Bad news for tea industry as auction prices slide

by Steve A. Morrell

Brokers reported last week that the drop in tea prices was bad news for the industry, which was doing reasonably well in recent months.

Forbes and Walker said in their weekly tea market report that after ten months of buoyant prices, last week’s auction prices declined by Rs. 20 to 30 per kilo.

The depreciation of the rupee against the dollar, now at Rs. 202.04, was also partly instrumental for the price decline. The anticipated crop boost after Easter and the Sinhala and Tamil New Year holidays was attributed to the dip in auction prices as leaf quality is considered poor due to the pause in plucking due to the intervening holidays, brokers said.

The Forbes and Walker report further said teas from Western slopes were badly affected prices slumping by as much as Rs. 30 to 50 per kilo.

John Keells Holdings (JKH) Tea Market report said Iran, Russia and CIS countries were active in Colombo last week, with Turkey and Libya also chipping in as buyers at the Colombo auctions but in limited quantities.

Asia Siyaka (AS) weekly Tea report also confirmed that Colombo was influenced by the vicissitudes of the dollar. The currency depreciation in Turkey, Syria, and some Middle East destinations also added to price declines in Colombo. Indicated markets reduced their buying as they were unable to settle their bills because of currency fluctuations.

Market conditions were unstable with buyers adopting restraint rather than being enthusiastic over the anticipated improvement in the market, the report further said.

In addition, the decline in the US market end 2020, although the US was not considered a major buyer, influenced a telling quotient for demand for Ceylon Tea.

Ceylon Tea exports to the US from January to November 2020 worked out to 5.4 MT, which placed Sri Lanka in third position behind Argentina (34.1 MT) and India (12 MT).

Ceylon tea exports to the UK, which was our major export destination before plantations were nationalized and British interests withdrew, is now barely 1% of the British market. UK is now dominated by imports from Kenya, which exports around 62.9 MT annually (56.70%).

The auctioned quantity last week was 5.6 million kilos. Production by end March 2021 was 71. 4 million kilos. In the corresponding period last year, (2020), production was 65.3 million kilos, with a relative marginal crop increase.

Nuwara Eliya BOP/BOPF was in demand, and price appreciation was encouraging. Prices were maintained at an escalated level of Rs, 30 to Rs, 40 per kilo, according to the report.

Low grown Tippy teas were also in demand although quantities were limited. They fetched prices ranging from Rs. 2,100 to 2,300 per kilo.