Asia Siyaka analyses record Sri Lanka tea production of 2010

Commodity broker Asia Siyaka has briefly analysed the record tea production of 2010 in addition to making some useful suggestions on the way forward. Here are excerpts from Asia Siyaka Commodities Ltd.:

The Sri Lanka Tea Board has released preliminary production data for year 2010. Final figures would most likely be confirmed during the first quarter of this year. Total production is at a highest ever 329.38 Mnkg, comfortably above the 2008 record of 318.6 Mnkg. Following the drought in 2009, production slumped to a nine year low of 291 Mnkg in that year.

Tea production from the Low Grown sector has reached a highest ever 195.6 Mnkg accounting for 59% of all tea produced in the country. The previous record for this elevation was 185.2 Mnkg achieved in 2008.

It must be noted however that in Q4 2008 the market collapsed following the global financial crisis and saw a sharp drop in production during that period; if not for the Q4 crisis, total national production too would have been in line with the 2010 figure.

In 1998, Low Grown production was 150 Mnkg. Since then crop has increased 30% to the current year’s total of 195 Mnkg. In 2004 tea production from this elevation reached 183.8 Mnkg and remained in this range till 2008. The exceptions were 2007/2008, when production declined due to exceptional circumstances.

Whilst it is accepted that the pace of growth cannot be sustained, one wonders if this growing region is becoming more susceptible to weather change with the early VP teas now passing their productive life cycle.

Deniyaya district production has been steady around 16 Mnkg since 2001 with a 9% increase this year. Galle recorded production of 48.7 Mnkg in 2001 and dropped sharply to 44.8 Mnkg in 2009 and has achieved 52 Mnkg in 2010.

Morawaka at 8 Mnkg has shown no change over the period. Matara has similarly maintained production of around 16 Mnkg. Ratnapura however was at 48 Mnkg in 2001 and peaked at 55.6 Mnkg in 2004. Since 2005 production in the district has been between 50 Mnkg and 53 Mnkg and recovered to 55 Mnkg in 2010.

High growns at 78.2 Mnkg are 7%% more than the 2009 drought reduced crop figure of 72.9 Mnkg. In 2008 however High Grown production was 84.4 Mnkg. Over the past 10 years production has ranged from 74 Mnkg to a high 86.9 Mnkg in 2002. More often than not production from this elevation has struggled to achieve the 80 Mnkg level. In this instance age profile of tea is a more serious issue and urgent steps would need to be taken to reverse the slide.

Nanuoya/Lindula/Talawakele has emerged as the main growing sub district, with production of 8.9mnKg.Boganwantalawa follows with production of 8MnKg. Upcot/Maskeliya which held the top spot in the past is at 7.6MnKg. On the eastern slopes, Haputale has grown to 4.9Mnkg; and Malwatte/Welimada at 4.5MnKg.

Mid Grown have done relatively well to achieve a 10 year high of 55.4 Mnkg. There would have been some movement of leaf to Orthodox factories from the higher elevations during periods of comparative by better price. Further, study would be needed to assess the impact of re-planting and higher prices leading to better agricultural practices combining to improve production from this elevation.

Nationally this year’s production gains are not a platform for a further surge over the next few years. There are strong challenges to be overcome from changing global weather patterns, ageing tea bushes, declining work force and rising costs.

In a recent industry review all segments were united in the conclusion that investment in re-planting is the number one national priority over the next 10 years.

Sri Lanka the only certified Ozone Friendly tea producer in the world, would need to move fast to build up supply adequately to quench the growing thirst of its hitherto loyal customers.