Monday, April 19, 2010

Sri Lanka - Tea Market update

By Cheranka Mendis

Volumes for this week tea auction to be held on 20 and 21 April are likely to be low due to the holiday season and the constant showers, sources claim.

Director of Forbes and Walker Tea Brokers (Pvt) Ltd. Dilan Polonwita yesterday stated that the upcoming sales would be very moderate, with approximately 5.7 to 5.9 million kilos of tea produced.

The last tea auction that was held on 5-6 April showed only 6.1 million kg of tea, one million less in volume than the previous tea auction. He stated that proper sales could only be reaped by mid May.

"With the rainy season in tow from end March, plucking was delayed by almost five to six days. This would be a cause of low level of production," Polonwita said. "However, from the month of May, productivity will be on the rise, quantities will grow and the end result of the month would show stability in the market."

Noting that Sri Lanka was now at a crucial juncture, Polonwita stated that when assessing data of the first quarter in tea production worldwide, year-on-year growth had increased, with countries such as India, Kenya and Sri Lanka catching up to close most deficits by end May 2010.

"Right now the market is substantially strong. Tea at the lower end is currently experiencing a fairly attractive process. However, by mid or end May, the prices will begin to differ between the lower end and better quality tea and the parity between the two will widen. From May onwards we are expecting the better quality tea to command a premium."

Up until end February, crop figures indicate a 21.2 per cent increase in tea production in comparison to the figures received this year and in 2009. Year-on-year gain was 51.9 million kilos in February 2010 whereas only 30.7 million kilos were produced in the same period the year before.

Sri Lanka experienced a 28.9 million kilo deficit in 2009 December when compared to December 2008. However, Sri Lanka will be able to surpass this figure by end 2010, Polonwita said.

"Figures indicate that up until now Sri Lanka has experienced a healthy crop figure. This would help the market realise its goals this year and would undoubtedly bring in more production in volumes by end this year."

He stated that worldwide deficit in tea production was some 50 to 60 million kilos in 2009 with major tea producer countries facing a slight drop in year-on-year production. However, a larger market is expected in 2010 as a healthy demand was encountered at the beginning of the year.

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