PLANTATIONS

Labour unions tamper with supply chain in lieu of demands:

‘Orthodox teas poised for positive future growth’

Exporters voice concern over interruptions to supply consistency:

Ravi LADDUWAHETTY

Sri Lanka, the largest global manufacturer of orthodox teas is in for good times with the demand and the buying power of countries purchasing Ceylon Tea seen to be increasing Tea Exporters Association chairman - designate Niraj De Mel told Daily News Business yesterday.

De Mel, also Managing Director of Van Rees Ceylon Limited who will be taking over the reins of the Association after its Annual General Meeting scheduled for August 19, said that the wet weather patterns prevalent in the tea growing areas along with the requisite sunshine, would be conducive for production growth in the months ahead and the year should end as another good cropping year.

Sri Lankan tea pluckers

Tea is enjoying good times in exports, with March producing 23 percent growth, bringing the cumulative first quarter increase to 17 percent. Total exports in March was Rs. 14.8 billion, up by 23 percent or Rs. 2.8 billion from Rs. 12 billion over the corresponding period a year ago.

In the first quarter, exports rose by 17 percent to Rs. 41 billion. Tea in bags and tea in packets together with green tea have shown a significant gain year on year during the first quarter. Volume wise exports in March were 27.6 million kilograms showing a gain of 3.6 million kilograms vis-a-vis 24.04 million kilograms of 2010. Cumulative exports for the period January -March 2011 totaling 77.4 million kilograms show a gain of 7.2 million kilograms vis-a-vis 70.2 million kilograms for 2010.

Tea output in March jumped to 33.2 million kilograms against 21.1 million kilograms in the same month last year. Output in the first quarter edged up 3 percent to 76.24 million kg from 74.02 million in the same period last year.

De Mel said that the industry has seen the fluctuating fortunes on the supply and demand side with heavy rains, floods, and landslides from October 2010 to January 2011 resulting in restricted offerings from January 2011 till February 2011.

“Due to the low auction offerings at the beginning of the year, prices started rising, as the exporters had to meet the contracted orders. As always the case with the rainy weather followed by adequate sunlight, healthy crops began to flush, leading to good quantities being offered from mid March.” he said.

The correction of tea prices began from mid March. However, the deterrent to the growth of the industry is the crisis in the Middle East and due to the problems in some of the main importing countries of Ceylon Tea such as Libya, Syria and Iran, a negative impact on the tea prices is evident since April.

De Mel also noted that the paradoxes of the industry were that on one side there is the healthy offerings while on the other side is the uncertainty and instability of demand. However, the main importers of Ceylon Tea - Russia and Iraq were helping towards absorption of the large offerings despite the decline of tea prices.

However, in contrast to this backdrop, one of the latest concerns of the industry was the stalemate of the ongoing wage negotiations between the Regional Plantation Companies and the labour trade unions.

One of the points of concern for the exporters right now, is that the hampering of deliveries from upcountry tea estates which commenced from last week will prevent them from meeting shipment timelines. A quick settlement to the on going negotiations will be most welcome from the point of view of the exporters to maintain Sri Lanka’s image as a reliable supplier of tea to the consumers.

Sri Lanka exports of bulk teas has been around 65 percent while the value added teas, which are teas in porcelain packs, jars, reed packs, tea in tea bags et al, has accounted for the remaining 35 percent.

“We do a lot of branded cartons of five and ten kilograms predominantly to Syria and Iran and going by the basis of the classification adopted by the Sri Lanka Tea Board that the value added component is ten kilograms and below, then the value added teas account for approx 55 percent and the bulk 45 percent, he said.

Another challenge that Sri Lanka faced was that Russia which accounted for a bulk of the exports and also in the value added form, imposed high taxes to protect its own packing industry.

So, the value added teas imported from Sri Lanka to this destination have been reduced and in turn, what is imported into Russia has been in bulk form, for the Russians to do the value addition, thus the real Sri Lankan value addition is affected.

Sri Lanka exports up to 55-60 million kilograms of tea to Russia annually of which 8-12 million kilos are to Ukraine.

John Keells Tea Market Report:

Better demand for BOP, BOPF teas

Last week’s Ex Estate sale comprising of 1.2 mkgs which is a drop of around 0.5 mkgs from the last sale met with better demand with prices for both BOP and BOPF appreciating.

Western High Grown BOPs appreciated Rs 10 to Rs 15 with a few better invoices gaining even more.

The Best BOPFs on offer were firm to a few Rupees dearer, whilst the Below Best gained Rs 10 to Rs 15 and more at times.

The plainer types too gained, but to a lesser extent. Except for one or two Nuwara Eliya BOPs that appreciated, others were neglected and tended lower.

BOPFs too were neglected with a fair weight remaining unsold although the plainer types were absorbed at slightly easier price levels in comparison to last week. Uva BOP and BOPFs appreciated by Rs 15 on average.

Low Grown CTC PF1s were firm to irregular, whilst High and Medium invoices gained by Rs 5 to Rs 10 on average.

