Business Tea Report

Bartleets weekly tea surveillance upto October 17:

Local packers trading strong on Ex-estate market

THIS WEEK’S AUCTION witnessed 4.91 mkg of teas traded of which 0.585mkgs were Ex-estate teas. An increase has been noted as compared to last week’s auction which totalled 4.806mkg with the Ex-estate reporting a 0.556mgs.

On the Ex-estate market the local packers were trading in strong.

Most of the high priced varieties were met with low demand due to the anticipated crop increase because of the changing favourable weather conditions. Meanwhile, the overall sale was low comparatively to last week’s auction.

The CIS, Far East, Japan and the Middle East were strong. The CIS were mainly active on the tea bags and Japan on Nuwara Eliya and Udapussellawa teas.

Looking at the Tippy market segment, it was strong on the flowery grades this week with the usual strong players Iran, Dubai and Saudi Arabia at the front line. Currently the market is estimated to be at its peak level.

On the Leafy market select best categories of OP and OPA grades continued to improve further. a shortage of well made teas were prominent at the sale.

Indications are that good teas will maintain at present levels and even more with less availability.

Plantation companies have conceded to a wage increase for plantation workers and entered into a collective agreement with the unions following a directive to increase salaries.

The wage impact on cost of production is around 60-65 per cent. It was pointed in 1992 that the total wage package of a plantation worker was Rs. 60/88 per day.

Today, the wage package is Rs. 290 per day, which is almost a 500 per cent increase over a period of 15 years. It has emerged that many tea smallholders are looking for other businesses and whilst the regional plantation companies are also looking to lease their lands.

There are about 700,000 people in the industry at present.

It is also claimed that the main companies are having a monopoly in exports and the share accruing to the tea smallholders is negligible.

Further it was stated that at present the industry earned around 91 billion rupees and by reducing the fertiliser price they could earn around 150 billion rupees according to the Small Tea Estate Holders Union (STEHU).

An estimated 21 million kilos of tea has already been lost costing a minimum of Rs.6.5 billion at the Colombo Tea Exchange.

According to Intimex consulting the Sri Lankan tea market should look in to new trends like Bubble teas, Red tea, Green tea, White tea, Yerba mate, RTD or bottled tea, Premium loose-leaf teas, higher-quality tea bags, functional teas, Organic and fair trade, Silky Nylon Bags, Artisan Teas, Pu-erh are just some of the latest buzz words. Few are beginning to keep pace with these global trends in recent past.

The industry has been slow to innovate, upgrade, add value, and move closer to consumers with only a few notable exceptions. Most are contract packers with focus on bulk teas. Low worker productivity cost of production that is now around US$ 1.75 per kg, well above that of Vietnam with around US$ 0.75 per kg are all concerns.

Inconsistent policies, CESS fund malpractices, cut throat competition among our local exporters that lead to price wars, ever increasing freight charges, under developed value addition base and technology are also concerns. Out of the 18 stocks, 8 were up, 5 were low and 5 reported static week on week.

On the US$ the Buying has remained at Rs. 113.38 whilst selling price has dropped Rs. 113.45 to Rs. 113.40 week on week.