Steep decline in tea prices

Lower priced teas too expensive;
buyers turn to Kenya and Darjeeling

By Steve A. Morrell -Island

A leading broker, who refused to be quoted, said because Ceylons were too expensive relevant to lower quality available, buyers who usually supported our tea have turned to Kenya and Darjeeling to fill their orders. To compound the depression, Western BOPFs sank to alarming depths recording prices of Rs. 60 to 80 per kilo below last week’s levels.

‘This is very bad news’, was the gist of John Keels Tea report this week

Some rain has been reported in Western planting districts which brokers opine could have limited impact on crop. Forecasts point to serious depression which might have desultory results in the short run. Long-term indicators, too, are not quite encouraging.

Planters said: ‘Some rain, yes, but January and February are traditionally dry, and because dry weather would continue, all else being equal, consequences of the strike would be felt in the immediate future. These would be short- term projections which could not be avoided’.

Added to these woes Low Growns which had not been positively affected by the wage strike too have recorded crop drops because of the serious drought in the Southern hills of Galle and Deniyaya.

Speculation which has led to this depressing trend could be attributed to large-scale encroachment of the forest cover depriving the adjunct eco-system of its sustaining moisture levels.

We have been reporting on seriousness of encroachments in this area, and also in the environs of Warwick Estate bordering the Horton Plains. Our periodic references to minus repercussions, that would result should legal controls not be enforced, have now been justified.

Brokers said that in the thick of this depressing situation two estates have achieved record prices .

Laxapana at the foot of the Peak wilderness sold a BOPF for Rs.540 and Kenilworth in the lower elevations at the Ginigathena Pass sold a Pekoe 1 for Rs.360.

Laxapana is a holding owned by Maskeliya Plantations Ltd. and Kenilworth is owned by Watawala Plantations Ltd.

A significant feature of the sale this week was that both the UK and Continent were relatively silent. Both these international markets were usual supporters of Ceylons at this time of year, but the strike residue prompted their limited buying. Gainers from the tea land strike last month will prove to be Kenya and the high elevation estates in Darjeeling, India.

We reported last week that Kenya has emerged from the long drought which had depressed their crop. However, indicators are that this year the tea industry would see boom times and it would not be wishful thinking that Kenya would progress to be the leading tea exporter in the world. ‘So much for Ceylons seeing any gains this year’, brokering sources said.

According to the Asia Siyaka Tea Market report this week, Unilever, the parent company of Lipton’s, would invest $130 million in Russia said Vice President of Unilever’s European Supplies Department Peter Emsting. The significance of this move would be that Ceylons would be affected. ‘Unilever is already in Russia’, said Anil Cooke of Asia Siyaka Tea Brokers, Ltd. We would have more news on this expansion next week.

Meanwhile, quite within context of our Tea Board report last week, the chaotic situation obtaining in that department because of protracted infighting instigated by its Chairman will have a regressive impact on the tea industry.

At this week’s sale there were approximately 4.3 million kilos on offer.

Tags: Ceylon Tea, Tea News, Business, Tea

Tea trade unions end strike agreeing to Rs 260 daily pay

By Walter Jayawardhana

Tea plantation trade unions entered into a new collective agreement with the Employers Federation reaching a compromise of a daily basic wage of 260 Rupees ending a strike that had entered its third week.

Ceylon Workers’ Congress, Ceylon National Estate Workers’ Union and Joint Plantation Trade Union Center represented the estate unions in the signing of this agreement. Chairman of the Employers’ Federation Gotabhaya Dasanayake and its member Lalith Obeysekara signed for the employers

The 33 per cent wage hike would be valid for the next two years and the salaries have been made effective since November 1.

The discussions were at a deadlock earlier with the employers offering 250 Rupees basic daily wage and the unions demanding 300 rupees.

