Tea Report

Bartleets Weekly Tea Surveillance Report up to October 3:

Strong demand for BOPFs with tea bags to CIS

THIS week’s auction witnessed a quantity of 4.989mkg arriving at the Colombo Auction, down from the 5.427mkg traded during the previous sale. Quantities have been slowly but steadily declining now for seven consecutive sales. Of this week’s crop, 0.608mkg were Ex-estate teas.

The Leafy-grade market was on the whole firm to dearer. The OP1 grade that established a new all-time record last week proceeded to further top it by another Rs. 20 this week.

Shippers to the CIS and the European destinations were visibly active and with the future sale offerings continuing to dip below five million kilos, the local buyers were struggling to covers their quantities.

The Tippy market also met with overall strong demand. Dubai and Iran were very active whilst the CIS, Turkey and Saudi Arabia were moderately active. Lack of availability was a concern.

In the Ex-estate segment local tea-bag packers to the CIS played a strong role which in turn led to strong demand for the BOPFs.

The Uva seasonal teas fell from last weeks highs due to quality concerns whilst the Uva/Udapussallawa colory teas moved up on availability. Japan drove the market for the best and below-best categories in the BOP market.

Meanwhile, round four of talks between Estate Trade Unions, Employers’ federation of Ceylon and the Labour Ministry have taken place in an attempt to strike a deal with regard to the proposed Rs. 30 wage rise for estate workers.

Whilst the President had called on the Labour Ministry to review the wages of estate workers, the Plantation companies have claimed that the Unions need to act more responsibly.

The ‘Auga 2007’ International Trade Fair is scheduled to be held in Cologne, Germany next week with a record number of 32 Sri Lankan exporters taking part in the event.

The biennial event is one of the most important food and beverage exhibitions which attracts over 7,000 exhibitors from over 150 countries.

Sri Lanka, which has been participating in the event for over thirty years, will have its leading tea exporters promoting their brands and for the first time this year, a workshop on ‘Ceylon Tea’ has also been organised for visitors to learn more about the island’s tea.

Sri Lankan exports to India should now be freeling the impact of the removal of Port Restrictions on tea under the India-Sri Lanka Free Trade Agreement. This followed the ninth Technical Level Negotiations to remove the restrictions.

However, Indian exports to other destinations appear to have taken a hit due to a decline in buying from Iraq and Pakistan. Total exports during January-June had declined to 86mkg from 106.6mkg last year.

With the emerging trend, the export target of 206mkg is unlikely to be reached according to sources across the Palk Straight.

One factor explaining the trend is the strengthening Indian rupee which has appreciated by around 14 per cent, making Indian teas more expensive at a time when shipments from Kenya have been getting cheaper due to a bumper crop in the East African producing nation.

However, aggressive marketing drives in Russia are now said to be showing good returns. Of the 18 Plantations stocks, eight had gained, five had dropped and the remaining five were static, week-on-week. Out of the gainers Malwatte, Namunukula and Maskeliya showed healthy gains in price.

On Monday the stock market cleared three billion rupees due to big transactions in Dialog and Ceylon Tea Services shares. The Sri Lankan currency was unmoved during the review period.