Issues in tea production in 2013
View(s):Sri Lanka’s tea production would continue to be hindered by possible wage hike agitation, dry weather, looming effects of the rupee and inadequate promotions for the industry from the cess collected.
The Asia Siyaka market report indicates that in the first quarter it expects the country to continue to face up to the dry weather patterns currently prevailing.
In addition, it is expected that the tea production would be affected in the second quarter in the wake of possible wage hike agitation by employees resulting in disruption at work as witnessed in the past, the report states
It was pointed out that this could have an impact on the tea production especially in the high and mid grown and thereby extend the cumulative shortfall in 2012.
Globally the report indicates there has been a short supply of black tea and it would be carried into the first quarter this year as well to ensure the tea prices remain buoyant.
Sri Lanka with a strengthening rupee and rising duties imposed on exports was expected to erode value to the tea producer, the report states.
Another concern noted was that the tea promotion cess that continues to be collected failed to provide results as the implementation of the project was delayed.
Further, in the second quarter tea prices in the global market would be consistent in line with the weather pattern as it was evident this factor played a crucial role last year that restricted production from India, Kenya, Sri Lanka and Uganda. “This year, additionally other factors could impact on Q2 production in Kenya and Sri Lanka,” the report states.
Tea prices held well for Sri Lanka in 2012 due to the weaker rupee, national and international supply issues and the stabilisation of some key international markets.
Following a slow Q1 the national average was at Rs.391.64 as against Rs.359.89 for 2011, the report states. However, in dollar terms the revenue has been lower throughout the year with 2012 ending at US$3.07 compared to US$3.25 per kg in 2011.
Sri Lanka tea production at 326.2 million kg is a nominal one million kg less than last year’s revised annual total of 327.5 million kg. A record Low Grown harvest of 201 million kg helped boost the national total. This is the first time that any elevation has crossed the 200 million kg mark. The previous record was 196.7 million kg achieved in 2011. Highest annual production was 331.4 million kg in 2010. High Growns which suffered most from the bad weather, could only total 72.7 million kg and were down 7 per cent on the 2011 quantity of 78 million kg; the lowest figure since 2007. Mid Growns with production of 52.2 million kg in 2012 was on par with the year before.
Sri Lanka made recorded revenues from tea shipments at Rs.180 billion last year as against Rs.164 billion in 2011 for the 319.9 million kg of tea recorded at the end of the year slightly lower over the previous year’s figure of 322.5 million kg. The approximate USD value is $1,407 million against $ 1,490 million in 2011.
The Middle East and North Africa absorbed 53 per cent of all exports, down from 56 per cent in 2011 due to political upheavals in the region though exports to Iran increased. Russia and the CIS countries increased purchases to 24 per cent compared to 21 per cent in 2011, the report stated.
Direct exports to Syria declined steadily in 2H 2012 and final figures were lower 12 per cent YoY 2011. Japan a key importer of high value liquoring teas has reduced its off take by 14 per cent from 11.3 million kg to 9.7 million kg in 2012. It is good to see Pakistan and Egypt increasing their imports of Ceylon tea, the report notes.
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