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Monday, 12 April 2010

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John Keells Weekly Tea Report:

Buyers quiet with approaching holidays

Towards the end of last week's auction for High Grown teas, the buyers went unusually quiet, and not only did prices tumble but also, the absence of bids made it difficult for the brokers to dispose of the teas.

This week too a similar pattern emerged, but on a less dramatic scale. In the days of yore such wide price disparities were uncommon, as buyers spread their buying, and competed strongly throughout the sale, to protect market share.

The weaker tone in recent sales means that averages have fallen despite declining crops following the dry spell, and margins for the producers have reduced.

It can be argued that prices have fallen from high levels and this can be considered a market correction for teas at the lower end of the spectrum.

In fact, all elevation averages for the first quarter reflect record levels that are much higher than the first quarter of any previous year. Despite the decline, current prices are significantly higher than the price levels of the corresponding sale of last year.

Worthy of note is that the cost of production for the producer is now significantly higher.

Apart from a market correction, other reasons can be adduced for the fall in prices. Improved inventory levels and higher costs for the exporter.

Freight rates which dropped and reached attractive levels last year, have increased sharply in recent months, to be above the rates which existed before the fall. Packing material costs have increased by around 30/40 percent.

The Rupee has been quite strong in recent weeks. Finally, retail prices have not increased to match the high prices that existed.

Against the dark skies, there were some shining stars. The few Western High Grown seasonal teas on offer at the Ex Estate sale fetched tall prices with yet another all time record price secured, this time for a FBOP grade from Diyagama West Estate at Rs 710. The garden is owned by Agrapatane Plantations Ltd.

The sale was handled by brokers John Keells PLC.

Following the record breaking effort at last weeks sale Uda Radella BOP continued its strong showing with yet another tall price of Rs 720 for a BOP Grade which was the Top price at today's sale.

The quantity of 2.7 mkgs of Low Growns that were on offer this week is the lowest on record since July 28, 2009 where quantity on offer was below the 3 mkg mark. The next two auctions i.e. April 21 and 27, 2010 the offer quantity declines further with the latter sale having only 2.5 mkgs.

The demand at this week Low Grown Auction continued quite attractive. In the Leafy category, the bold Pekoes met with a dearer market, however, some BOP1/OP1s were marginally lower. OPAs maintained last levels.

In the Small Leaf category, prices for most grades declined several rupees, this could be attributed to the selective demand from the Iranian buyers due to their New Year festival where most trading houses remain closed.

Some rain has been experienced in the Low Grown Planting Districts which would help the production levels from decreasing further.

Most factories in the low country will close for the traditional New Year on April 9 and resume operations around April 19.

Libya continued quite strong, whilst Dubai, Jordon, Iraq, Syria, Saudi Arabia and other Middle Eastern countries lent useful support.

Western Teas

Select Best BOPs declined substantially following quality, other good invoices shed Rs 15/- to Rs 20/- and more, Below Best sorts were Rs 10/-to Rs 15/- easier on average, poor varieties eased Rs 10/- and more. Select Best BOPFs shed Rs 20/- to Rs 30/-, other good invoices were Rs 20/- easier, Below Best and plainer varieties declined Rs 10/- to Rs 15/- and more as the sale progressed. Select Best Medium BOPs were firm, others declined Rs 10/- to Rs 15/- and more. Medium BOPFs declined Rs 10/- on average.

Nuwara Eliya Teas

Brighter BOPs were Rs 10/- to Rs 15/- easier, others were substantially lower. BOPFs shed Rs 10/- to Rs 15/- on average.

Uva Teas

Coloury BOPs were firm to marginally easier, others shed Rs 10/- to Rs 15/- and more. Coloury BOPFs declined Rs 5/- to Rs 10/-, others were Rs 10/- to Rs 15/- easier. Udapussellawa BOPs were firm to dearer, whilst the BOPFs shed Rs 10/- on average.

CTC Teas

Select Best Low Grown PF1s were firm, others declined Rs 20/- to Rs 30/-. BP1s were firm to Rs 5/- easier. High and Medium PF1s declined Rs 5/- to Rs 10/-. BP1s gained Rs 10/- to Rs 15/- on average.

Low Growns

Fair demand. Select Best OP1s maintained last levels, Best types were irregularly lower by Rs 10/- to Rs 15/-, Below Best and poor sorts too tended lower by Rs 5/- to Rs 10/-.

Select Best along with the Best BOP1s declined Rs 10/- to Rs 15/- and more at times, however the Below Best types were dearer by Rs 5/- to Rs 10/-, poor types were irregularly dearer by Rs 3/- to Rs 5/-. Select Best OPs were firm to Rs 5/- to Rs 10- dearer at times, the balance were marginally easier.

Select Best OPAs were firm to Rs 5/- to Rs 10/- dearer, however the Balance were irregularly lower by Rs 5/- to Rs 10/- and more towards the close. Select Best Pekoes shed Rs 10/- to Rs 15/- following quality, however the bold Pekoe varieties advanced sharply by Rs 10/- to Rs 20/- and more at times, Below Best and poor sorts were irregularly dearer by Rs 5/- to Rs 10/-. Select Best Pekoes were substantially lower to last, Best Pekoes eased Rs 5/- to Rs 10/-, however the Below Best and poor sorts gained Rs 5/- to Rs 10/-.

Select Best and Best BOP SP. shed Rs 10/- to Rs 15/-, Below Best and poorer sorts too eased by a similar margin. Select Best and Best BOPs declined Rs 10/- to Rs 15/-, Below Best and poorer types were lower by Rs 5/- to Rs 10/-.

Select Best and Best FBOPs were initially lower by Rs 10/- to Rs 15/-, but met with slightly better demand towards the latter part and were lower by Rs 5/- to Rs 10/- on closing levels, Below Best types declined Rs 10/-, poorer sorts were barely steady. Select Best and Best FBOPF1s shed Rs 10/- to Rs 15/-, Below Best types and poorer sorts shed Rs 5/- to Rs 10/-.

The Best Tippy varieties met with good demand and maintained last levels, however the Below Best and poorer types were lower by Rs 5/- to Rs 10/-.

Off Grades

Select Best liquoring Fngs1s were lower by Rs 10/-, Below Best and the Best depreciated by Rs 20/- and more at times, poorer sorts were lower by Rs 10/- to Rs 15/-. All BPs sold at firm levels. Select Best and Best BMs appreciated by Rs 5/-,whilst the Below Best and Best sold at last levels, poorer sorts were dearer by Rs 10/-. All Low Grown Fngs were irregularly dearer by Rs 5/-. Select Best and Best BOP1As were lower to last by Rs 10/ - to Rs 15/-, whilst the Below Best and others too were easier by Rs 15/- to Rs 20/-.

Dust

Improved demand. Select Best Dust1s were firm, whilst the others in the Best and Below Best category advanced Rs 10/- to Rs 15/-. Poorer sorts were irregularly dearer. Clean Secondaries gained Rs 10/- to Rs 15/-, whilst the Below Best types gained Rs 5/- to Rs 10/-, poorer sorts eased Rs 5/- to Rs 10/-. Best Low Grown Dust/Dust1s advanced Rs 15/- to Rs 20/-, whilst the Below Best types gained Rs 10/- to Rs 15/-, poorer sorts maintained last levels.

 

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