Distress in global tea cup: Sri Lanka not spared

By Shabiya Ali Ahlam
Distress in the international markets has brewed a storm in the global tea cup, negatively impacting the top tea-producing countries and Sri Lanka has not been spared in this wave.

While the local tea industry continues to grapple with a number of domestic issues such as managing higher costs of production and improving productivity, Sri Lanka’s weekly tea auction prices have been moving down.

According to the latest update by Asia Siyaka Commodities, the downtrend is attributed to the “subdued demand from major importing countries”. This is in addition to the local production remaining stagnant, despite a number of efforts taken by the authorities.

The killing of a top Iranian General by the US and the retaliatory missile attacks by Iran subsequently on a US military base in Iraq, have made the global politics extremely volatile. Iran is a major buyer of Ceylon Tea. 

It has been observed that the softer trend in international tea prices has also impacted India’s export prospects, primarily for the CTC variety. 

Just as in Sri Lanka, the Indian tea industry too continues to face headwinds in controlling costs, primarily after the significant increase in the wage rates during the financial year 2019.
The Ceylon Tea industry would be embarking on a similar challenge as its neighbouring giant, with the government having announced a decision to increase the minimum daily wage of plantation workers from Rs.750 to Rs.1000, with effect from March 1, 2020.

Meanwhile, the Kenyan auction prices, in spite of the crop loss in the current year, remained under pressure due to the overhang of the record production witnessed during the last calendar year. 

Its production dropped by approximately 15 percent, compared to the corresponding period of the previous year.

About 6.37 Mnkg of tea came under the hammer at the Colombo Tea Auction this week, of which 2.81 Mnkg were Low-Grown Main Grades and 2.16 Mnkg were High and Mid-Grown Main Grades.