Testing times for tea

Saturday, 21 June 2014 00:01 - - {{hitsCtrl.values.hits}}

Brokers say 2014 unlikely to be a record year for tea production
Lack of timely availability of fertiliser headache to growers

The tea industry may have hoped for 2014 to be another outstanding year for production, but the recent setback has evoked mixed sentiments among brokers, with the majority expecting a likely drop in the yearend crop. With unfavourable weather conditions having negatively impacted the crop, resulting in January to April cumulative production dropping to 102.5M/kgs compared to 115.5M/kgs in 2013, the industry expressed it was unlikely the dampened growth could be recovered within the remaining three quarters. While Asia Siyaka Commodities stated there was no reason as to why there should be a drop, two other produce brokers, John Keells Ltd. and Forbes and Walkers, said the industry would see production stand below 340 million kilos by end of 2014. The basis for the latter is that the industry had been unable to have record production for two consecutive years in the past. In 2013 the tea industry recorded an all-time high crop of 340 million kilos, a 2.7% increase from the previous record of 331 million kilos achieved in 2010. While the situation is not the same for 2014 since the industry saw an overall drop in production within the first four months, for the month of April 2014 production totalled 28.9M/kgs vis-à-vis 33.8M/kgs of 2013, showing a significant decrease of 4.89M/kgs. Asia Siyaka Commodities CEO/President Anil Cooke told the Daily FT the 7.1 million drop in March production from a year earlier had got the industry worried. However, he expressed confidence in a recovery in production in the coming months. Nevertheless, he said it was only possible based on two variables, which are favourable weather conditions and uninterrupted supply of fertilisers to growers. “There is no reason as to why production will continue to fall. It was noted that after the Vesak period there has been an increase in production. We have to wait and see if that can be sustained. Also there are no indications that the weather will drastically dry up. So there is no reason to conclude that the there will be a drastic drop,” Cooke pointed out. Although John Keells Ltd., Vice President/CEO Sudath Munasinghe and Forbes and Walkers Tea Brokers Managing Director Yshan Fernando noted it would be difficult for the tea crop to be recouped this year, they shared Cooke’s sentiments relating to the availability of fertilisers and its impact on the industry. “There is an issue regarding the availability of fertilisers and this could be one of the factors contributing to the drop in production. With the farmers having limited access to this, production will be further impacted,” asserted Munasinghe. Similarly, Fernando noted: “While the delay in the monsoon will result in a drop in the yearend yield, adding to this will be the lack of timely availability of fertilisers to farmers.” Analysing the first quarter cumulative production figures of 2013 and 2014, it is observed that for the tea industry to end with the 2013 yearend production of 340 million kilos, an average of 28.75 million kilos should be achieved every month from the second quarter onwards. However, as per first quarter production data, the average production per month stands at 24.46 million kilos. According to a report released by Forbes and Walkers Tea Brokers on 27 May, all elevations have shown a decline in production in the month of April this year in comparison to April 2013.

Tea brews record exports in March

Export earnings from tea in March increased by 20.3% to $ 155 million, recording a historically-high monthly value. According to the Central Bank, this was a combined outcome of a 14.3% increase in export volume and an increase in the average export price of one kilogram of tea by 5.2% to $5.02. In the first quarter tea exports grew by 16% to $ 387 million in comparison to the corresponding period of last year.