President Mahinda Rajapksa presided over the signing of the new collective agreement. President Rajapaksa was also able to persuade the trade union leaders to come to a compromise since the major tea plantation trade union bosses , P. Chandrasekharan of the Upcountry People’s Front and Arumugam Thondaman of the Ceylon Workers Congress are his cabinet members.

P. Chandrasekharan , a day before the agreement said that President Rajapaksa had requested him to come to a quick compromise since the strike was costing the nation about one billion Rupees. He said he would comply with the request of the President. Meanwhile the Ceylon Workers Congress , on the request of the President helped all other unions to come to a compromise. Vice President of the Ceylon Workers Congress R. Yogarajan coordinated other smaller unions to come to the compromise.

In the Central hills , where Sri lanka’s best high grown Ceylon teas are produced , the workers were becoming restive with out seeing a resolution of the strike and at some workers were trying to organize sathyagraha inside tea factories when the employers called anti-riot units of the police. Some of the workers few days ago performed a sathyagraha on the rail tracks of Thalawakele, where the Podi meike train had to be delayed for 45 minutes. (EOM)

Estate Unions and the Employers’ Federation signed a new cooperative agreement in Colombo, on Tuesday, pertaining to salaries of estate workers, despite a half a million Sri Lankan plantation workers have entered the third week of their strike for higher pay. President Mahinda Rajapakse presided while the deal. According to the revised agreement, wage of an estate worker per day is 260 rupees.

The amount reflects a 33 percent increase. This agreement, which has been backdated to November 1st, will be effective for the next two years. The workers determination stands in marked contrast to the efforts of the trade union leaders who are conniving with management and the government to wind up the strike as quickly as possible.

Sri Lanka’s tea and rubber workers, among the most downtrodden sections of the working class, stopped work on December 5 to demand a daily wage of 300 rupees (less than $US3). Their present pay is just 135 rupees, plus a variable allowance of up to 60 rupees. Anger among workers has boiled over because they have not received any pay rise since mid-2004. Like other sections of the working class, estate workers have been hit by rapidly rising prices. They are only paid for the days on which they work. Many workers do not receive the full allowance, which is dependent

Tea auctions this week

Improved demand for liquoring teas

A smaller volume of 2.8 Mkg of Low Growns that came under the hammer this week had wide spread demand, but at lower levels. In the Leafy Category, Select Best OP1s declined several rupees, however a few below best invoices gained following additional inquiry, whilst the poorer sorts were mainly firm. The well made BOP1s were marginally lower, others too declined several rupees. The best and the below best OPAs declined several rupees, however, the poorer sorts maintained last levels. The best Pekoes on offer, were mainly firm, but all others declined Rs. 2/- to Rs. 4/-. The bolder varieties in particular, saw less inquiry. In the Small Leaf category, select best FBOP/FF1s were sold around last weeks levels. The below best sorts advanced Rs. 3/- to Rs. 5/-, particularly towards the latter part of the sale. Once again, the best Tippy varieties declined Rs. 20/- to Rs. 30/-, others too met with a lower market. There was excellent demand from Russia and Libya, whilst Iran, Turkey, Syria, Jordon, Iraq, Saudi Arabia and other Middle Eastern markets too lent useful support.

Elevation averages for the month of October shows a positive variance when compared with last year for all elevations. The High, Medium and Low Growns for the month shows a positive variance of Rs.20.64, Rs.19.60 and Rs.9.09 with the total recording a pus of Rs.12.82. The cumulative average for January/October also shows a positive variance for all elevations at Rs.34.54, Rs.13.21 and Rs.3.41 respectively, with the total national average recording a plus of Rs.12.62.

