Tea prices in Bangladesh fell about 2 percent at the weekly auction on Tuesday due to higher supplies of inferior grade leaf, but strong demand for quality leaf capped a steeper decline. Bangladeshi tea fetched an average of 174.46 taka ($2.50) per kg at the auction, compared with 178.36 taka in the previous sale. The volume of poor grade leaf was higher and that contributed to declines in both prices and sales volume, a senior official at National Brokers said.

There was however strong demand for quality tea which helped to limit any further drop in prices, the official added. About 41.4 percent of the 3.28 million kg offered at the sole auction centre in Chittagong was unsold. In the previous auction, about 34 percent of the 3 million kg on offer remained unsold. Bangladesh's tea production in 2016 is expected to have risen to a record 80 million kg from 66 million a year earlier, Commerce Minister Tofail Ahmed said earlier this month, output that may be big enough to make imports unnecessary.

Copyright Reuters, 2016