John Keells Tea Market Report:

Rise in cost of production

Sri Lanka’s Cost of Production particularly in the Regional Plantation Companies has escalated after the recent wage increase to plantation workers.

The spiralling cost of production on account of lower production, coupled with higher wages is a cause of much concern to plantation managers.

It comes at a time when auction prices too are on the decline. Most plantations expect the cost of production to leap by around Rs 40 per kg or more on the wage increase alone which will make it difficult for plantations to stay viable.

Those plantations which have been performing well over the years will see an erosion in their profit margins.

Sri Lanka has one of the highest production cost compared to other major tea producing countries on account of the very low crop and labour productivity.

Sri Lanka’s land productivity, in the region of 1,430 kgs yield per hectare is substantially lower in comparison to India and Kenya which have recorded yields in excess of 2,200 kgs per hectare.

In pluckers productivity too Sri Lanka with a 13.5 kgs lags far behind India with 24 kgs. and Kenya 48 kgs.

For the Sri Lankan tea industry to be competitive, raising productivity and consequently lowering the cost of production and intensifying value addition, would be the way forward. These are a few of the major challengers facing the industry today.

CTC teas from all elevations had a poor run during the month with Low Grown CTC teas in particular recording a Rs 24.90 (6.16 percent) negative variance. Western High Grown averages which recorded a positive variance of Rs 4.87 for the month and Rs 5.26 todate, is mainly instrumental in holding Sri Lankan averages on par with last year.

Last week’s Ex Estate market comprising 1.4 kgs met with lower demand. Prices for most Western High Grown BOPs declined substantially, whilst a large weight remained unsold from the Below Best and plainer categories.

The Best BOPFs on offer declined Rs 10 to Rs 15 and more. However the Below Best types commenced firm to dearer and appreciated as the sale progressed. The plainer types however, were barely steady.

There was little or no improvement witnessed for most Nuwara Eliya type of teas, whilst Uva’s fluctuated following quality with most invoices tending lower. CTC’s too were of a irregular market and tended firm to irregularly lower.

The 3.4 Mkg of Low Grown teas on offer at this week’s auction, met with improved demand for most varieties. In the Leafy category, select best BOP1/OP1s met with good demand and prices advanced a few rupees above last. Better OP/OPAs too advanced sharply, whilst Pekoe/Pekoe1s moved up Rs 5 to Rs 10.

Teas at the bottom end of the market for the leafy varieties however, were lower by Rs 10. In the Small Leaf category, there was improved demand for the better FBOP/FF1s and also the better Tippy sorts.
There was excellent demand from Russia, CIS, Syria, Jordon, Saudi Arabia, Dubai and other Middle Eastern countries.

Western Teas

Select Best BOPs declined 10 to 15, other good invoices shed 10 and more, Below Best and plainer varieties eased 10 to 15 on average with a fair volume remaining unsold. Select Best BOPFs declined 5 to 10 following quality, other good BOPFs tended lower, Below Best sorts were firm and advanced as the sale progressed, plainer varieties were firm to easier. Medium BOPs were irregular following quality. BOPFs declined 10 to 15.

Nuwara EliyaTeas

Teas A few bright BOPs declined 5 to 10, others were irregular. BOPFs were firm to easier.

Uva Teas

BOPs were firm to 10 easier. Coloury BOPFs advanced 15 to 20, others were irregularly lower. Uda Pussellawa BOPs were 5 lower. BOPFs gained 10 to 15 and more following quality.

CTC Teas

Select Best Low Grown PF1s declined 20 to 25, others were 10 dearer. BP1s were firm. High & Medium PF1s gained 10. BP1s were 5 to 10 dearer.

Low Growns

Improved demand. Select Best OP1s were irregularly dearer by 5 to 10, Best types were mainly firm, Below Best and poor sorts eased 5 to 10 and more at times following quality. Select Best BOP1s were steady, Best types were 5 to 10 dearer, Below Best and poor sorts tended lower by a similar margin. Select Best OPs appreciated 20 to 40, Best types too gained 5 to 10.

Select Best FBOPs maintained last levels, Best and Below Best types gained 5 to 8, poorer types too gained 5. Select Best FBOPF1s were firm, Best and Below Best types gained 5 to 8, poorer sorts gained 5. Select Best Tippy varieties met with improved demand and advanced a few rupees above last, Below Best and poorer sorts were irregularly lower to last.

Off Grades

Select Best licquoring Fngs1s depreciated by 10 to 15, whilst the Below Best and poorer sorts eased by 10. Select Best and Best BMs appreciated 10 and more at times, whilst the poorer sorts were irregularly lower by 5. All Low Grown Fngs shed 20 and more at times. All BPs sold at firm levels. Select Best BOP1As were firm on last levels and appreciated as the sale progressed, Best and Below Best varieties however, shed 10 on average, poorer sorts eased 10 to 15 and more at times.

Dust

Select Best Dust1s were firm, a few Dust1s in the Best category appreciated 10 to 15, whilst the balance declined by a similar margin. All secondary Dust eased 15 to 20. Best Low Grown Dust/Dust1s were firm, whilst the balance shed 10 to 15.
source - www.dailynews.lk