Tea Report

Bartleets Weekly Tea Surveillance upto February 13:

Middle East market liberalisation boosts Lanka tea demand

The quantity of tea arriving at the Colombo Auction this week came down to 6.466mkg from 6.909mkg traded in the previous sale. The ex-estate crops too have come down to 0.755mkg from 0.762mkg as to last week.

Market segments: In the Ex Estate segment Western brighter good teas and Colory thicker very best BOPs were dearer. Germany and the UK were eyeing these crops somewhat keenly. While the below best teas maintained last levels, the easing of the Kenyan political crisis resulted in market volumes not being much affected.

The low grown teas had showed a lower demand due to the Iran container back-log which was affected by the stormy weather conditions of late.

On the liquoring teas, CIS showed a better demand and Japan was stronger on the lighter varieties. It has been anticipated that the market would pick up on the seasonal teas.

In the Tippy market segment, there was lower demand due to the very selective buying patterns witnessed from all the buying nations.

Meanwhile in the Leafy-grade segment, the Pekoes had good interest from Turkey and Syria while the CIS market was showing downward trend due to the winter season coming to an end. Whilst the comparatively low oil prices have been affecting the buying power in the Middle East markets, the better types are surviving due to tenders.

Export earnings:Sri Lanka being one of the world’s largest exporters of tea along with Kenya, has earned a record of $1.03 billion in 2007, compared to $881.2 million in 2006 according to Sri Lanka Tea Board.

This is the first time that earnings from tea have surpassed the billion dollars mark in the 141 year old history of the tea industry.

The value increase has been approximately 29 per cent for each kilo of tea exported according to the chairman of the tea board. However, regardless of the significant increase in the value of tea exports, the volumes have recorded a reduction of 5.5 per cent from 327.4mkgs to 309.8 mkgs, year on year.

Demand Analysis: on the demand side, the Middle-East and North African markets accounted for 53 percent of exports whilst the Russia and former Soviet Republics contribution was 23 per cent.

These two were easily the largest markets for the islands tea. Strong oil prices which boosted their economies and improved the spending power of their consumers was what spurred demand to new highs last year.

Meanwhile, an industry stakeholder has claimed that the liberalization of tea markets such as Iran, Iraq and Libya will also boost demand for Ceylon Tea further.

Plantation Ministry

The plantation industry Ministry has passed a law that will facilitate the acquisition of uncultivated lands in order to focus on developing the tea industry further.

The extent of tea plantation land is currently estimated at 221,000 hectares, out of which 132,329 hectares are held by the tea smallholders who contribute some 60 percent of production.

It was further stressed by an official that the Ministry has full powers to take over uncultivated lands under the land development act.

Land of the rising market

Japan’s black tea consumption has increased by 30 percent during the past two decades despite the Japanese consuming more green tea.

Due to this trend, the position of Japan was elevated to 6th place last year.

Sri Lanka currently dominates the black tea segment in Japan with a strong share of 67 percent which amounts to some eleven million kilos.

The export revenue is also risen to around Rs. 3.65 billion to become the largest foreign exchange earner contributing 22 per cent of the total Japanese trade in value terms.

Stocks currency:

With reference to the weekly surveillance of the 19 plantation stocks, 13 were high in value whilst two reported static and four were low.

Watawala and Kotagala a witnessed a significant gain of 13 and 12 per cent respectively week on week. The dollar traded at between Rs. 107 and Rs. 108.