SRI LANKA TEA PRODUCTION - JANUARY 2020

Sri Lanka Tea Production for the month of January 2020 totalled 21.9 million Kgs recording a decrease of 1.27 million Kgs vis-à-vis 23.2 million Kgs of January 2019. High Grown production has shown a growth YOY, whilst Medium Growns and Low Growns have shown a decrease. It is also relevant to note that Low Grown production of 13.3 million Kgs is the lowest since 2011, when 13.2 million Kgs  were recorded.

When analyzing the CTC production of 2.08 million Kgs for January 2020 ,  a gain of 0.28 million Kgs is noted compared to 1.80 million Kgs of January 2019. High Grown production for January 2020 has shown a significant increase YOY followed by Low Growns and Mediums.

The summary of tea production for the month of January 2020 is appended below (in MT).

CATEGORY

QUANTITY (MT)

Orthodox

19,690

CTC

2,084

Green

164

Total

21,938

SRI LANKA TEA EXPORTS - JANUARY 2020

Sri Lanka Tea Exports for the month of January 2020 totalled 22.09 million Kgs vis-à-vis 23.67 million Kgs of January 2019, thus showing a deficit of 1.58 million Kgs. When analyzing the main categories of exports (i.e. Packeted tea, Tea Bags and Bulk tea) for January 2020, shows a decrease when compared to the corresponding month of 2019. Total revenue too, of Rs. 18.09 billion  for January 2020 shows a decrease of Rs. 2.15 billion  compared to Rs. 20.17 billion  of January 2019, resulting in the FOB value of Rs. 818.86 per kg  recording a decrease of Rs. 33.28 compared to Rs. 852.14 per kg  of January 2019.

Iraq has emerged as the largest importer for January 2020 followed by Russia and Turkey. Other noteworthy importers are Iran, Azerbaijan, China and Saudi Arabia. It is also relevant that destinations such as Libya and Syria have shown a significant decrease in imports for the period under review.

The relevant export figures for the month of January is appended below. (in MT).

DESCRIPTION

QUANTITY (MT)

Tea In Bulk

9,523

Tea In Packets

10,254

Tea In Bags

1,776

Instant Tea

197

Green Tea

344

TOTAL

22,094

MAJOR IMPORTERS OF SRI LANKA TEA – JANUARY 2020/2019 (MT)

COUNTRY

2020

2019

IRAQ

3,068

2,915

RUSSIA

2,849

2,826

TURKEY

2,734

2,389

IRAN

1,491

1,712

AZERBAIJAIN

871

814

CHINA

836

758

SAUDI ARABIA

744

561

LIBYA

630

1,481

U.S.A

603

590

SYRIA

535

1,066

SRI LANKA TEA PRODUCTION – JANUARY TO DECEMBER 2019

Sri Lanka Tea Production for the period January-December 2019 totalled 300.1 million kgs vis-à-vis 303.9 million kgs of January-December 2018, showing a decrease of 3.8 million kgs . High Grown production for 2019 totalled 61.7 million kgs compared to  63.7 million kgs of January-December 2018 thus recording a decrease of 2.0 million kgs. Meanwhile, Mediums totalling 45.9 million kgs have shown a marginal gain of 0.1 million kgs against the volume of  45.8 million kgs of January-December 2018, whilst Low Growns totalling 189.8 million kgs have recorded a decline of 1.9 million kgs vis-à-vis 191.7 million kgs of January-December 2018.

CTC production for the period January-December 2019 totalled 23.58 million kgs, recording a decrease of 0.4 million kgs compared to  24.0 million kgs of January-December 2018. High Grown production totalling 3.5 million kgs for January-December 2019 has recorded a decrease of 0.2 million kgs against the volume of  3.7 million kgs of January-December 2018. Medium Growns totalling 8.0 million kgs shows a decrease of 0.2 million kgs vis-à-vis 8.2 million kgs of January-December 2018, whilst Low Growns have remained static with January-December 2019 production recording 12.0 million kgs.

The summary of tea production for the January to December 2019 is appended below (in MT).

CATEGORY

QUANTITY (MT)

Orthodox

273,907

CTC

23,585

Green

2,642

Total

300,134

SRI LANKA TEA EXPORTS – JANUARY TO DECEMBER 2019

Sri Lanka tea exports for the period January to December 2019 totalled 292.6 million kgs vis-à-vis 282.3 million kgs of January-December 2018, showing a gain of 10.3 million kgs. When analysing the exports category-wise, Bulk tea totalling 122.8 million kgs during January-December 2019 has shown a marginal growth of 0.4 million kgs against the volume of  122.4 of January to December 2018. The Peacketed tea for January to December 2019 of 139.08 million kgs has shown a growth of 7.8 million kgs compared to  131.25 million kgs of January to December 2018, whilst Tea bags totalling 22.9 million kgs for January to December 2019 have shown a growth of 1.4 million kgs vis-à-vis 21.5 million kgs of January to December 2018. Similarly, Instant tea totalling 3.07 million kgs has shown a growth of 0.59 million kgs against the quantity of  2.4 million kgs when compared to the corresponding period of 2018. Green tea too for the period January-December 2019 totalling 4.7 million kgs has shown a marginal growth of 0.1 million kgs vis-à-vis 4.6 million kgs of January to December 2018.

