Tea Traders brew warning of global market share loss

• Claim quantity of tea production hampered due to ban on fertiliser
• Say drop in tea exports and foreign exchange earnings inevitable
• Point tea exporters are faced with issues in Japan, Taiwan and EU on MRLs
• Call for immediate corrective action
• Volatility of exchange rate caused uncertainty losses to exporters, opportunity to increase market share globally

The Ceylon Tea Traders Association (CTTA) this week raised the red flag on the policies adversely impacting production, adding that a decline in quality will see the loss of global market share.

It reiterated that the decision by the Government to ban the use of chemical fertiliser and agrochemicals effective May 2021, is causing grave concern to the tea industry.

“The quantity offered at the weekly auction has shown signs of a decrease, whilst the quality characteristics have recorded a noticeable decline, as well,” CTTA Chairman Jayantha Karunaratne said at the Association’s 127th Annual General Meeting (AGM) on Wednesday.

Collectively, the industry is of the view that the decision to ban the use of chemical fertiliser and agrochemicals has begun to show a negative impact on the industry. 

‘Ceylon Tea’ is marketed globally on its unique characteristics in terms of its blackness and flavour profile. 

“Any decline in the quality of Ceylon Tea will have serious consequences, where the Sri Lanka market share in a global arena would fall. As a result, a drop in exports and foreign exchange earnings is inevitable,” he warned.

The Colombo Tea Auction continues to maintain the highest average price for tea in comparison with all other global auction centres. The Colombo tea sale average from January to August is Rs. 618.80, as against Rs. 622.67 in 2020. Tea exports total 187.6 million kg against 174.1 million kg in 2020, recording positive growth.

Karunaratne also said tea exporters to Japan, Taiwan, and the EU are faced with issues concerning maximum residue levels (MRLs). “CTTA with all stakeholders proposed to introduce a system of communication between exporters and producers expecting immediate corrective action,” he added.

High volatility of exchange rate has caused uncertainty and losses to the exporters and loss of opportunity to increase market share in international markets, he said, adding that the dollar rate quoted by commercial banks does not reflect the real value.

“On and off payments received by the exporters are on hold by the US intermediary banks. These payments are sometimes held up for two to three weeks without credit being given to the exporter,” he claimed.

Karunarathne noted some companies ventured into new projects, with new machinery, factory expansions, and market expansions with borrowed funds. Cash flow forecasts have changed with the current circumstance as a result of the pandemic. “There should be initiative and encouragement from the authorities so that such projects would continue without being abandoned,” he said. 

CTTA Chairman also said exporters are currently faced with new challenges as main importing countries have depreciated their currencies, capacity and equipment shortage freight rates on major trade lanes have gone up by 400% to 500%. 

He urged the authorities could offer better service in Colombo to attract more shipping companies in the long run. 

“Tea trade has been resilient over the years and we will continue to be innovative whilst contributing to the country's economy with increased export revenue,” Karunaratne stressed.