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'Little hope' of restart of Darjeeling tea supplies, halted by strike

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There is little hope of a resumption of tea production this year in the prize Indian origin of Darjeeling, where picking has been halted by a general strike, Camellia said, counting the cost of weakened prices too.

The avocados-to-macademia nuts grower said that it "lost the entire second flush" of tea at its Darjeeling gardens thanks to a protest started in June by separatists demand the creation of Gorkhaland for Darjeeling's majority Nepali-speaking community.

Growers in Darjeeling, source of what is termed the "champagne of teas", harvest leaves over four flushes during the March-to-October season – the second one seen as the most important in production and quality terms.

"The general strike which started on June 12 has brought the province to a standstill," said Tom Franks, the Camellia chief executive.

'No prospect of early resolution'

And there "appears to be no prospect of an early resolution to the situation", Mr Franks said.

The government West Bengal, the state which includes Darjeeling, has called a meeting next week to resolve the crisis, although even a successful resolution would not bring an immediate return to normal tea output, given a backlog of weeding and pruning needing to be undertaken.

Mr Franks said that "it is now considered unlikely that there will be any more significant production in Darjeeling this year".

'Substantially lower prices'

While Darjeeling tea accounts for only a "relatively small" part of the group's output, and indeed is responsible for only about 6-7% of India's overall production, "the loss of this particularly high value component of the crop is disappointing," Mr Franks said.

Indeed, the void has increased the group's exposure to commodity tea markets which have been hit in India and Bangladesh by a succession of strong harvests overall.

In Bangladesh, "despite efforts made by the government to support the domestic market by increasing the duty on imported teas, average prices are down 27% compared with last year due to high volumes of carry forward stock in the market," Mr Franks said.

While Camellia – christened after the Latin name for the plant genus which includes the tea bush – sold tea from stocks in an effort to support its performance, helping revenues rise 24% to £123.6m in the January-to-June half, the weak prices undermined margins.

"Overall profitability which has been held back by substantially lower prices for tea in India and Bangladesh," said Malcolm Perkins, the group's chairman.

Group earnings from continuing operations for the half year tumbled by more than 70% to £1.9m.

'Encouraging African prices'

However, Mr Perkins noted a bright spot for prospects was buoyancy in tea prices in Kenya, where cold and dry weather curtailed national tea output in the first half of 2017 to 200,909 tonnes, down 19.4% year on year, according to official data.

"Tea prices in Africa… are encouraging," he said, pegging average values up 19% year on year.

This week's Mombasa auction saw prices of the best Kenyan tea grade, Best Broken Pekoe Ones, average $3.73 per kilogramme, up 5.4% week on week.

Prices bottomed out this year at $3.24 per kilogramme in March, before weather concerns took hold.

Camellia shares stood down 0.3% at 10,175p in late deals in London.

By Mike Verdin

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