The Ex-estate quantity on offer was marginally lower to last week at 1 Mkgs. There was improved demand at the commencement of the sale, particularly for the Western High Grown BOP/BOPF in the below best category where prices advanced by Rs.5/- to Rs.10/-. A few select best BOPs appreciated Rs.2/- to Rs.5/- whilst a few BOPFs gained Rs.5/- to Rs.8/-. The plainer BOPs were of an easier market whilst BOPF maintained. Nuwara Eliya BOP/BOPF was of a slightly lower market whilst a few Uva coloury BOPs sold well, others along with the BOPF declined Rs.4/- to Rs.6/-. The Low Grown CTC PF1s appreciated Rs.5/- to Rs.10/- and more at times whilst High Grown PF1s were irregularly lower. BP1s on an average were firm to a few rupees easier. (John Keells Limited)

Tea auctions this week

A total of 6.0 m/kgs came under the hammer this week.

Ex Estate offerings totalled a 1.0 m/kgs. It was heartening to witness the turn around in the market particularly for the better teas, which appreciated Rs.5-10 per kg all round, creating a significant price parity between the better teas and their poorer counterparts. The price movement at this week’s Mombasa Tea Auction also followed a similar trend endorsing the greater demand for better quality teas. Therefore, the current price parity would no doubt be encouraging to producers to focus on product quality at the first available opportunity to secure better performance on estates. The tea bag sector continued to be dominant on a cross section of the BOPFs on offer whilst shippers to UK, Japan and the Continent continued to selectively absorb the better liquoring teas.

Low growns continued to witness a similar trend which is rather discouraging for producers of good quality teas. The feature at the Low grown sale of yesterday was the wide spread demand that was evident for teas at the lower end of the market. This week too the better teas were mostly lower with buyers being very selective. This was quite evident in the OP/OPA grades as the parity between the better teas and the bottom end teas have narrowed considerably. There was fair demand from Iran, Dubai, CIS and selective inquiry from Saudi Arabia. (Forbes Tea Brokers)

MONTHLY AVERAGES – OCTOBER 2006

The total sale average for October of Rs.210.68 per kg shows an increase of Rs.12.82 or 6.47% growth compared to Rs.197.86 per kg of October 2005. It is also relevant that all categories of tea have recorded increases for the month with the High growns ecording an increase of 11.4% followed by Medium growns of 11.2% and the Low growns of 4.3% compared to the corresponding month.

In analysing averages for the period January-October the total cumulative figure for the year 2006 too shows a growth of 6.9% compared to the corresponding period. It is also significant that all categories have shown a growth compared to the same period of last year. -Daily Mirror FT

September Tea crop (Supposedly) a record

Auctions automation has come up again. Brokers and producers comment
‘Don’t mess with the system’
By Steve A. Morrell

The Sri Lanka Tea Board in their latest release said that crop intakes for September this year have been highest on record.

All well and good, but at what cost, is the question. We have spoken to 2 Brokers, Director Ceylon Tea Brokers (Pvt) Limited, Russell Tennekoon, and Deputy Chairman Asia Siyaka Commodities (Pvt ) Ltd., Anil Cooke who conceded that although they did not dispute the Tea Board report, they had their reservations on quality of produce sent down to the auctions. Also in question was the phenomenal upsurge in low grown production which were mostly small holder units.

We reported about 2 months back that there were approximately 380,000 small holders managing a collective area of 400,000 hectares more or less, of legitimate tea land. (Irrespective of land tracts encroached into the Sinharaja Forest, which has now been denuded, of just about 15 per cent of this eco system, and producing unaccounted crop for the tea area officially declared).

Both Brokers said that herein was the crunch, in that quality of leaf was much to be desired. Drop in leaf standards is camouflaged by the most expensive machine installed in factories called colour separators.

Russell Tennekoon said these machines cost as much as 15 million, and quite apart from artificial treatment of leaf, the problem of refuse tea percentages increasing was now causing anxiety. This was more prevalent in low grown production, they said. Refuse tae production was presently at about 15 per cent, which is substantial.

They said that previously refuse tea percentage was not more than 2 or 3 per cent. Phenomenal increase would need critical enquiry and a clearer picture should then emerge.

