Sri Lankan tea prices slide, buyers shift to cheaper origins

ECONOMYNEXT – Prices of Sri Lankan tea have been sliding despite their reputation for quality, owing to increased volume and comparatively less demand with big buyers shifting to cheaper alternatives, a plantations industry official said.

“No country can match our quality standards in orthodox tea,” said Lalith Obeysekere, Secretary General of the Planters’ Association, which represents regional plantations companies (RPCs).
 
The high quality means prices tend to be higher than at auctions in other tea exporting countries.
 
The cumulative Colombo auction average for January-May 2019 is down 41.64 rupees or almost seven percent to 574.90 rupees a kilo, from 616.54 rupees fetched in January-May 2018. 
 
Obeysekere said prices were not coming down because the tea bushes are old.
 
“Age of tea bushes has nothing to do with quality,” he told EconomyNext. “Old tea has the best possible quality.”
 
The answer is in pruning, which is done in plantations regularly, he said.
 
“During the latter stages of the pruning cycle comes what’s called the ‘banji’ formation on the plucking table; that is when your tea bush is not in a productive stage and could have an impact on quality,” Obeysekere said.
 
A premium quality tea shoot consists of two leaves and a bud which makes an ideal cup of tea.
 
Obeysekere said tea producers had to cope with political and economic uncertainties in key markets as well as other economic impacts like inflation which has pushed production cost up.
 
“About 60 percent of our produce is shipped to and through North Africa to the Middle East, and problems which arise over there has had a severe impact on the Colombo auction price,” he said.
 
“For an instance, the sanctions imposed on Iran, Iraq and Egypt affected us badly because imposition of such sanctions is the worst thing that can happen to a commodity.”   
 
To counter this situation, the Tea Board has come up with a massive promotion campaign about to be launched world-wide.
 
And big buyers are shifting to cheaper alternatives like Kenya and India.
 
“Sri Lanka is currently losing international markets like Egypt and Pakistan mainly because importers buy tea which has more cuppage – number of cups which could be produced; ideally CTC teas – whereas we specialize in orthodox teas,” Obeysekere said.
 
Sri Lanka’s cost of production is very high owing to the contracting labor force working in estates.
 
“We had 350,000 workers back in the day and now we are down to 130,000 workers,” Obeysekere said.
 
Since the next generation of estate workers’ receive good education, it is unlikely many of them will take up their parents’ line of work.
 
Also, with apparel and other industries more popular, a sector-wise transition among laborers has left the tea industry with less than half of its former workforce.
 
Hence, tea factories have to cope with rising costs of production.
 
“We are looking for possible solutions to this issue like mechanization of plucking, which still is not the ideal solution as the terrain of our plantations is not ideally suited for such mechanization.”
(COLOMBO, 4 JULY, 2019)