Conducive weather:

Tea market will regain momentum

By Lalin FERNANDOPULLE

There is a light at the end of the tunnel for the tea industry with the onset of rains which is expected to revive production which dropped drastically due to the prolonged drought.

Brokers said many regions are experiencing sunny mornings and evening showers, the weather is seen as being conducive for growing tea.

“Tea production will improve with the regular showers which are vital to enhance quality and demand at the Colombo auctions”, a broker said.

Lanka Commodity Brokers Ltd. (LCBL) sources said that by midddle of this month cropping will commence and increased volumes will be catalogued for auctions conducted throughout December.

“Larger volumes will continue to be on offer during the early part of the new year as well”, sources said.

The tea industry is optimistic that the yield would improve and the market would regain momentum with the conducive weather prevailing in the country.

LCBL Director/CEO Sarath Sirisena said 2011 has been a bad year for the tea producer who has been burdened with additional costs making it difficult to make ends meet.

The dry weather from May to September had a drastic impact on the crop grown on High and Medium elevations which account for a substantial quantity of tea production in the country.

According to brokers tea production volumes this year are turning out to be disappointing due to the poor weather during the past few months.

The country recorded a crop of 22.9 MKGS in September this year which is 2.6 MKGS lower than the crop harvested in the corresponding month last year.

The highest drop was recorded from the High and Medium elevations with the former declining by 1.2 MKGS and the latter by 1.1 MKGS while the Lower Grown sector showed a marginal decline of 282, 799 Kgs.

According to Lanka Commodity Brokers Limited (LCBL) a crop of 245.1 MKGS was recorded from January to September this year as against 247.2 MKGS recorded during the corresponding period last year which reflects a negative variance of 2.1 MKGS. During the period under review the High Grown sector recorded a gain of 0.6 MKGS while Medium Grown production recorded a sharp drop of 3.9 MKGS. Low Grown production has shown a gain of 1.2 MKGS. “Hot on the heels of the wage increase granted to the plantation workers the drought added to the woes causing a huge loss to the industry”, Sirisena said.

Spiralling costs have sent the cost of production to unprecedented heights resulting in huge negative variances between COP and the Gross Sales Average (GSA). Brokers said traditional buyers of Ceylon Tea are facing problems due to the turmoil in the Middle East which has severely impacted on tea prices and demand. Sanctions against Iran, a key market for Sri Lankan Low grown teas has had a serious setback on the market.

“Libya, a strong contender at our auctions has been conspicuous by its absence for the past few months”, brokers said.

The recession in the US and certain parts of Europe is adding to our woes and these markets which paid for good Ceylon Tea earlier may be forced to look at cheaper alternative markets from other origins.

HVA Group Chairman, Rohan Fernando said that tea exports to the Middle East have picked up and there is prospects of a quick recovery of the crisis hit markets. “The demand for tea will never subside as it is a refreshing health beverage which is an integral part of daily life. The prestige of Pure Ceylon Tea has been maintained and it has paid well for the industry”, Fernando said.

According to tea research data, from January to October this year 261.8 MKGS of tea were sold at Rs. 360.80 per Kg while on average during the corresponding period last year 262.28 MKGS were sold at Rs. 367. 81 per Kg.

Sri Lanka Tea Board sources said tea production will stabilise this month with the improvement in the weather in the plantation regions.

He said tea exports to the Middle East are continuing despite the crisis in certain countries. The CIS and Middle East are major markets for Ceylon Tea.

Sri Lanka is the fourth largest producer of tea while China, India and Kenya are the leading producers in the world. These four countries account for around 75 percent of the world’s tea production.

Sri Lanka held the number one slot for tea production but in 2007 Kenya took over due to the increase in cultivated land and improved production skills.

Tea export earnings crossed the one billion dollar mark in 2009 for the first time becoming the second largest export revenue for the country. Around one million people are directly employed in the tea sector.