Tea surveillance

MARKET STRONG: The Colombo Auction saw a quantity of 4.84Mkg being traded at last weeks sale of which 0.56Mkg were ex-estate teas. Overall, the market held strong as prices across the board maintained last weeks levels or gained further.

Of the international buyers, Iran and Iraq were particularly active in the low grown market, with Iran in particular snapping up on the Tippy invoices. Buyers from Turkey and Syria remained active in Pekoe buying which pushed prices up further.

Consequently, the low grown market maintained and at times grew stronger, week-on-week.

Select Western drew interest from Europe and the CIS and price levels held on to last weeks patters. As a break from the norm, demand for high grow, high quality Dimbulla teas was spurred by air mail inquires from North America.

With the current high prices misrepresenting the real position of the tea industry, officials have been quick to point out that it is definitely not 'boom-time ' in the sector.

Moreover, crop production has declined further in the absence of proper rain-fall across the island. The wilting of bushes has started in some estates with many factories now in a state of temporary closure. With the current weather pattern, estates will need to take additional steps to safeguard the quality of future tea output.

In the wider picture, the Plantation Minister has requested regional plantation companies to popularize green tea cultivation with a view to meeting a growing international demand. Sri Lanka currently only produces a small quantity of green tea in a limited number of areas and they are said to have a good international demand.

A number of recent studies have pointed to the health benefits of green tea and that has added to its popularity in Japan, EU and elsewhere.

However, the future of green tea exports is likely to hinge on the product getting H.A.C.C.P. certification that is likely to be made compulsory soon. With an estimated 680 tea factories in operation, 30 per cent are claimed to be in need of appropriate improvements in machinery. The Ministry has pledged to assist in this regard.

However, talk is all too cheap for some players in the sector. In a recent interview a Tea Smallhoders Development Authority (TSHDA) official said that the State was withholding funds that are due to them for replanting.

A Rs.60 million shortfall reported last year was only received in 2007. Such delays for many smallholders, who cultivate less than 50 acres, are preventing them from replanting. Many have to operate with cash flow constraints. Similar complaints were aired recently by the CTTA calling for greater transparency on how the industry cess funds are managed whilst the rubber sector also cried foul.

Whilst disagreements continue in Sri Lanka, the Indian Plantations Minister has announced plans to expand its crops by 50 per cent over the next five years under a plan to spend Indian rupees 48 billion on rejuvenating and replanting. Much of the investment will focus on further strengthening the Assam state. Plans for Inter-cropping on the plantations with spice cultivation are also under consideration.

Main Source: Research Intelligence Unit (2007)