Slowing down of Gulf and CIS markets:

Tough times ahead for tea exports - CTTA Chairman

Ravi LADDUWAHETTY

Sri Lanka’s tea exports to Gulf and CIS markets will face tough times ahead, the century-year old Colombo Tea Traders’ Association (CTTA) cautioned yesterday.

This will also mean that low grown teas accounting for well over 70 per cent of the national production, exported to these markets will be affected, CTTA Chairman Avindra De Silva told Daily News Business yesterday.

He said some of the reasons attributed to the demand slowing down was due to a combination of reasons which revolve round the current global financial crisis leading to delayed payment and extended credit requirements, additional weeks stock covers build up in many tea supply chains, crash in most commodity prices having an effect on tea as well.

The depreciation of the Sri Lanka Rupee in key tea importing countries CIS, Iran, Turkey and other Middle East countries and the negative impact of the oil prices decline on these economies has also aggravated the problem, he said.

Negative sentiment resulting in lower prices and significantly high quantities of Low grown and Low Grown type leaf teas being withdrawn in the auctions held during the month of October which by the last auction had surpassed 60%.

Demand from the key importing countries slowing down resulting in average prices for Low Grown Tea falling over Rs.100/- per kg within a short period of four weeks leading to the unavailability of funds to settle the green leaf supplied by small holder farmers. The average price for Low grown tea at the Auction held during the last week of September being Rs. 333.30 whilst the average price recorded at the last sale in October being Rs.224.07, he said.

The industry has taken action to arrest the decline in auction prices and stimulate demand commencing with the first Auction in November. Some of these measures included.

Reduction of auction offerings of low grown types teas at the first auction in November by withdrawing 1.9 million kilos of re-printed tea which are the unsold tea from a previous auction, the sale of tea to be confined to transactions concluded during the sale of each catalogue by the brokers and Suspend the sale of low grown teas by private sale.

Meanwhile, Chairman of the Tea Exporters’ Association Jayantha Keragala said most of the tea exporters were of the view that the two markets have collapsed with the prices below the 2006 levels.

However, he said prices have marginally stabilised with the intervention of the Sri Lanka Tea Board but were yet lower than the early and mid 2008 prices.

Buyers are adopting a wait and see attitude as they want to see to what level the Colombo tea auction prices decline to, he said.