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Thursday June 8th, 2023

Sri Lanka tea prices hit record in May amid currency collapse

ECONOMYNEXT – Sri Lanka’s low grown Ceylon teas hit a new record of 1,506 rupees a kilogram, up from 640 rupees a year earlier industry data showed, as the currency collapsed steeply following mis-targeted interest rates and a botched float with a surrender requirement.

In the last week of May low growns averaged 3.43 dollars a kilogram up from 2.43 a year earlier. Global commodity prices have moved up due to US money printing, which tends to weaken the dollar.

At June 07 auction low grown BOP1 grade from Brombil estate fetched 4,200 rupees a kilogram and Pothotuwa BOP1 fetched 4,400 rupees a kilo, Ceylon Tea Brokers data showed.

In Sri Lanka Mercantilists and soft-peggers usually claim that inflation comes from imported prices. However, prices of all traded goods, whether imported or exported go up when the central bank prints money to depreciate the currency.

Global prices also go up in dollar terms (commodity booms) when the US Federal Reserve prints money. At the moment commodity prices are booming due to the so-called ‘Powell Bubble’ the worst since the Greenspan-Bernanke bubble which broke in 2008/2009.

In US dollar terms the national sale average on May 31 was 3.69 dollars a kilogram compared to 3.18 last year.

At the June 07 sale auction, Low Grown gained, Ceylon Tea Brokers, a Colombo-based tea brokerage said.

Low Grown leafy/Tippy variety had seen an increased demand selling 2 million kilograms however in the previous week it sold 2.7 million kilograms.

The High Growns that saw higher demand in the previous week sold only 0.8 million kg compared to 1 million kg in the previous week.

Low Growns

Low Grown attract the highest prices for Ceylon Tea.

In the June 07 week auction, the Low Grown Tea sale average was 1,506.71 rupees, down from 1,538.90 rupees in the previous week.

However, in dollar terms, it had shot up to 4.2 dollars per kilogram, up from 3.6 dollars in the June 01 sale.

BOPF tea prices had eased.

OP and OPA Well-Well-made varieties were firm, whilst the balance and bottom were irregular.

Select best FBOP/FBOP1 were firm while others eased.

BOP Select Best and best gained while poorer sorts had eased.

High Grown

The High Grown auction average was 1,053.07, down from 1,098.64 rupees.

In BOP teas, few Best Western’s were dearer following quality. Balance was firm to 30 rupees per kg lower.

Below best were firm. Plainer types were irregular. Nuwara Eliya’s gained on last. Uda
Pussellawa’s tended dearer. Uva’s were firm.

In the BOPF category, Best Westerns declined 50-70 rupees a kilogram while Below Bests were irregularly easier. others gained to a lesser extent.

Medium Grown

The Medium Grown auction average for the week was 1,099.02 rupees down from 1,135.53 rupees a week before.

This week, BOPF’s Select best and best gained whilst the poorer sorts were firm.

In BOP1, Select the best together with the best & below best increased by 50 rupees per kilo. Poorer sorts declined by 50 rupees per kg.

While the OP1’s Select best were dearer by 50 rupees per kg. Best & below best gained by 100 rupees per kg whilst the
poorer sorts were firm.

In the PEKOE/PEKOE1 PEKOE category, Select best along with the below best moved up by 50 rupees per kilogram.

Teas in the best category improved by 100 rupees per kg whilst the poorer sorts shed by 50 rupees per kg.

PEK1’s Select best increased by 100 rupees per kg. Best and the below best gained by 50 rupees per kg
whilst the poorer sorts easier by 50 rupees per kg.

In the FBOP/FBOPF1’s Select best gained by 100 rupees per kg. Best and the Below Best gained by 30-50 rupees per kg whilst the poorer sorts dropped by 50 per kilogram


High-grown BP1s were firm while PF1 moved up by 20-30 rupees per kilogram.

Mid grown BP1s were lower while PF1s were easier by 30-50 rupees per kilogram.

Low-grown BPIs gained by 30-50 rupees a kilogram, while better PF1 teas lost around 100-150 rupees.
(Colombo/June 12/2022)

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  1. Elango says:

    Sri Lanka should consider exchanging tea with rice with Pakistan

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  1. Elango says:

    Sri Lanka should consider exchanging tea with rice with Pakistan

Sri Lanka’s shares slip on profit taking and selling pressure

ECONOMYNEXT – Sri Lanka’s shares closed lower on Wednesday after four consecutive gains in previous sessions spiraled into selling interest and profit taking, an analyst said.

