Monday, May 3, 2010

Sri Lanka Tea update - Low growns still highest tea producer

By Steve A. Morrell
Tea production has not hit the expected high cropping pattern. However, all is not lost yet. Scheduled rain already had positive impact on crop. Our enquiries gleaned from most elevations and planters confirmed crop was ‘coming in’. Positive indicators will emerge in about five to six weeks. Offerings at the Colombo auctions would have distinct impact that crop increases are unavoidable and cost of production would decrease.

Previous week too crop offered was about 5.5 million kilo. Our contacts in Maskeliya said low cropping patterns would adjust to the expected norm May this year, because tea manufactured now would be offered in Colombo end May, and when that happens exports could register increased revenue through enhanced production.

Although we did not contact Brokers last week expectations are that irrespective of increased crop, prevailing high prices could possibly see further increases.

Brokers said India would withdraw part of their production from their export destinations.

The Indian Rupee strengthened against the dollar, and these sources said India could consume their entire production. Further with the Indian Rupee gaining value at about 13.4 % Looking for over seas markets to sell their tea beverages was now not one for priority consideration.

Expectations are that with India withdrawing part of their tea crop from targeted end users, Sri Lanka could gain. This would need close observation. But who would observer the Indian phenomenon is a question that would need answers..

Additionally from where would leadership come to take advantage of the presented opportunity. are also questions that would need positive responses.

Meanwhile, Chinese exports to the US 2009, was ahead comparing 2008,at 12,135 metric tons Their market share to the US too increased; 2009 exports to the US was 21.53 % An increase from 2008. which was 11, 168 metric tons. According to the Asia Syaka weekly tea market report Chinese exports have increased to about 21 countries.

Countries in the Pacific archipelago, Europe, including The Netherlands, who are more coffee drinkers than tea, Japan, and Russia. To name some are now on the Chinese export market list.

We also need to accentuate health benefits of tea. Ceylon Tea Brokers Tea report said ‘High end Tea became dearer in European markets. These teas commanded prices at about 200 Sterling per kilo.

There were no outstanding selling marks that obtained outstanding prices last week. A few low grown parcels sold at about Rs.1000. per kilo but nothing sensational that deserved special mention.

Next week and first week May will not see heavy crops being harvested.

Last week just about 5.6 million kilos were on offer at the auctions. This week too at the 4th/5th May crop expected to go under the hammer will not exceed 6.3 million kilos.

However, there now seems to be some positive indicators emerging in the marketing sector.

Single garden marks have now formed niche markets in the US. For instance, a leading Broker who preferred anonymity said , it would not be surprising to find a leading Bogowantalawa selling in the US at premium prices. He said Ceylon Tea is still an unique tea and respected world wide in that context.

Reason for its second best demand is that promoters do not have sufficient funds to market their product to capture the US market.

At last week’s auction. Low grown leafy teas appreciated in value. However ex Estates offerings were lower following quality.

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