Tea News

Bartleets weekly Tea Surveillance Report upto September 19:

Ramadan, winter season increases demand

A QUANTITY of 5.627 mkg was traded at the Colombo Auction this week down by 0.248 mkg when compared to 5.875 mkg last week. Some 0.731 mkg of this week’s sale were Ex-estate teas.

On the Ex-estate Local Tea bag packers were very active on the CIS market whilst Japan and UK were quite selectively buying.

Furthermore the catalogue quantities of sale no’s 38 and 39 shows a significant overall drop of 7.90 per cent. Comparatively High and Mediums reporting 12.76 per cent, ex estate 10.26 per cent and the low growns reporting a 5.70 per cent respectively.

Meanwhile due to the lower quantities the buying was hard anticipating the unions’s action to have a minimum monthly wage for the estate workers which will in return make things quite tough.

The leafy market showed a significant improvement, in almost all the grades with Pekoes in particular gaining by up to Rs.15 per kilo. Heavy winter buying noted for the OP’s and OPA’s with their prices also jumping by similar margins. Future sales are expected to witness continued upward pressure, especially from the CIS.

The Tippy market also moved up this week with strong demand all-round especially for the flowery grades. Once again Iran played an active role whilst the CIS and Dubai also showed sustained interest. Moderate demand was also encountered from Saudi Arabia and Turkey.

One explanation for the good market this week could be the fact the quantities for the coming sales are down significantly, spurring supply side-worries on the part of exporters.

Another factor is that current shipments are heading out to meet the post-Ramadan period of festivities when consumption will experience a hike. The dawning of the winter buying season would also add similar demand pressures.

The ominous signs of further disruption were on the horizon this week as the Ceylon Workers Congress threatened to withdraw from a negotiated wage settlement that was reached only last December.

Citing the cost of living hike as the main reason, the unions also said that the government had failed to keep its promises on resolving workers issues.

Many plantation firms have been struggling to maintain profit margins due to the impact of the first wage hike last year and subsequent drought.

New regulations aimed at improving the quality of the island’s green leaves area set to be introduced under a Plantations Ministry initiative.

Currently, the quality of young tea leaves is below expectations and some 30 per cent are destroyed during transportation. New methods that will cut the damage rate to 10 per cent are also expected to follow.

Meanwhile, the Sri Lanka’s High Commission in Ottawa has claimed that Sri Lankan tea exports to Canada have the potential to increase ten per cent from the current level of US$4 million.

The statements were made on the eve of the ‘Canadian Tea and Coffee Shop” exhibition. Some twenty Canadian importers of Sri Lankan tea were present on the occasion where both the Sri Lanka Tea Board and Organic Lanka Incorporates were running a stall.

Furthermore, it has come to light that Canada does not impose additional taxes for pre-packed or value added teas.

Of the 18 Plantation stocks monitored six have gained, eight were down and for remained static.

War threatens South Asian tea

TEA PRODUCERS from the world’s leading exporters - India and Sri Lanka - have warned a war with Iraq will seriously affect their businesses.

“Already the Indian tea industry is in a bad shape and the situation could take a turn for the worse if there is a war in Iraq,” said D.M. Jain, president of the Indian Tea Association (ITA).

His comments come after Sri Lanka’s tea factory owners issued a similar assessment.

Tea has seen “a drop in prices and less demand mainly in the low grown sector due to the impending war in Iraq,” Sarath Samaraweera, chairman of the Private Tea Factory Owners Association said last week.

Both countries record substantial sales in the Middle East, which is also a key shipping route to their European markets.

A war in Iraq could literally destroy one of India’s biggest growth markets. In the first 10 months of 2002, India exported 36.3 million kilogrammes of tea to Iraq under the “food-for-oil” programme, triple the amount sold the previous year.

India’s recession-hit tea industry - which produced 854 million kilogrammes and exported 179.79 million kg in 2001 - has recorded four successive years of weak global and domestic prices.

Prices for some teas have fallen more than 30% to below their production cost.

The Sri Lankan government plans to subsidise its tea factories and small growers because of the low prices, the Daily News newspaper reported, quoting Plantation Industries Minister Lakshman Kiriella.

Auction prices have fallen in the world’s biggest exporter - which sold 287 million kgs in 2002 - because traders fear shipments could be stranded at sea if there is a war. Sri Lanka’s “low-grown” teas, which are favoured by the Middle Eastern market, have dropped between 10 and 15% in price over the last month, and large quantities reportedly remain unsold.

About 40% of Sri Lanka’s tea goes to the Middle East and 6.1% to Iraq last year.

The Commonwealth of Independent States - the former Soviet bloc - is Sri Lanka’s largest market, much of which tranships through the Middle East.

Tea is one of the Sri Lanka’s main foreign currency earner.
(BBC World Editon.)