Active buying from Japan, CIS and European Union countries

Bartleet Produce Marketing Tea Surveillance report upto August 6

The quantity of tea arriving at the Colombo auction last week decreased to 6.805mkg from 7.244mkg traded in the previous week's sale. Meanwhile, the Ex-estate crops too showed a decrease from 0.823mkg to 0.782mkg.

Market segments

In the Ex-estate segment, better westerns and the Uva/Udapussellavas showed an upward trend. Uvas were getting brighter whilst the market seemed to pick up anything true to grade due to fear of erratic weather affecting future crops.

Meanwhile, a significant draw-back has been noted on the Nuwara Eliya lighter liquoring teas where the market appeared to slow-down due to low interest from buyers, particularly from Japan.

The reason given by industrial sources is that erratic weather has adversely affected the normal expected quality of the crops and thereby hurt the buying patterns.

Furthermore, it was emphasised that if this trend is not taken seriously, the Nuwara Eliya tea, regarded as the Champaign tea of Sri Lanka will face a similar fate as the Uda Pussellawas a decade ago. This week, the UK was mainly picking up the Dimbullas whilst Japan, CIS and the European continent showed some active buying.

In the Tippy market segment fair demand was witnessed where Iran and Dubai were moderate. Meanwhile CIS was very selective in their buying patterns.

In the Leafy grade segment, delayed winter buying coupled with the Ramadan festival ahead brought down the leafy prices drastically this week. Congestions in some Middle East ports too was a vital factor for the lower prices. Almost all the grades lost the prices except select best OP and OPA grades.

Strong / holders

Increased tea prices have helped the Tea Smallholder's second quarter net profit to increase by 32 per cent up to Rs. 51 million as compared to last year. Meanwhile, revenue shot up 24 percent to Rs. 616 million over the same period. The revenue was boosted from the southern planting districts where low grown teas in this region have been enjoying high prices due to the increased demand from the oil exporting countries of Russia and the Middle East. These countries with bustling economic growth have continued to develop a favourable taste for the island's low grown teas. According to the Tea Smallholder Factories, they have received a boost to their income during the June quarter due to the inquiries from these high disposable income regions.

Smallholders, located mainly in the southern districts, accounted for more than half of the island's tea crop.

Green Tea

Hapugastenne Plantations, Imperial Teas and Tea Tang have embarked on a venture valued at between Rs. 50-100 million to manufacture green teas for the export market. According to sources, the teas will be marketed at a price of US$5 per kg. Already inquiries are coming in from USA, Russia and the CIS countries which are increasingly looking at green tea as a health drink according to sources.

Due to the high cost of production, the venture will be looking at niche export markets around the globe. The main stakeholder will be Hapugastenne, where one of its factories, fitted to manufacture black tea, will be converted to make green tea.

Supply factors

Kenya's production for the first-half of the year declined by 21 per cent from 198mkg registered in the same period last year to 157mkg according to the Tea Board of Kenya. According to the Managing Director of the KTD, the first quarter of the year, which recorded a decline of 34 per cent owing to the effects of dry weather condition was the key factor in the short-fall.

Production during the second quarter recorded a decline of only three per cent due to reduced amounts of rainfall experienced in most parts of the country.

During the six month period, the tea exports from Kenya had only reached to 39, market destinations worldwide as compared to 42 destinations reached during last year.

Egypt imported around 43mkg or 24 percent, UK imported 32mkg; Pakistan imported 27mkg, Sudan with 13mkg and UAE imported 8mkg.

Illicit trade

Pakistan is annually losing US$50 to US$ 75 million due to tea being smuggled. Pakistan's tea market is estimated at 170mkg and some 40mkg of the tea is said to be smuggled into the country through Afghanistan under the garb of Afghan Transit Trade (ATT). Meanwhile, the official import of tea stood at 50.5 million tons, a fall of almost ten per cent as compared to the last year's 55.5 million tons.

The smuggling has existed for almost sixty years and it has been a very well managed business. As a measure to stabilize the prices, the PTA and tea blenders were demanding the government to abolish taxes on tea import.

Plantation stocks

With reference to the weekly surveillance of the 18 plantation stocks, 16 reported a gain whilst one was static and the other was lower: Kahawatte, Udapussellawa and Watawala reported a gain of 23, 15 and 10 per cent respectively, week on week.