Tea prices stabilise at auction

by Gamini Warushamana and Lalin Fernandopulle

Tea prices at this week’s auction stabilised at around Rs. 215 a kilogram compared to last week’s auction of Rs. 201 per kg, an increase of Rs. 15 per kg.

Director, Promotion, Sri Lanka Tea Board, Hasitha De Alwis said there was less unsold tea at this week’s auction which is an indication that prices will further stabilise though not at around Rs. 300 per kg.

“The deceleration trend in tea prices has been controlled and predictions are that prices will increase with the improvement in quality”, he said.

The tea industry anticipates a firmer market in the first quarter of 2009. The volume coming to the auctions will reduce and there will be an improvement in the quality high grown teas.

He said the quantity of manufacture of tea in India will decline during the first quarter of 2009 due to the winter in the North.

Manufacture of tea in Kenya will be low during the first quarter of next year due to the drought.

Tea prices at the auctions in October were the lowest at Rs. 200 per kg. Prices increased marginally at last week’s auction. The crisis in the tea industry deepened last month at the Colombo tea auction as prices fetched the lowest.

In the third week of November, 19% of the tea at the Colombo auction was unsold and the price dipped by 20 per cent and the average price fetched was Rs. 224 per kg. Market sources said that this dull situation will continue till mid January.

The decline in prices in December as a result of the over supply and in addition the low demand in major markets remained unchanged.

Managing Director, Euro-Scan Exports (Pvt) Ltd., Anselm Perera said over 70 per cent of the tea produced were scrap when prices were good during the past two years.

Producers did not focus on manufacturing orthodox teas. “Despite the drop in orders, quality teas fetch a high price. Orders have dropped due to the world recession”, he said.

Head of Hayleys Plantations, Kavi Seneviratne said though tea prices stabilised at last week’s auction it was yet not a good market situation. The positive factor was that there were less unsold teas at the auction.

“The market for tea will not improve due to the global crisis. Factories cannot pay higher prices to green leaf suppliers if prices at the auctions are low. A green leaf supplier is paid around Rs. 32 per kg which is not adequate”, Seneviratne said. Green tea leaf prices dropped sharply and some plantation companies have reduced production. The last auction for the year will be held tomorrow and the following day. The auction will resume on January 5 and 6.