The Hindu Business Line : Price surge cheers up plantation sector

However, Mr M.P. Cherian, Chairman of the Association of Planters of Kerala (APK), warned that several problems – the Free Trade Agreement with ASEAN countries, absence of productivity-linked wages and rules impeding diversification of the product basket – continue to haunt the industry.

Tea

Regarding the tea sector, Mr Cherian said that the prices had remained at remunerative levels in 2008, which was later sustained in the first seven months of 2009.

While the prices in the South remained at Rs 66.27 a kg in 2008, it has surged to Rs 80.45 a kg during the first seven months of 2009. Decline in the Kenyan crop during 2008 was one of the principal causes for the price surge.

This was also accompanied with positive signs of demand growth during the last couple of years as domestic consumption of tea grew at 3.5 per cent per annum.

The market fundamental for 2009 looks positive and prices are expected to sustain in the medium term.

Coffee

The recovery in coffee prices witnessed during 2007-08 has been sustained in 2008-09 as well. Meanwhile, world coffee production for 2008-09 is estimated at 127.3 million bags compared to 118.1 million bags in the previous year, registering an increase of 7.8 per cent.

The crop year 2009-10 has just begun in a few of the producing countries, and in Brazil, initial estimates place the production at 39.1 million bags compared to 45.9 million bags in the previous years. Consequently the world production for 2009-10 has been is estimated 127 million bags. Though a global deficit has been predicted for the current year, the price rise could not be sustained due to the global economic recession, APK said.

For rubber growers, 2008 was a mixed bag. After fetching Rs 142 a kg in mid-2008, prices declined due to the economic recession. The demand also dropped following a slowdown in the tyre manufacturing industry. A sharp fall in crude oil prices has also resulted in availability of synthetic rubber at cheaper rates making it more viable for the tyre industry. An important factor that could determine the outlook is how the economies of the US and Europe cope with the economic recession and also how China and India sustain its growth in the days ahead, Mr Cherian pointed out.

Spices

Spice crops – cardamom and pepper – have both maintained their prices. The average price of cardamom during 2009 was Rs 537, while the price of pepper is currently at Rs 136 per kg. The cardamom sector has not been significantly affected in the economic crisis as its dependence on the export market is minimal. Moreover, the lower production in Guatemala and the increase in exports from India would also keep the demand supply in balance.

On the flip side Mr Cherian pointed to the global economic crisis which is increasingly forcing the developed countries to embrace protectionist measure by way of increasing tariffs, imposing import restrictions and reinstating subsidies.

Despite the high commodity prices, several factors like deficit monsoon , depressed demand and high cost of production have also been plaguing Indian plantations.