'Tea market will remain strong'

By Waruna de Silva

The performance of the tea industry for 2012 concluded with mixed fortunes; with the rupee value for a kilogram of tea auctioned fetching a substantially higher value than 2011. However, based on the figures released to date, the Sri Lanka tea production volume is estimated to culminate with a lower figure in 2012 vis-à-vis 2011.

The Sri Lanka national sales average for 2012 stood at Rs. 391.46 compared to Rs. 359.68 (+31.78) obtained in 2011. This could be attributed mainly to the depreciation of the rupee in 2012. Therefore, the rupee turnover in 2012 for auctioned teas ended higher than 2011.

Though the rupee value for 2012 stood higher when converted to dollar terms, the sale average for the year 2011 was $ 3.26 as against $ 3.08 in 2012 (-0.18); which indicates that the 2012 dollar average ended lower compared to 2011.

Sri Lanka's tea production up to end November 2012 stood at 299.63 million kilos, compared to 301.82 million kilos for the corresponding period in 2011 (-2.19 million kilos).

The highest production decline was reported from the High Grown areas followed by the Medium Grown teas, while Low Growns showed an increase compared to 2011.

The total tea production for the year 2012 is estimated to be approximately two million kilos lower than that produced in 2011.

Based on Sri Lanka's tea exports statistics up to November 2012, the total exported including re-exports with imported tea recorded 289 million kilos, thereby showing a decrease of 3.33 million kilos compared to the corresponding period last year. With the increase in FOB price per kg from Rs 512.08 to Rs 562.91, cumulative export earnings amounted to Rs 162.68 b, showing a gain of Rs 12.98 b (+8.67 percent) as against the corresponding period last year.

The country-wise analysis of exports shows that CIS countries including Russia continue as the largest export destination followed by Iran and Syria.

A noteworthy feature is that Iran and Libya substantially increased their imports of Sri Lanka tea by 9.22 percent, 9.21 percent vis-à-vis 2011.

The uncertainty in the Middle Eastern sector, the tightening of sanctions by the European Union and the United States on Iran could create a challenging environment for the tea industry. However, the market is expected to remain strong in the first quarter in 2013.

While a lower tea production is usually witnessed during this time of the year, the western quality season and lower global tea production which was witnessed in 2012 will have a spill-over in the first quarter of 2013; thereby contributing towards a stronger market.

The writer is Executive Director at Ceylon Tea Brokers