The main All Share Price Index was down 0.28 percent or 24.39 points to 8,722.06, this is the lowest the index has been since May 02, while the most liquid index S&P SL20 was down 0.40 percent or 9.92 points to 2,468.44.

“The market was gaining in the previous sessions and there is selling and profit taking present today, due to continuously being on green,” an analyst said.

In the previous sessions the market was seeing gains, due to lowered policy rates and low inflation stimulating buying interest and driving the sentiment up, an analyst said.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

“There are gradual improvements in the market sentiment, with positive sentiments coming in from lowered policy rates and inflation,” an analyst said.

The market generated foreign inflows of 12 million rupees and received a net foreign inflow of 18 million rupees, due to low share prices and discounted shares followed by a dividend announcement.

The market generated a revenue of 554 million rupees, this is the lowest the turnover has been since May 10, while the daily turnover average was 1 billion rupees. From the total generated revenue, the banking sector contributed 120 million rupees, Diversified Banks contributed 115 million rupees and the Capital Goods Industry generated 78 million rupees.

Top losers during trade were Sampath Bank, Commercial Bank and Aitken Spence. (Colombo/June06/2023)

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Sri Lanka Treasuries yields plunge, 12-month down 318bp

ECONOMYNEXT – Sri Lanka’s Treasuries yields plunged across maturities at Wednesday’s auction with the 12-month yield falling 318 basis points, in one of the biggest one day falls, data from the state debt office showed.

The 3-month yield fell 244 basis points to 23.21 percent.

The 6-mont yield fell 339 basis points to 21.90 percent, along with the 12 months to 19.10 percent.

The short-term yield curve is inverted.

The central bank last week cut its policy rate 250 basis points in a signaling move but is not printing money to enforce the rate cut.

The debt office sold all 140 billion rupees of offered securities. (Colombo/June07/2023)

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Sri Lanka forex reserves rise US$722mn in May 2023

ECONOMYNEXT – Sri Lanka’s foreign reserves grew 722 million US dollars to 3,483 million US dollars in May 2023 from 2,761 million US dollars in April, official data showed as deflationary policy and weak credit reduced ‘above the line’ outflows.

Sri Lanka lost almost all its reserve in over two years as the central bank sold reserves and printed money to keep rates down (sterilized reserves sales) including borrowed dollars from India.

Gross official reserves fell to a low of 1,705 million US dollars in September 2022.

Sri Lanka’s central bank hiked rates in April 2022 to slow credit and also stopped printing money after it ran out of borrowed Asian Clearing Union dollars from India.

Sri Lanka’s gross official reserves are made up of both monetary reserves of the central bank and any balances of the Treasury account from loans or grants it gets.

The central bank’s net foreign reserves are still negative after busting up borrowed reserves to suppress rates. By April (before the collection of reserves in May) the central bank’s net reserves were negative by 3.7 billion US dollars.

In May alone 662 million US dollars were bought from the market, Central Bank Governor Nandalal Weerasinghe said.


No pre-determined level to stop Sri Lanka rupee appreciation: CB Governor

Borrowing dollars through swaps and busting them up, was invented by the US Federal Reserve as it was printing money and breaking the Bretton Woods system in the early 1970s.

Sri Lanka received a 350 million US dollar tranche from the Asian Development Bank and 331 million US dollars from the IMF to the Treasury for budget support.

The loans can be sold to the central bank by the government to generate rupees and spend. However, since credit is weak, not all the inflows go out of the country particularly as the central bank is conducting deflationary open market operations on a net basis.

By allowing the rupee to appreciate unlike in previous episodes of recovery in an IMF program, after a bout of money printing, the central bank is bringing down inflation – in some cases absolute prices – and restoring confidence and easing the ‘pain’ of ‘monetary policy’ or stimulus.


Why is Sri Lanka’s rupee appreciating?

Though exports are falling, tourism revenues are also picking up.

The budget support loans, tourism receipts less the reserve collected will widen the trade deficit. Building foreign reserves involves lending money to the US or other western nations and is similar to repaying foreign debt. (Colombo/June07/2023)

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