An Echelon Media Company
Wednesday February 1st, 2023

Sri Lanka tea, rubber estates suffer massive losses amid falling commodity prices

COLOMBO (EconomyNext) – Falling international commodity prices due to an underlying strengthening of the US dollars has hit Sri Lanka’s plantations firms which has lost 2.8 billion rupees in the past year on tea and rubber.

By the end of 2014, 19 regional plantations companies said they lost an average of 30 rupees per kilogram of tea sold with an average cost of 455 rupees and a net sales average of 455 rupees.

The loss on a kilogramme of rubber was 35 rupees, with average cost of production at 327 rupees and net sales average of 292 rupees, they said.

Classical economists have forecasted earlier that a ‘Great Moderation 2.0’ of low commodity prices could be emerging  with the end of excessive money printing by the US Federal Reserve which sent gold, oil, steel, copper, and food commodities zooming despite the bursting of a credit bubble in 2009. (Great Moderation 2.0: The Russian ruble, Sri Lanka’s tea and rubber: Bellwether)

Great Moderation 1.0 occurred in the 1980s with monetary tightening by then US Fed Chief Paul Volcker in 1980 with gold at 250 dollars and oil below 20 dollars a barrel.

It lasted until the 2000, when the US Fed created the ‘mother of all liquidity bubbles’ which burst in 2009 generating the Great Recession.

But instead of slipping immediately into a period of low inflation from 2009, quantity easing programs of the US Fed again fed a commodity bubble and inflation, which some economists say ended the possibility of a ‘v shaped recovery’ and delayed an overall recovery.

But now quantity easing programs have been ended and tighter banking sector rules and capital requirements have made credit tighter, though the effects of EU monetary loosening remains unclear.

A stronger dollar has set off a chain reaction, reducing the disposable incomes of countries with mining and oil interests and increasing the disposal incomes of other nations. Farming incomes are also falling in all countries.

Due to wage rigidities organized businesses find adjustments difficult, though food and fuel prices fall, increasing the disposal incomes of workers. In modern settings, where cutting wages is politically not feasible, currency depreciation tends to be the option.

Roshan Rajadurai, Chairman of the Planters’ Association of Ceylon – which represents the Regional Plantation Companies (RPCs) said large quantities of tea remain unsold at auctions and companies had to borrow to pay wages.

The auction average in Colombo in February 2015 has fallen 64 rupees from a year earlier to 418 rupees, the regional plantations companies said.

Sri Lankan tea prices were still higher and ranges around 3 dollars a kilo compared to 2.0 dollars for countries such as Kenya, the RPC said.

In Sri Lanka labour accounted for 67 to 70 percent of total costs.  The RPCs said a worker plucked about 18 kilograms a day in Sri Lanka, compared to 38 kilograms in India and 48 for a Kenyan plucker. However the codditions of the fields, steepness of tea fields and the degree of mechanization could impact plucking averages.

Sri Lanka’s government which has promised guaranteed prices for tea and rubber though it is not clear how this will be financed.

Comments (3)

Your email address will not be published. Required fields are marked *

View all comments (3)

Comments (3)

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka coconut prices ease at auction

ECONOMYNEXT- Sri Lanka’s coconut auction prices fell in the last auction in January 2023, with average prices going down by 4.1 percent at an auction on January 26, data showed.

The average price for 1,000 nuts fell to 80.811.89 from 84,116.85 a week earlier at the weekly auction conducted by Sri Lanka’s Coconut Development Authority.

The highest price was 87,300 rupees for 1,000 nuts down from the previous week’s 90,200 rupees, while the lowest was 72,500 down from 73,000 rupees.

The auction offered 469,564 coconuts and 300,983 nuts were sold. (Colombo/ Feb 01/2023)

Continue Reading

Sri Lanka shares edge up at close

ECONOMYNEXT- Sri Lanka’s shares edged up on Wednesday pushed as investors bought in to beaten down shares following the previous session’s drop, market analyst said.“

At this price level what we are seeing is a lot of confidence from the investors to collect when the prices drop. So, the market is not falling sharply,” a market analyst said.

Market had also seen buying in Expolanka shares on speculation that the parent company of SG Holdings was buying back into the shares.

All Share Price Index (ASPI) edged up by 0.96 percent or 84.96 points to 8,950.01.

The most liquid index S&P SL20 gained 1.27 percent or 35.02 points to 2,799.53.

Banking and Insurance counters had seen interest on the back of positive sentiments from the IMF.

The central bank has said it could cut interest rates in future when the the country sees fall in inflation, which has already started decelerating.

The market saw a turnover of 1.5 billion rupees today,lower than the month’s daily average of 1.8 billion rupees and nearly half of 2022 average turnover of 2.9 billion rupees.

The bourse saw a flow of net foreign inflow of 45 million rupees extending the net offshore buying to 1.9 billion so far this year.

Top gainers of the day were Commercial Bank, Expolanka, and Ceylinco Insurance. (Colombo/Feb01/2023)

 

 

 

 

 

Continue Reading

Sri Lanka bond yields down at close

ECONOMYNEXT – Sri Lanka’s bond yields were down at close following a bond auction on Wednesday, dealers said while a guidance peg for interbank transactions remained unchanged.

“The rates were steady at the auction,” a dealer said.

“This can be a signal to the market saying the rates will go down in the future.”

A bond maturing on 01.07.2025 closed at 32.40/60 percent, down from yesterday’s 32.60/85 percent.

A bond maturing on 01.05.2027 closed at 29.10/35 marginally down from yesterday’s 29.20/75 percent.

The Central Bank’s guidance peg for interbank US dollar transactions remained unchanged at 362.14 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 371.38 rupees on Friday, data showed. (Colombo/Feb 01/2022)

Continue Reading