Business Tea Report

Fair demand for Tipping Market

The quantity of tea arriving at the Colombo Auction this week decreased to 6.210mkg from 6.386mkg traded in the previous sale. Meanwhile the Ex-estate crops showed an increase from 0.943Mkg to 1.082mkg.

Market Segments: In the Ex-estate segment CIS were very active in buying CTC teas whilst BOP and BOPF wee purchased in low levels.

Japan and UK were active in buying BOP and BOPF whilst North American sector buyers showed a selective buying pattern. Well made teas were much competed and bought in the auction making it a point to the plantations to strengthen on the quality aspect.

The Tippy market witnessed a fair demand. CIS were active whilst Dubai and Iran were selective in their buying pattern. Overall Leafy grade segment showed a further improvement from last week with almost all the grades moving up except the Pekoes.

Some quotations given by the local buyers to their foreign counterparts have got confirmed and it was one of the main reasons for the market to rise. Shippers to Germany were buying heavily as the BOP1 grade hit an all time record price this week.

Company News: Agalawatte Plantations which is part of Mackwoods Group has recorded a revenue of Rs. 1.88 billion and a net profit of Rs. 165.3 million in 2007, the highest in the companies history.

The turnover was mainly attributed to the performance of the company’s three major crops - tea, rubber and oil palm. This diversification had resulted in the boost to profits and sustainability.

The December 2006 labour unrest and the drought in the first quarter of 2007 which affected the drop in National Tea Production in 2007 also resulted in a six per cent decrease in Agalawatte’s tea crop as against 2006.

However, despite the drawbacks it had succeeded in improving the value of the tea by 44 percent which contributed Rs. 859 million, an increase of 35 percent from the previous year.

Despite all the odds Talawakelle plantations too had reported an after tax profits of Rs. 100.9 million for 2007. The annual report states that the turnover and net profit after tax which has increased by Rs. 188.9 million and Rs. 22.3 million respectively.

The profitability was mainly due to the increase in the low grown teas. The company is eying on a green tea line in the coming future to strengthen its product diversity.

International News: Despite the fact that Sri Lanka’s main competitor, Kenya, produced and exported greater volumes, the islands’ tea sector has gained the edge when viewed in terms of value.

Kenyan Production reported a crop of 369 mkgs as compared to Sri Lanka’s 304.6 mkgs, displacing Sri Lanka as the largest exporter of tea in the world.

However, looking at export earnings on tea, Kenya recorded $639 million, as compared with $652 million in the previous year, whilst Sri Lanka achieved $ 1.02 billion, up from $ 836 million in 2006.

Domestic policy: The President has appointed a commission to look into the development activities in the tea estates following a Cabinet Memorandum.

The commission will be focusing on the welfare activities for estate workers and will be charged with the task of looking into the problem of labour disputes in the estates. They will then make necessary recommendations to the Government.

Plantation stocks: With reference to the weekly surveillance of the 19 plantation stocks, nine were high in value whilst nine were lower and one reported static. Elpitiya and Tea Smallholders witnessed a gain of 7 and 6 per cent respectively, week on week.