What Moves Tea Prices: Weather, Auctions and Currency

A volatile calm

Measured over decades, real tea prices have trended gently downward as production has grown. Measured over months, they are anything but calm: the FAO's work on international tea price volatility documents sharp swings driven by weather shocks, logistics disruptions and currency moves.

Understanding the difference between the trend and the noise is the first skill of tea buying.

Weather: the master variable

A drought in Kenya, a flood in Assam or a failed monsoon in Sri Lanka removes millions of kilograms from the market within weeks, and prices respond immediately at auction. Because tea is plucked continuously, weather hits supply fast — there are no strategic reserves of fresh leaf.

Conversely, a perfect growing season floods the auctions and softens prices, as recent high-rainfall months in Kenya have shown.

Currency and costs

Tea is traded in US dollars but produced in rupees, shillings and Sri Lankan rupees. A weakening producer currency effectively discounts that origin's tea on the world market, while freight rates and fuel costs add or subtract a layer on every kilogram shipped.

The FAO's composite tea price — a weighted average of the major auction centres — is the standard yardstick for watching these forces net out.

Managing the swings

Buyers manage volatility with forward cover, multi-origin sourcing and flexible blending. Our role as a trading house is to absorb part of that swing on our customers' behalf — holding stock, watching the auctions weekly, and advising on when to buy and when to wait.