Bartleets weekly Tea Surveillance up to August 21:

Slack demand due to seasonal factors

The world renowned Colombo Tea Auction witnessed a quantity of 5.91Mkg of tea traded this week of which the Ex-estate teas accounted for 0.8Mkg. However, seasonal factors in a large number of buying countries led to a slacking of demand in most segments of the market.

In the Leafy grades, Pekoe prices came down drastically and were difficult to sell throughout much of the sale. Leafy teas like OP’s, OPA’s and OP1’s were on the whole lower with the exception of a few selected OP1’s.

The coming of the holy month of Ramadan and the consequent day-time fasting has clearly led to less activity from the Middle East and CIS buyers.

A similar pattern emerged in the Tippy market as Dubai, the CIS and Iran were all moderately active as compared with last week. Exporters to Saudi Arabai were selective during the sale.

Bright weather was experienced in both the Western districts as well as Nuwara Eliya where cold nights prevailed all week long. Uva and Udapussellawa regions experienced similar weather with windy conditions. Overcast condition prevailed in the low-grown areas with slight winds. All planting districts reported a fall in crop intake.

At the macro economy level, tea continues to retain its pole position in the agricultural export sector despite a fall in its share from 70 per cent to 68 per cent in 2006.

Last year’s tea exports in US dollar terms rose by 8.8 per cent whilst agricultural exports recorded a growth of 12 per cent. Some 881 million dollars were generated from tea exports and this is set to increase this year.

Meanwhile, the latest trade data indicated a rise in total export earning of 6.8 per cent to US$675 million for the month of June 2007. Despite lower volumes, higher tea prices resulted in a rise in tea export earnings for the month.

Overall imports for the month of May 2007 posted a record-breaking slide from $940 million in 2006 to $832 million as imports of petroleum, fertilizer, textile materials and other consumer goods all declined.

The quest for greater export penetration has led to a three day official visit by Sri Lanka’s Foreign Minister and his trade delegation to Libya.

The North African country has been experiencing resurgence in its economic environment and ways of fostering better trade and cooperation were discussed during the meetings.

Libya’s Trade and Investment Minister said that a level playing field would be formed for Sri Lankan imports as enjoyed by African countries and this is expected to boost the levels of tea exports to Libya.

However, urgent issues relating to the Colombo Port need to be addressed as the northern entrance to the port is currently closed in order to ward-off possible attacks by the LTTE.

The resulting congestion, long waiting times and rising costs have been further exacerbated by the unveiling of a new fuel surcharge ranging from $25-$50 per TEU that will be applied to all loaded and empty boxed entering and departing from the islands shores.

The Central Bank announced this week that plans are afoot to establish an agricultural commodities futures market as part of a strategy to curb inflation. With inflation currently galloping at some 17.2 per cent, close to the 1994 highs, the move is seen as an attempt to stabilise the domestic food prices.