Moving past the storm in the teacup

Even with the COVID-19 pandemic, a ban in an essential production input and process standstills due to the economic crisis, Sri Lanka’s second-largest export industry – the tea industry – has continued to operate amidst adversity. 

For example, due to fuel shortages and resulting transportation issues, hillside tea farm resorted to suspending tea sacks from pulley systems along ziplines, just to meet supply timetables. 

Anel de Silva, the Managing Director of Heritage Group, a major tea exporter, stated: “Shipments continue internationally,” “The weekly tea auctions – moved to an online format – continue to operate as normal,” and “The Port of Colombo is operating without interruption”. Despite difficulties, the industry has been resilient in operating efficiently across the supply chain.

The plan to stop the importation of fertiliser and other agricultural chemicals while instantly switching farms to organic farming methods in May 2021 galvanised the tea industry. In 2020, Sri Lanka spent nearly $ 400 million importing 1.3 million metric tons of fertiliser. However, because of the Russian Ukraine conflict, fertiliser in February 2022 being shipped was halted. 

Supply levels in Sri Lanka were already low as a result of the failed organic agricultural mandate. The issue grew worse due to a lack of foreign funds to source this raw material. In accordance with a credit line given to Sri Lanka, India provided 44,000 metric tons of urea in the middle of July. The fertiliser was swiftly transported by Sri Lanka’s tea board to more than 100 manufacturers for distribution to smallholders and neighbourhood estates.

Despite local supply lag, demand is in full swing. Middle Eastern consumers are in high demand due to their windfall gains from rising oil prices. The United Arab Emirates acquired 13 million kilos, while Iraq purchased 28 million kilograms mid-year. 

After retreating from the market during the geopolitical issues in February, Russian consumers have now returned. Through July, Russian tea firms purchased 12.3 million kilos albeit 3.5 million less compared to the same period in 2021. Yet purchased by paying premium price frequently, with upfront payments.

In comparison to 2021, production totals for the year up through July decreased by 20%. Less raw material was reaching companies as a result of a drop in plucking rounds. These saw 10 to 13 days apart as opposed to previously seen 7 to 8 days, and since industries are experiencing power problems, they were purchasing less raw leaf. Moreover, as employees were malnourished, disheartened, or unable to afford transportation, yield per acre was in decline.

Because leaves must be processed within four hours after being plucked, the quality of the tea decreased at the severity of the crisis. Lack of fuel and absent drivers – who were working elsewhere because they could not afford gas and diesel – made transportation impossible. Instead of making timely deliveries of leaves to the manufacturers, other drivers were entrusted with transporting workers to the fields from pickup places.

However, this year’s tea exports may bring in more money than the 1.3 billion dollars projected for 2021. That will not only help pay for imports; it would also reassure foreign lenders that Sri Lanka now justifies a bailout after defaulting on payments on $ 51 billion worth Government debt in May. 

In response to crisis challenges, farms and enterprises have changed. Women are now permitted to wait in line for meals while absence policies are suspended, boosting morale. In order to ensure that tea arrives at auction houses on schedule, producers lend fuel to their transportation companies. The difficulties the sector has previously encountered will hopefully be in the past as Sri Lanka moves toward a slow recovery.

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