Tea prices likely to stay strong in Q4: John Keells

Leading produce broker John Keells Ltd. is forecasting Lankan tea prices to stay strong in the last quarter of this year owing to strong demand caused by crop failures in most major Black Tea producing countries.

“Although Sri Lankan tea prices have been high, it has come in the back drop of production shortfalls. As often seen in the past, increased prices, coinciding with increase production are not too common an experience,” John Keells said.

“Often when global tea prices increase, we have seen a decline in global production, negating the gains in prices. Thankfully the buoyant prices for Sri Lankan teas from all three elevations has somewhat compensated for the production drop on most plantations in 2012,” the produce broker added.

It said Sri Lankan tea met with strong demand at the sales in the month of September 2012, culminating in recording the second highest average of Rs. 419.78 for any given month, the previous best being Rs. 430.31 achieved in September 2009.

John Keells also said Sri Lanka’s tea sale average of Rs. 419.78 for September 2012 registers an increase of Rs. 73.96 (21.39%) over last year with total high grown average of Rs. 418.18 recording a significant gain of Rs. 114.42 (37.67%), followed by Rs. 79.29 (26.73%) for mediums and Rs. 60.66 (16.40%) for the low grown. The outstanding averages recorded during the month have pushed up the to-date average to Rs. 361.63, which is a gain of Rs. 24.03 (6.64%) over the corresponding period of 2011.

Commenting on last week’s auction, the produce broker said the one million kilo of ex estate teas met with fair demand. The best western high grown BOP/BOPFs were barely steady, whilst select best and plainer BOPs appreciated Rs. 10 to Rs. 15 on average. BOPFs were firm to somewhat lower at times.

Nuwara Eliya BOPs continued to sell well gaining Rs. 10 to Rs. 20 and more, whilst the BOPF, although lower to last week, continued to sell in the range of Rs. 600 to Rs. 660. Seasonal type Uva declined Rs. 20 to Rs. 30 on average, whilst others too were irregular except for a few coloury BOPs that gained by a similar margin. Low Grown CTC PF 1s were firm to Rs. 15 to Rs. 20 easier, whilst high and medium types gained by a similar margin.

The low grown average of Rs. 450.55 established at the sale of 26 September 2012 is the second highest on record for any particular sale. However with this week’s lower prices, particularly for the small leaf varieties following the devaluation of the Iranian currency, the low grown average is expected to be lower.

In the leafy category, prices for the best BOP1s on offer continued its bullish trend with prices ranging from Rs. 700 to Rs. 760, whilst the OP1s too sold above the Rs. 700 level. Some bold pekoes met with a slightly lower market but most other grades were fully firm if not dearer. There was excellent demand from Russia, Iraq and Libya, whilst Iran, Saudi Arabia, Jordon, Dubai and other Middle Eastern countries also lent useful support, John Keells said.