Business Bartleets Weekly Tea Report

Bad weather hits profit margins

This week’s Auction witnessed 5.453 mkg of teas traded of which 0.638 mkg were Ex-estate teas. An increase of 0.536 mkg has been noticed on the total crop as compared to the last two week’s sale.

In the Ex-estate market, demand was comparatively slack as compared to recent weeks as availability improved and prices started to normalise. Russian buying was also lower as they appear to have picked up on their required quantities of winter buying.

The BOPF was therefore well down during the sale. However, the BOP’s held firm due to strong Japanese interest.

Tippy Teas also met with lower demand due to very conservative activity on the part of the usual players Iran, Dubai, CIS, Turkey and Saudi Arabia.

A similar tale accompanied the Leafy-grade market which cooled considerably with many of the teas selling below last levels. The only exception was the wiry-types like the OP1’s and the BOP1’s that maintained.

Demand for Pekoe grades also eased with many of the exporters awaiting confirmation from their counterparts overseas. With the plantations experiencing sustained rainy weather in recent days, future crop output is set to rise but players will be keeping an eye on quality.

An analytical laboratory that will experiment to develop the tea industry is soon to be unveiled by the Sri Lankan Tea Board.

The Rs. 70 million project aims to introduce micro-biological and pesticide testing section to the unit that is already equipped with a chemical section.

Beefing up the scientific approach is aimed at boosting the quality standards with regard to the analysis of pesticide residue which will serve to deter the illegal sparkling of Methyl Salselate. Testing for bacteria and other microbes are also expected to be carried out.

The latest in a series of Plantation Companies to report a fall in profits was Talawakelle Tea Estates which is a subsidiary of Hayleys. Net profits for the year up to September 2007 are reported to have taken a hit of 86 per cent, falling to Rs. 16 million.

Turnover had also fallen from 1.35 billion to 1.28 billion. Profits were particularly affected during the first quarter when the western high grown quality season normally fetching good prices was hit by bad weather. The impact of last year’s strike also lingered on to stifle production.

Meanwhile, Sunshine Tea (Pvt) Limited bagged the ‘Gold Award’ at the Chamber of Exporters for the firms performance in value added tea exports during 2006-07. Sunshine Tea’s unrivalled track record also led to the firm being selected as the exclusive packer for the Sri Lankan Tea Board.

Out of the 18 plantation stocks monitored nine were up five were down and four remained unchanged in value, week-on-week. Hapugastenne, Udapussellawa, Kelani Valley and Horana showed an increase of 20 per cent, 20 per cent, 14 per cent and 11 per cent respectively.