tea regulations were proposed in early 2020 and resulted in the signing of the Tea Act 2020 in December. The new Act makes a number of significant changes to the way in which the tea auction system and export markets work in Kenya and we await to see how they will impact the industry.
There were no wage increases agreed with the unions during the year and discussions are ongoing.
We replanted a total of 47Ha in 2020 (2019: 51Ha) and uprooted a further 50Ha for replanting in 2021.
Malawi
Production (including smallholder volumes) was down on 2019 by 5% due to the drier conditions experienced, particularly in the second quarter. Our production levels for the first quarter of 2021 are 7% higher than last year.
With the very large volumes of tea available in Kenya, pricing has been under pressure, and sales through the auction were suspended in April 2020. On resumption of the auction, prices improved significantly in July and overall average prices for the year were in line with 2019 levels. Pricing in 2021 is slightly higher than the same period in 2020.
The newly elected Government of Malawi announced the implementation of a new minimum wage from the start of 2021. A wage increase reflecting this was subsequently agreed with the unions at 19% for 2021 alongside certain productivity improvements.
As a result of cash conservation measures, no replanting nor any new irrigation schemes were carried out during the year.