RPCs remain wary of plantation sector outlook despite improved tea prices

• Higher prices primarily a result of lower production
• Currency depreciation a serious challenge for industry amid increasing input costs
• PA chief says COVID-19 has added to tea producers’ woes

Sri Lanka’s Regional Plantation Companies (RPCs) remain wary of the sector’s outlook due to whopping crop losses which has led to increased cost of production despite recently improved tea auction prices.

“The challenges around COVID-19 add to the already pressing difficulties of tea producers who have been facing an unprecedented drought for the past 3 months which is estimated to have caused as much as a 40 percent reduction in estate production. The loss in crop had already created an increase in the cost of production (COP),” the Planters’ Association of Ceylon (PA), Chairman, Sunil Poholiyadde stated via press release.

Given the unprecedented global supply chain disruptions unfolding as a result of the pandemic, Ceylon tea attracted significantly improved prices by the close of the very first tea e-auction which took place on 3rd April 2020. 

Higher prices were primarily a result of lower production, where weekly auction volumes were approximately 40 percent lower than in a normal cropping month, and sharp currency depreciation.

However, Poholiyadde warned that while improved prices would be useful in a crisis situation, currency depreciation also posed a serious challenge for the industry when considering its impact on increasing input costs, which together with lower production volumes – would negatively impact an already high cost of production.

In the case of the rubber sector, six auctions were delayed for a period of three weeks owing to the COVID-19 pandemic, despite increased production driven by favourable weather conditions in rubber growing regions. 
Poholiyadde noted that the interruption in auctions had caused acute difficulties for RPC cashflows. 

“The resumption of auctions has been an extremely welcome development for the rubber sector as well. Prices have remained at relatively similar levels to before the COVID outbreak. However we will need to pay careful attention here given the sharp declines which were seen in global oil prices,” he added.Following the declaration of plantations sector as an essential service by the government, PA acknowledged that RPC operations immediately gathered momentum amidst stringent new measures to protect workers and the wider estate community against the COVID-19 pandemic. 

“While work on the estates was halted by March 13, as soon as the COVID pandemic worsened, most RPCs were able to resume work after only 4-days interruption. This was due to the remarkable initiative taken by RPCs with the assistance of health authorities to institute stringent health and safety protocols, while ensuring that all workers and the wider estate community had their essential needs met,” 
Poholiyadde elaborated.

Moving forward, he reiterated the total and continuing commitment of all RPCs to ensure that all possible precautions are taken to prevent the spread of COVID-19 among workers and the estate community, in compliance with guidelines issued by health authorities.  

At present, the RPC tea sector alone maintains a workforce of approximately 135,000, and is also responsible for the welfare of a wider estate community with an approximate population of 1 million since most of the migrant workers have also returned to the estates.

Media Spokesperson, Dr. Roshan Rajadurai stressed that RPCs are fully committed to ensuring the health and safety of its employees despite the challenges.

“The PA and its members will also be carefully monitoring the situation as it develops, and will be ready to implement any further directives issued by the government and health authorities on an urgent and immediate basis,” he added.