The few brokens on offer appreciated with a few invoices gaining substantially.

There were good demand for the 3.9 mkgs of Low Growns that were on offer this week. However, Select Best OP1s shed Rs 10 to Rs 15, whilst BOP1s declined Rs 20 to Rs 40. OP/OPAs advanced Rs 10 to Rs 20. Select Best Pekoes too advanced Rs 10 to Rs 20. In the Small Leaf category, Select Best BOPs gained Rs 5 to Rs 10. Select Best FBOP and FBOPF1s gained Rs 5 to Rs 10. Better Tippy varieties met with good demand but tended irregular at times.

Western Teas

Select Best BOPs gained Rs 15 to Rs 20 and more following special inquiry, other good invoices advanced Rs 10 to Rs 15 and more, Below Best sorts gained Rs 10 to Rs 15 on average, plainer varieties advanced Rs 15 to Rs 20.

Select Best BOPFs advanced Rs 5 to Rs 10, other good invoices were firm to marginally dearer, Below Best sorts were firm to Rs 5 dearer, plainer varieties gained Rs 5 to Rs 10 and more.

Medium BOPs advanced Rs 10 to Rs 15, BOPFs were firm.

Nuwara Eliya

Teas A few bright BOPs sold well on special inquiry, most others were firm to easier. BOPFs were firm to Rs.5 easier.

Uva Teas

BOP and BOPFs were firm to Rs 10 dearer. Uda Pussellawa BOPs advanced Rs 10 to Rs 15, whilst BOPFs gained Rs 20 and more for the clean leafy sorts.

CTC Teas

Low Grown PF1s advanced Rs 10 on average, BP1s gained Rs 10 to Rs 15. High and Medium PF1s advanced Rs 10 and more at times, BP1s gained Rs 15 to Rs 20 and more.

Low Growns

Good demand. Select Best OP1s eased Rs 10 to Rs 15, however Best and Below Best types were irregularly dearer by a similar margin, poor types were firm to Rs 3 to Rs 5 lower. Select Best BOP1s shed Rs 20 to Rs 40, Best types were firm Rs 5 to Rs 10 lower at times, Below Best and poor sorts were irregularly lower by a similar margin. Select Best OP and OPAs appreciated Rs 20 to Rs 40, balance too gained Rs 10 on average. Select Best Pekoes advanced Rs 30 to Rs 40, Best and Below Best types were dearer by Rs 5 to Rs 10, flaky types were fully firm.

Select Best Pekoe1s appreciated Rs 10 to Rs 15, Best and Below Best types gained Rs 5 to Rs 10, poor types were steady.

Select Best BOPs advanced Rs 5 to Rs 10, Best types were firm, Below Best types gained Rs.5 to Rs 10, poorer sorts were firm.

Select Best BOPSP maintained last levels. Best types moved up Rs 5 to Rs 10, Below Best types shed Rs 10, poorer sorts were lower by Rs 5 to Rs 10.

Select Best FBOPs advanced Rs 5 to Rs 10, Best types maintained last levels, Below Best types eased Rs 5 to Rs 10, poorer sorts shed by a similar margin.

Select Best FBOPF1s maintained last levels, Best types were firm, Below Best types shed Rs 5 to Rs 10, poorer sorts were firm.

Select Best Tippy varieties met with good demand but tended irregular at times, Best types advanced above last, Below Best types were irregular, poorer sorts declined Rs 5 to Rs 10.

Off Grades

Select Best liquoring Fngs1s appreciated by Rs 5 to Rs 10, whilst the Below Best and poorer sorts advanced Rs 10 to Rs.15. Select Best BMs gained Rs 10 to Rs 15, whilst the Below Best and poorer sorts appreciated by Rs 10 to Rs 15.

All BPs were dearer by Rs 5. All Low Grown Fngs were firm to dearer by Rs 5.Select Best BOP1As along with the Best appreciated Rs 10 to Rs 20, whilst Below Best and others too appreciated by a similar margin with good demand.

Dust

Select Best Dust1s maintained last levels, whilst the Best and Below Best types appreciated Rs 5 to Rs 10, poorer sorts declined by a similar margin. Clean secondaries were firm, whilst the balance gained Rs 5 to Rs 10. Best Low Grown Dust and Dust1s were firm, whilst balance appreciated Rs 10 to Rs 15.

Best green tea from FLCH

A subsidiary company of Free Lanka Capital Holdings PLC (FLCH) - Melfort Green Teas (Pvt) Ltd, one of the leading manufacturers of green tea in Sri Lanka, has made its mark around the globe as the producers of the finest quality purest green tea.

With green tea being widely accepted throughout the globe as a health drink with no less than 25 health benefits, Melfort Green Tea has successfully established itself in the niche market looking for a high quality product.

“At FLCH we not only manufacture excellent Black Tea, but also have successfully ventured into Green Tea,” a company spokesman said.

