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Asian teas see robust year PDF Print E-mail
Monday, 11 February 2008

Asia News Network . Colombo

Sri Lanka has had another good year of tea prices not just for the unique range of Low Grown Orthodox teas but for the High and Mid Grown Small leaf grades as well. The latter standards sold well in a global market that had Kenya in competition.

Kenya boosted supply through a rapid and sharp recovery in its production after the 2006 drought. Asian teas see robust year Annual production in 2007 would definitely be a record in excess of 365 million kg.

India also maintained steady supply though final production figures are likely to be about 10 million kg lower that its record crop of 956 million kg achieved in 2006.

China emerged as the world s largest producer in 2006 and was the first country to cross 1 billion kg mark. Indications are that 2007 would be a similar total comprising mostly of green tea (70 per cent).

These figures indicate that the world market was well supplied with black tea in 2007. Buyers loyal to Ceylon tea however could not obtain their full requirement.

The Market for Orthodox Low Growns has few competitors. Indian products with a few exceptions generally do not compare favourably, and are often low end reducers. Low Grown supply was a key factor that drove the market in 2007. Annual production figures show Low Growns having lost 7 million kg; down from 184.5 in 06 to 177.6 in 07. A review of monthly production shows that the short fall was narrowed towards the end of the year and often supply was much tighter during the first two quarters. Bad weather and reduced fertiliser application were the main causes.

 On the demand side Middle-east and North African markets which absorbed 53 per cent of Sri Lanka Tea Exports were active once again. Russia/ CIS with an off take of 23 per cent were also strong.

Both regions benefited from strong oil prices which boosted their economy and improved spending power of their consumers. Low Grown monthly average prices for all teas sold were at record levels through out the year. In January the figure was 235.23 Rupees and by December had risen to 357.77 rupees, highest for any month. Depreciation of the Rupee also helped lift auction prices. In US$ the 1997/1998 record figures were passed in the month of February 07. It must be noted however that the 2007 discounted dollar does not compare with its 1997 /1998 purchasing power.

High Grown prices rose sharply in the first quarter in Rupee and Dollar terms, as a result of the production crash that followed theQ4 06 strike. Plantation companies whose cost of production skyrocketed after the strike and exporters forced to pay up on previous contracts; both lost money during the period. The market eased during Q2 but production losses in Q3 and increased seasonal demand started pushing prices up all the way till the close of the year.

The market for Mediums rode with both Low and High Growns. Orthodox leafy types moved in sympathy with the stronger low growns while Small Leaf types sold in line with High Growns. Rising Private Sale quantities is a cause for concern. During the year 2007 a record 55 million kg (19 per cent) of all tea sold was on Private Sale basis. The greater weight of this teas comprised of Low Grown main grades.

It is believed that the producers advantage of shortening the tea to cash cycle is out weighed by negative impact on auction prices. The other reason attributed to producer (private tea factories in particular) eagerness for adopting this channel of sale is inflation of the factory average.

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