Tea Broking is a vast subject but you are going to get the short version!
Tea Auctions provide a barometer of price based on supply and demand.
Tea Broking has stood the test of time and the primary method of sale was through auction of the commodity.
Did you know that Tea Auctions were held by the East India Company in London from as early as 1680! It became Public Auctions in 1836 and moved to Mincing Lane. It moved location once more in the 80’s and continued till 1998 when it closed down altogether as most of the teas produced were being sold in the country of origin. It was a cheaper option and the Producers got their money a lot quicker.
J. Thomas & Co started the Calcutta Tea Auctions as early as 1861. In 1961 the then Prime Minister of India, Jawaharlal Nehru attended the Centenary Auction at Nilhat House. Tea was one of the major export earners at that period and attracted the attention of the head of the Government of India.
Tea is a perishable commodity and cannot be stored indefinitely without suffering a loss in quality. With an annual production exceeding 1200 million kilograms there is no other way to sell the commodity without the well-oiled machine that Tea Auctions have become. Sure, there other ways to sell tea, largely through Private Treaty (Sale) but here again the price is always decided on the basis of a plus or minus the Auction price. Plus the Auction price – for an assured quantity of superior quality. Minus the Auction price – due to savings in transport, warehousing, interest and so on.
This is what the JT website has to say in support of Tea Auctions:
Advantages to Producers
- • Only forum which enables large volumes of tea to be sold in a short time through competition, a transparent price barometer
- • Exposure to all potential domestic and international markets
- • Facilitates quality control and benchmarking
In my earlier narratives I had touched on the warehousing, cataloguing, and sampling of Tea offered for sale to the Buyers. These are all part of the Auction process!
The Selling Broker has tasted each sample and determined an indicative price (valuation) for each lot of tea. It is important to explain that this valuation is not arbitrary but based on the sample from the same tea garden the week before. There could be an improvement in quality or a deterioration due to seasonal considerations or fault in the manufacturing process (which is not common). This valuation is not sacrosanct but forms a basis to start the bidding process in the Auction Room.
Auctions are being held simultaneously at other centres in India and overseas. The price bands established at one centre would have a bearing on prices at another centre provided the type and quality of tea are similar.
I have showed a couple of pictures here and a YouTube link of a Tea Auction in Mombasa. It’s a 5 hour long video but if you want to see how the bidding process takes place I would encourage you to watch for about 10 minutes.
The auction process is a bit like Sotheby’s where Art is sold through auction. One painting is often sold for thousands of dollars. Here Tea worth thousands of dollars are sold but it’s a longer process!