Wednesday, October 12, 2011

Tea: dark clouds recede but doubts remain

By Steve A. Morrell

At last week’s Tea auctions buyers, Brokers, and Producers, were all in good spirits because price gains were substantial after the recent pall of gloom overtook the industry stemming from the Middle East crisis.

Director, Eastern Brokers, Mohan Jacobs speaking to The Island Financial review confirmed sale results were ‘quite good’ last week, but shippers had to wait to receive their payments. "Trading in that context had not returned to normal. This was worrisome but the monies will come. But then shippers will have to wait, which was not conducive to normalized trading," he said.

However there was another aspect to reversal of industry results.

Ceylon Tea Brokers PLC., in their market report indicated quick analysis on sale to the Russian Federation resulted in decreasing volumes exported to that destination.

In 2001, Ceylon Tea exported to the Russian Federation was about 54 million which eventually peaked in 2006, at 72 million kilos. Since then their absorption of Ceylon Tea decreased steadily till 2010 results showed about 54 million kilos.

However more worrying was that Tea exports from Viet Nam, and Kenya rose steadily, to record increases in 2010, to 19.1 million; and Kenya exports stood at 15 million in 2008. Increases from analysis conducted by Ceylon Tea Brokers. Viet nam from 4.1 million in 2001, increased exports to CIS/Russia to 20 million in 2009.. Kenya’s exports in 2001, was a mere 810 thousand, kilos.

The demand for Ceylon Tea had decidedly decreased. It was now important to see how these analytical results will impact officialdom, namely the Tea Board, or the Ministry to rectify existing anomalies and boost exports.

Meanwhile there were trade concerns that weather patterns were topsy turvey this year with distinct worries that crop had decreased . Both, the Western quality season failed in January this year, as did the Uva season in August. There was hardly a dry spell that provoked quality manufacture.

Similarly, weather did not induce humid growing conditions. This stifled production and the Plantations are now faced with rising costs. They predict that year end results will be bad. Most Plantation Companies will be faced with substantial losses.

Price gains last week were good, but such would only reduce plantation losses. The end result would inevitably be that a darkened red line could not be avoided.

Teas from all elevations sold well. The market future for Tea looks good , but that is not the main criteria that is relevant to the industry, brokers said.

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