The green tea is produced at two plants in Pussellawa. One is in Melfort Estate which has a production capacity of 600 metric tons per annum using the pan process. The other is in Sanquhar Estate here around 400 metric tons are produced using the steam process. Incidentally, Sanquhar Estate is regarded as the oldest tea plantation in Sri Lanka dating back to the 19th century.

Melfort plant is accredited with HACCP food safety management systems and ISO 22000 quality standard. It is also the only green tea plant in the country which produces green tea with estate-fresh green leaves thereby guaranteeing freshness and quality at the highest levels.

Describing the Melfort product as “a unique blend”, Melfort Green Teas Deputy Managing Director/CEO Tiran Peiris said that it is due to exceptional climatic conditions and the exclusive rich fertile soil in the estate. “Moreover, the fully computerized processing mechanism ensures that the aroma, the flavour and the natural goodness of the green tea are retained,” he said.

He said that another reason for the high quality is due to the use of China Jat tea bushes that are meticulously cared for in the entire process of plucking, handling and processing.

The premium grade Melfort tea was ranked as the overall winner at the specialty tea of the Year Contest in 2008 at the World Tea Expo in USA. Another brand - Sanquar Fannings reached the finals at the same Expo. The latter is similar to Japanese green tea fannings.

Ceylon Tea Brokers records impressive performance

Sanjeevi JAYASURIYA

Ceylon Tea Brokers PLC has recorded an impressive performance for the year ended March 31, 2011 and is looking forward to continue and sustain its upward trend.

The company’s turnover for the year was Rs 269 million compared to 214 million recorded last year.

The profit for the period was Rs 34 million up from Rs 22 million last year.

“The fourth quarter marked a greater end to a very successful year with over 50 percent growth on net profit on year on year basis. Our strong performance could be attributed to a strong teamwork and continuous investments into IT related services,” Ceylon Tea Brokers PLC Director Waruna de Silva told Daily News Business.

The measures taken to ensure customer retention and the rapid growth in new business were also contributory factors, he said.

“We have the advantage of being the only stand alone listed tea brokering company in the country at present.

‘We consider the year 2010 and also 2011 as years of consolidation. The acquisition of the company by Capital Alliance Group in 2005 saw the company growing at a rapid pace on year on year basis,” he said.

The country’s tea industry could grow due to continued global demand for value added tea and the health aspect related to tea will have a positive impact on the long run.

With the increased trend in the local consumption the tea industry will forge ahead bringing in more business opportunities for companies to capture the market, he said.

“We look forward to continue the current growth momentum for the year ahead through our investments and that continues to be the case as evident in our strong business performance,” de Silva said.

Hayleys Agriculture to unify nine companies under single entity

After over five decades of evolution and growth into business entities that individually play nationally significant roles in Sri Lanka’s agriculture sector, nine Hayleys Group companies involved in agriculture have been unified under a single corporate brand ‘Hayleys Agriculture.’

The new entity will harness synergies for greater impact and potential and will lead to an enhancement of the preeminent role that Hayleys has hitherto played in the local economy.

‘Hayleys Agriculture’ will henceforth be a visual depiction as well as a verbal representation of the full spectrum of products and services encompassed by Hayleys Agriculture Holdings Ltd., a single platform and management structure within the Hayleys Group for businesses with cumulative sales of more than Rs nine billion in 2010.

Unveiled at a gala convention in Colombo for top customers in both B2B and B2C segments as well as other stakeholders, the new holding company harmonizes the management, processes, supply chain, agricultural research, extension and outgrower models of Hayleys companies in crop protection, crop production, agriculture equipment, environmental science, fertilizer, animal health and agricultural exports.

“The concept is based on the universal axiom that there is greater strength in unity,” said the Hayleys Group Director in charge of the conglomerate’s agriculture sector companies Rizvi Zaheed. “We are bringing together synergies in a way that maximizes the strengths of the individual companies and makes the cumulative result greater than the total of the parts,” he said.

He said the amalgamation of common services and integration of the extensive value propositions represented by the companies under the Hayleys Agriculture umbrella would substantially enhance their impact on the sector and drive growth while saving costs.

The nine companies represented by Hayleys Agriculture are Hayleys Agro Products Ltd., Hayleys Agro Fertilisers Ltd., Haychem Ltd., Agro Technica Ltd., Hayleys Agro Biotech Ltd., Sunfrost Ltd., HJS Condiments Ltd., Hayleys Agro Farms Ltd., and Quality Seed Co. Ltd. Together they embody the Hayleys Group’s enduring legacy of involvement in the agronomy of Sri Lanka, the lives of farmers and a commercial engagement in virtually every stage of the lifecycle of myriad agricultural products and services. A strong linkage with the global supply chain whereby primary fruit and vegetable products from the hinterland of Sri Lanka enter global markets as ready-to-consume products gives Hayleys Agriculture a truly unique position.

“The unification of these companies under Hayleys Agriculture presents a single total solutions provider to multiple stakeholders - the farmers, the consumers and the policymakers,” Zaheed said.