Drought drives Sri Lanka monthly tea auction average price to new high
ECONOMYNEXT – The monthly average price at Sri Lanka’s tea auctions in Colombo hit a new high in September owing to a sharp downturn in production because of drought amid strong demand, brokers said.
Demand was also propped up by some panic buying owing to a strike by workers wanting higher wages and the onset of winter orders by tea importing countries.
But brokers said regional plantation companies remain unprofitable because of poor crops.
“In the backdrop of a sharp decline in production due to extremely dry weather conditions, the Colombo tea auction (September monthly) average reached an all-time high of Rs512.03 a kilo – a gain of Rs143.85 year-on-year,” Forbes & Walker Tea Brokers said.
“While current tea prices look attractive, plantations continue to be unprofitable due to the extremely poor crop intake and high production cost.”
Forbes & Walker Tea Brokers said that, with the significant production decline in Sri Lanka, orthodox teas are experiencing a scarcity.
“The Ceylon tea crop by the end of the year is likely to be well below the 300 million kilo mark.”
Brokers John Keells Ltd. said the crop situation in tea growing areas continue to cause concern due to the lack of adequate rainfall.
“Initially, it was the failure of the South West Monsoon, which has had a negative impact on crop intakes; now it appears that the delayed North East Monsoon, which brings in a fair amount of rain, will have an impact on intakes in the last quarter of this year,” they said.
John Keells said that, with a limited quantity available for sale, buyers were active and prices moved up quite sharply.
“The ongoing work stoppages and disruptions in the plantations too prompted a bit of ‘panic buying’ throughout the sale as the buyers had to secure teas for orders at hand,” they said.
(COLOMBO, Oct 06, 2016)