Lanka's tea prices perched artificially high

by Elmo Leonard

Sri Lanka has lost some of its Middle Eastern tea markets to Vietnam for the low grown type of teas which these Arab countries favour, consequent to a drop in supply, the aftermath of the island's 36-day strike, ended December last.

This is just one facet of the chaotic situation, the Sri Lanka tea industry faces. It is brought about by the recurring strikes, called by politicians to satisfy their voters, unconcerned of the repercussions the industry has to face, top men in the Colombo tea trade said.

The Cost of Production (COP) on some high and medium altitude tea plantations (estates) is Rs. 600 per kilogram (rupees 109 to a US dollar) while Colombo tea auction prices for teas coming from these estates range from Rs. 300 to Rs. 500 per kilo.

Rs. 300 to Rs. 500 per kilo can be attributed to the Western or Dimbulla/Dikoya tea plantations, currently enjoying its quality tea season, due to the prevailing conditions of warm dry days, cold nights with desiccating winds, usual for this time of the year.

But, the crop is down by 16 to 18 percent and possibly more, due to pruning of the tea bushes, necessitated by overgrowth during the December strike.

Western plantation teas would have otherwise sold at around Rs. 250 to Rs. 350 per kilo, a multinational source, all of whom declined to be named said.

The prevailing high prices at the Colombo tea auctions are artificial, driven by the unusually low factor of supply. Such a situation could be dangerous for the country of origin, for buyers could turn to other destinations.

Affixed to the catastrophe, an unusual drought prevails in the Eastern plantations of Bandarawela and Badulla. Here too, teas fetch the artificial Rs. 250 to Rs. 350 per kilo, which would otherwise, at this time of year have fetched Rs. 150 to Rs. 200 per kilo.

"But, of what avail, although drought is an act of God, when crop figures are so low," a broker said. Nuwara Eliya, or the plantations sandwiched between the Western and Eastern estates, last week fetched Rs. 400 to Rs. 500 per kilo.

Low grown teas last week commanded Rs. 280 to Rs. 380 per kilo, whereas if the unfathomable strike of last year did not take place, the trade thinks that low growns would have fetched Rs. 210 to 280 at this time of the year.

Sri Lanka cannot put up with unintelligible strikes, for wage increases, while the owners get no benefit of added labour input, at a time when competition from the world of tea growers is increasing. Vietnam produces low grown teas types, what the Middle Eastern buyers prefer.

If the decades-long stranglehold minority political parties hold over the tea plantation owners, continues, Sri Lanka will lose other markets which buy other types of teas Ceylon teas.

The long-term repercussion could be the industry loosing its viability and being forced to close down.

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