Mixed fortunes for Tea Industry in 2012

Waruna de Silva - Executive Director, Ceylon Tea Brokers

The performance of the Tea Industry for the year 2012 concluded with mixed fortunes; with the rupee value obtained for a kilogram of tea auctioned obtaining a substantially higher value than 2011. However, based on the figures released to date, the Sri Lanka tea production volume is estimated to culminate with a lower figure in 2012 vis-à-vis 2011.

The Sri Lanka national sale average for 2012 stood at Rs.391.46 per kg vis-à-vis Rs.359.68 per kg (+31.78) obtained in 2011. This could be attributed mainly to the depreciation of the rupee in 2012. Therefore, the rupee turn-over in 2012 for auctioned teas ended up higher than the year 2011.

Though the rupee value for the year 2012 stood higher when converted to USD terms, the sale average for the year 2011 was USD 3.26 as against USD 3.08 in 2012 (-0.18); which indicates that the 2012 dollar average ended lower in comparison to 2011.

The Sri Lanka Tea Production up to end November 2012 stood at 299.63 Mn kgs, in comparison to 301.82 Mn kgs for the same period in 2011 (-2.19 Mn kgs). The highest production decline was reported from the High Grown areas followed by the Medium Grown teas, while Low Growns showed an increase in comparison to 2011. The total Sri Lanka Tea Production for the year 2012 is estimated to be approximately 2 Mn kgs lower than the total tea production in 2011.

Based on the Sri Lanka Tea Exports statistics up to November 2012, the total Tea exported including re-exports with imported tea recorded 289 Mn kgs; thereby showing a decrease of 3.33 Mn kgs compared to the same period last year. With the increase in FOB price per kg from LKR 512.08 to LKR 562.91, cumulative export earnings amounted to LKR 162.68 Bn; showing a gain of LKR 12.98Bn (+8.67%) as against the same period last year.

The country-wise analysis of exports shows that CIS countries including Russia continues as the largest export destination from Sri Lanka followed by Iran and Syria. A noteworthy feature is Iran and Libya substantially increasing their imports of Sri Lanka tea by 9.22%, 9.21% respectively vis-à-vis 2011.

The uncertainty in the Middle Eastern sector, the tightening of sanctions by the European Union and the United States on Iran could create a challenging environment for the Ceylon tea industry.

However, the market is expected to remain strong in the first quarter in 2013.

While a lower tea production is usually witnessed during this period of the year, the western quality season and lower Global tea production which was witnessed in 2012 will have a spill-over in the first quarter of 2013; thereby contributing towards a stronger market.