The tea board reported that September production was 28.02 million Kilos, which recorded highest for the Month.

However the same report also indicated drop of 2.83 million kilos for the recorded period.

The Tea Board controversy over suspended Director general H.D.Hemaratne, has now been relegated to the confines of limbo. We learn there was no charge sheet issued and his suspension with full pay continues.

Automation of auctions has come up again. In this instance too we consulted at least two from buyer locations who said ‘Don’t mess the system’. The auction system as run presently has not caused major dislocation an as it is now conducted should be continued, they said.

Total crop sold this week was 6.4 million kilos. Prices have not been quite that exciting. Decline in prices were recorded in all three elevations.

Although Kenyan tea production has not improved and continues to lag behind, Ceylon tea has not scored quite significantly to merit honourable mention.

-The Island-

Tea exports up in September

January-September volume up 8.4%, value up by 13.9%

Sri Lanka’s tea exports during the month of September ’06 totalled 26.5 m/kgs vis-à-vis 30.6 m/kgs during the corresponding month last year. During the month under review, however, the average unit FOB value for a kilogram of tea totalled Rs.284.44 whilst the corresponding figure was Rs.254.43. This reflects an increase of Rs.30.01 or 11.79% over the corresponding figure.

In analyzing the teas exports for the period January-September ’06 a total of 244.6 m/kgs have been exported this year compared to 225.5 m/kgs exported during the same period last year.

During the period under review we have recorded a growth of 19.1 m/kgs in volume whilst an increase of Rs.8.2 billion in value over the corresponding figure.

The CIS continued to be the single largest importer of Sri Lankan tea having imported 57.9 m/kgs for the period January-September ’06, an increase of 7.5 m/kgs vis-à-vis corresponding figure of 50.4 m/kgs, followed by UAE with imports totalling 34.5 m/kgs and in the third position Syria with imports amounting to 23.1 m/kgs. FORBES & WALKER TEA BROKERS (PVT) LTD

-DM Financial Times

Forbes Tea Market Report

This week’s Auction quantities totalled 5.2 m/kgs. There was good demand at irregular rates following quality.

Ex Estate offerings totalled 0.9 m/kgs. Overall quality showed no significant change except for a further decline in levels of seasonal quality of the Uvas.

Consequently, the availability of airmail bids too were limited resulting in significant price declines of the high priced teas.

The bearish trend continued this week as well particularly as the sale progressed with overall prices showing a drop of Rs.3-8 per kg. Shippers to Japan and the Continent continued to be selective whilst there was less activity from the CIS shippers.

A total of 2.7 m/kgs were on offer in the Low grown Tippy/Leafy catalogues this week. There was a fair selection of clean well made teas on offer.

Better made OP1s together with BOP1s were a strong feature this week whilst the cleaner secondaries too were fully firm to dearer. Better Pekoes together with bold below best types were fully firm to dearer. High priced OP/OPAs however declined. Cleaner below best OP/OPAs together with the teas at the lower end were fully firm to dearer. In the Tippy catalogues too better made FBOPs and FF1s were fully firm to dearer whilst the cleaner secondaries too were irregularly dearer. Well made FFs too sold well although some of the high prices of last week could not be attained. There was good demand from Saudi Arabia, CIS, Turkey, Iran and Dubai whilst Iraq too was active.

August tea crop down
Sri Lanka tea production for the month of August shows a decline of 2.91 m/kgs or approximately 11.01% when compared to the corresponding month of last year.

All elevations recorded a decline with the Low grown sector showing the highest drop for the month.

January – August too shows a decline of 5.0 m/kgs when compared to the corresponding period last year. -DM Financial Times

Ceylon tea to be renamed as ‘Sri Lanka Tea’

With the tea industry much in need of a boost President Mahinda Rajapakse’s proposal to re-brand Ceylon tea as Sri Lanka tea has been welcomed by industry stalwarts.