Meanwhile, revenue of Rs. 240.6 billion realized  from tea exports for January to December 2019 is the highest ever surpassing the previous best of Rs. 233.3 billion realized  in 2017. Further, this also shows a growth of Rs. 8.9 billion  when compared to Rs. 231.7  billion of the corresponding period of 2018.  It is also relevant that the total FOB value for January to December 2019 of Rs. 822.25 has shown a growth of Rs. 1.50 vis-à-vis Rs. 820.75 of January to December 2018, thus recording the highest ever FOB value surpassing the previous best which was realised during the corresponding period of 2018.

Turkey has emerged as the largest importer of Sri Lankan tea in 2019 followed by Iraq and Russia with Iran occupying the 4th position. Other noteworthy importers are Libya, China, Azerbaijan, Syria and the UAE. Meanwhile, destinations such as USA, Saudi Arabia, India and Germany have shown a growth in imports in 2019 compared to the corresponding period of 2018.

The relevant export figures for twelve months are appended below. (in MT).

DESCRIPTION

QUANTITY (MT)

Tea In Bulk

122,844

Tea In Packets

139,080

Tea In Bags

22,913

Instant Tea

3,071

Green Tea

4,749

TOTAL

292,657

MAJOR IMPORTERS OF SRI LANKA TEA – JANUARY TO DECEMBER 2019/2018 (MT)

COUNTRY

2019

2018

TURKEY

39,087

35,634

IRAQ

38,408

38,435

RUSSIA

29,068

30,580

IRAN

22,263

23,914

LIBYA

12,329

13,686

CHINA

11,870

10,020

AZERBAIJAIN

11,721

10,550

SYRIA

10,985

10,180

U.A.E.

9,901

10,180

JAPAN

7,538

7,416

Tea Market Outlook for 2020

Predicting the market outlook for the ensuing year in the backdrop of a rather challenging 2019 seems a difficult task. It is important that due consideration be given to numerous factors in predicting tea prices – current global economic situations, uncertainty in key importer countries of Ceylon Tea and equally important, would be climate change and its adverse impact, whilst monitoring the supply and demand equation. 
From a global perspective, production in 2019 is likely to record a deficit reflecting the decline in the tea crop in Kenya and a slowdown in China. Analysts predict that whilst overall global production may record a gain of approximately 2% in 2020, which would be in keeping with the average growth per annum in the last 10 years (2009-2018), this would exclude China which is predominantly green tea. 

Although there would be several factors, the lower growth pattern would emanate primarily due to climate change and its ill effects, lower farmer profits owing to high cost of inputs which would weigh on investment. From a Sri Lankan perspective, non-productivity related wages and low mechanization  in the sector has impacted the competitiveness of Ceylon tea, which has resulted in a high production cost.    

Production growth in the last two to three years has essentially been from the African Region consisting mainly of CTC teas. From an orthodox perspective, Sri Lanka as a prime supplier together with India and Vietnam have recorded a decline year-on-year. Therefore, if the supply and demand equation would be a deciding factor, it is reasonable to assume that prices in respect of orthodox teas would sustain at these levels as a worst-case scenario. 

Tea is the most consumed beverage in the world apart from water and analysts predict tea consumption to be growing steadily driven by China accounting for a significant portion and followed closely by India. The demand for tea is likely to be less exposed to economic cycles than other commodities, which augurs well. Global demand for black tea has had a steady influence from China and is likely to show growth during the ensuing year as well. From a Sri Lankan perspective, exports to China have recorded a significant gain. 

Producer countries consumption is on the rise and consequently, lesser volumes of tea may be available for export which would augur well for prices of orthodox teas, in particular, with its limited supply.  

Taking these factors in to consideration and that global production during the 1st quarter is usually the lowest during the year, the buoyancy in the market is likely to continue throughout 1st quarter. Prices for large leaf orthodox teas , could be considered to be in short supply in the backdrop of the lower output from Sri Lanka over the past two to three years and therefore, the large leaf type teas would continue to attract a premium for the 1st half of 2020. The demand for liquoring small leaf teas from the High and Mid Grown region are likely to encounter downward pressure depending on the availability from other centers, where a degree of substitution is possible.

The market demand for teas for the second half of the year would no doubt depend on how the global tea industry would progress during the first half.  As FB has highlighted periodically, FB is confident that market demand for ‘good quality teas’ would certainly command a significant premium consistently throughout the year.

Whilst tea prices are projected to be buoyant in the first quarter of 2020, for long-term sustainability, the industry needs re-engineering to achieve global competitiveness. Cost of producing a kilo of tea in Sri Lanka is amongst the highest in the world. Rising input costs, declining productivity, uneconomic age profile in tea bushes and high social costs have led to declining profits. Perhaps, higher productivity and cost reduction will have to be achieved for enhancing the  competitiveness of ‘Ceylon Teas’ in the world market in the medium to long term. Therefore, global competitiveness of ‘Ceylon Teas’ will largely depend on how quickly the industry addresses these vital issues. 

(Source - Forbes & Walker Tea Brokers)