Monday, April 26, 2010
Sri Lanka - Good time ahead for all the Tea Plantation companies
At long last tea seems to have shed subjugated image relegated to low level performance and now enroute to better crop harvests this year. January returns indicated by the Sri Lanka Tea Board, dated February 19, said crop returns end January recorded nearly 10 million kilos more than last year. Best performers were low growns with crop increases of about 7 million kilos. Higher elevation results were not that good at some 800,000 kilo increase. Medium elevation crop increases too were not impressive, but all told tea seems to have recovered.
About 400,000 small holders purportedly are propping the industry, and support extended by the Ministry of Plantation Industries to this sector through the fertilizer subsidy has had positive impact . .
The worst is yet to come though. February is usually a dry weather month, and this year too irrespective of the global warming ‘whipping boy’, prevailing dry weather will affect production, but perhaps to lesser degree than last year. This too is normal.
Sri Lanka’s prime tea land is at higher elevation and performance levels at upper reaches of Central Hills will need some attention.
The growing trend for green tea production augurs well for selected market choices. So too Cut Twist and Curl, or the familiar metaphor CTC tea. Correlating to such production increases, Brokers have also reported increases in value added exports. These and other plus phenomena are good indicators that tea crop and production are on recovery indicators.
Reports from Central hills are that February crop intakes may be low, but with expected conventional rain mid March, April showers would further augment crop increases. Expectations are that ‘things are looking up’.
Ceylon Tea Brokers through their weekly tea Market report said although export volumes dropped last year better prices sustained good market conditions and regressive conditions did not quite register alarming trends that drastically affected the industry.
Export details were that CIS countries were our biggest importers, followed by UAE and Syria, Iran, Turkey, Jordan, and Kuwait who were also in the upper level importer bracket for Ceylon Tea.
Malawi still remains the plus producer worldwide, Sri Lanka and Kenya were worst affected last year.
Last week about 7.1 million kilos were auctioned. This week too the 7 million mark would not be surpassed. 7.6 million kilos would be on offer this week.
Western quality, late in arrival could have some salutary repercussions on the market, but there was not that degree of excitement this year, because quality weather prevailed only in pockets in some Western holdings.
Market indicators effective January this year were good. January ended on an average price realization of Rs.381. per kilo. Last year the same period was Rs 280. the difference this year being about Rs.100 on the plus side.
The industry has not seen these price increases ever. The question is would there be profits to be made.
Tea factory owners have indicated enthusiastic ‘yes’ responses. We also spoke to two Regional Plantation Company sources who said their profits too would ‘not be too bad’.
All told tea is now in advancing mode .