Speaking at a ceremony held to award four international quality certifications to Ceylon Royal Tea Supplies (Pvt) Ltd. the President said that the brand name ‘Ceylon Tea’ is no more a Sri Lankan brand name and should be changed to Sri Lanka Tea.

Ceylon tea from Sri Lanka, acclaimed as the best tea in the world has its inherent unique characteristics and reputation running through more than a century. Sri Lanka as the third biggest tea producing country globally has a production share of 9% in the international sphere, and one of the world’s leading exporters with a share of around 19% of the global demand. It is also the biggest employer in Sri Lanka, providing direct and indirect employment to over one million people, and a major contributor of government revenue.

However leaders in the industry have been complaining of the need to re-brand to compete with global rivals and maintain the niche that the country has had for almost a century. -The Morning Leader

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Tea bounces to higher levels

"We support a population not only the country" – Chairman Planters’ Association of Ceylon

By Steve A. Morrell

Forbes and Walker Tea Brokers (Pvt). Ltd., in their weekly tea market report last week have again reported positively on the industry.

Quite apart from this sustained salutary image official direction originating from Government circles seem to assume unjustifiable perceptions that the industry is sub performing. That too at knee jerk reaction when ever the Tea Industry was brought into reckoning and its monetary importance evaluated. Usual consensus in official circles was that tea had not quite achieved its potential.

This was coherently contested by Chairman Planters’ Association of Ceylon, Kavi Seneviratne who said ‘ What ever contrary views are claimed, it had to be conceded that the country would face catastrophic repercussions if there was no tea. If "We have sustained a population, not just yesterday, but over a century. Even if there was official support for other industries, and tea had to make do on its own it was still resilient to withstand the vicissitudes of an extremely volatile market.

He said demands of EU countries that all tea exports must have Hazard Analysis Critical Control Points, (HACCP), certification, meant that each tea factory had to invest at least Rs.10 million to upgrade facilities as demanded by that group of Countries. Additionally withdrawal of VAT benefits, and the imposition of additional tax burdens impacted on the industry.

Pointedly most new industries had government support through incentives and similar salutary fringe attractions. The tea industry had to pay for all this largess. industries over the years have constantly been exposed to all sorts of benefits, not least tax holidays and the like. ‘True, the country’s taxes have to be paid, but not to subsidise some others who may perhaps be less productive, and also to pay for their tax holidays.

The Planters’ Association of Ceylon (PA), established in 1854, is now over 150 years in existence, responsible for opening out the remote hinterland which is now known as the lush green central hills enveloped in undulating manicured tea land. This country does owe much to the few who still brave the elements to produce its sustenance, and not relegate the industry to ‘country cousin’ status.

All in all, in crisis the tea industry is resilient, but needs support, and not constant debilitating snide remarks that does no good to nobody, except perhaps bolster a sagging egos.

In this context, it was also relevant that remarks from Presidential Advisor, and now Governor of the Central Bank, Ajit Nivard Cabraal, at the last Colombo Tea Traders Association Annual general meeting, he down graded the tea industry when he said that house maids now bring in over 2.8 billion Dollars as foreign exchange. He failed to recognise antecedents stemming from the industry which sustained entire provinces, and districts in collective atmosphere of social life integrated with commercial activity. These were cogent remarks of Kavi Seneviratne who said that government sources should recognise this fact.

The Forbes and Walker Sri Lanka Tea Review 2005, traced progress of the tea industry, and within all parameters, it was undoubtedly a prestigious publication, and authoritatively compiled and pieced together progress details in 2005.

Among statistics released over the 10 year period 1996 to 2005, tea production increased approximately 70 per cent. That is, from approximately 258 metric tons, then to 314.7 to end 2005. This was by any standard phenomenal.

However to dent the bubble of euphoria, Kenya, India, and mainland China too have increased production. These countries although examined did bear production figures which had increased. But only just. Nothing very exciting, said the Brokers. (Island)