Ceylon Tea loses flavour with buyers
Plantation companies are facing a crisis as about 25 per cent of stocks of Ceylon Tea particularly the western high growns during this peak season remain unsold at the auctions.
About 20-25 per cent of the western high growns on certain auctions and about 35 per cent of particular grades of high growns on occasion are withdrawn from the auctions as they are not bought by foreign buyers, Forbes and Walkers CEO Anil Cooke told the Business Times.
Regional Plantation Companies (RPCs) are really caught on since stocks go unsold and do not get the full price and often the price drop is not in line with the depreciation of the rupee and in absolute value the price of Ceylon Tea is significantly lower than last year, Mr. Cooke explained.
He pointed out that the producer is also left unaware whether the decline in purchase of stocks of tea is a trend or not since this is not consistent, as a result there is market uncertainty at present.
He pointed out that this year’s climatic conditions was also not as good as the previous year and this has had an impact on the quality of the tea produced especially on the high growns.
January being the Dimbula season the demand is generally high for Ceylon Tea and thereafter for the high growns but this year things have not been the same.
The dry cold weather has impacted on tea production that has declined on the western side and with it the quality of Dimbula and the Nuwara Eliya improved. But the cost of making tea increases because there is less tea since crop production comes down and foreign buyers pay high prices for less crop.
But the fall-out from the high-residue weedicide has left buyers becoming more selective and playing safe and buying only through selective gardens has reduced the wider spread of demand across all other estates.
European buyers, in addition to Japan, have restrained purchasing stocks of Ceylon Tea as a result of the high residue levels this year, Mr. Cooke noted.
“The consistency of buying over time for high growns result in a wide fluctuation in price and as a result sellers are refusing to meet the needs of the market,” he noted.
Exporters complain that an increase in tea production is also very relevant today and they are facing issues particularly when buyers refrain from buying.
Some of the reasons buyers are refraining from buying are due to adulteration of Ceylon Tea, the issue regarding high residue levels that has impacted purchases from Japan, Europe and Saudi Arabia and this is likely to become a significant problem, Tea Exporters Association (TEA) Chairman Jayantha Karunaratne said.
In this respect, he pointed out that high growns have seen less demand since buyers are exercising caution in the purchase of stocks of Ceylon tea.
Hayleys Plantations Managing Director Roshan Rajadurai said that they have reached saturation point and that though they have the capacity and will to replant “we do not have the labour to pluck when replanted.”
In this respect, he pointed out that due to labour out-migration they were hoping to first ensure the wage model could be settled “then we will be in a mood to replant.”
Discussions, he said have commenced between the trade unions and the RPCs on evolving the revenue share model but no finality has been reached yet.
Mr. Rajadurai believes they should be able to come to some agreement within the course of this year and also pointed out that they were yet to hear from factory owners on the sub leasing of their estates.