SRI LANKA TEA PRODUCTION - JUNE 2019

Sri Lanka Tea Production for the month of June 2019 totalled 27.1 million kgs, showing a fairly significant gain of 3.9 million kgs vis-à-vis 23.2 million kgs of June 2018. Low Growns have shown the highest gain YOY followed by High and Medium Growns.

When analyzing the January-June 2019 cumulative production of 158.4 million kgs, however, only a marginal gain of 0.3 million kgs is recorded vis-à-vis 158.1 million kgs of January-June 2018. On a cumulative basis, High Growns show a negative variance compared to January-June 2018, whilst Mediums together with Low Growns have shown a growth YOY.

CTC production for the month of June 2019 of 1.9 million kgs shows a growth of 0.17 million kgs vis-à-vis 1.7 million kgs of June 2018. When analyzing the respective elevations, only Medium Growns have shown a growth which is fairly significant compared to the corresponding month of 2018, whilst High Growns and Low Growns show a negative variance. Meanwhile, January-June 2019 CTC production of 11.2 million kgs shows a decrease of 0.9 million kgs vis-à-vis 12.2 million kgs of January-June 2018. On a cumulative basis, all elevationshave shown adecrease compared to the corresponding period of 2018.

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

CATEGORY

QUANTITY (MT)

Orthodox

143,837

CTC

11,283

Green

1,532

Total

156,652

SRI LANKA TEA EXPORTS - JUNE 2019

Tea exports for the month of June 2019 totalled 24.1 million kgs, showing a marginal decline of 0.6 million kgs vis-à-vis 24.7 million kgs of June 2018. Bulk tea exports have shown an increase, whilst Tea bags and Packeted tea show a decrease compared to the corresponding month of 2018. Total revenue of Rs. 19.9 billion  realized for June 2019 too shows a decrease of Rs. 0.7 billion vis-à-vis 20.6 B of June 2018, resulting in the FOB value of Rs. 829.12 per kg  for June 2019,  declining by Rs. 4.09 when compared to Rs. 833.21 per kg  of June 2018.

January-June 2019 cumulative exports of 145.1 million kgs, however, shows a growth of 7.6 million kgs vis-à-vis 137.5 million kgs of January-June 2018. On a cumulative basis, Tea bags, Packeted tea together with Bulk tea have shown a growth YOY. It is also noteworthy that revenue of Rs. 121.8 billion  realized is the highest export earnings recorded biannually, improving on the previous best of Rs. 113.9 billion  realized during the corresponding period of 2018. This reflects an increase of Rs. 7.9 billion  YOY. Consequently, the FOB value for the period January-June 2019 of Rs. 839.46 per kg  shows an increase of Rs. 11.33 vis-à-vis Rs. 828.13 per kg of January-June 2018.

Iraq has retained the No. one spot as the largest importer of Sri Lankan Tea for the period January-June 2019 followed by Turkey, Russia and Iran. Further, Libya, China and Azerbaijan are some of the noteworthy importers, whilst it is also relevant that destinations such as India, Germany and USA have shown a significant growth in imports for the period under review when compared to the corresponding period of 2018. The relevant export figures for first six months are appended below. (in MT).

DESCRIPTION

QUANTITY (MT)

Tea In Bulk

59,975

Tea In Packets

69,472

Tea In Bags

11,612

Instant Tea

1,645

Green Tea

2,437

TOTAL

145,141

MAJOR IMPORTERS OF SRI LANKA TEA – JANUARY TO JUNE 2019/2018

COUNTRY

2019

2018

IRAQ

19,662

18,305

TURKEY

18,117

17,197

RUSSIA

14,972

16,476

IRAN

10,380

11,147

LIBYA

7,604

4,446

CHINA

6,078

5,342

AZERBAIJAIN

5,506

5,164

SYRIA

4,947

5,331

U.A.E.

4,725

5,724

GERMANY

3,712

2,591

SRI LANKA TEA PRODUCTION AND EXPORTS - 2018

Sri Lanka tea production for the period January-December 2018 reached  303,843 MT  showing a decrease of 3,237 MT against the volume of 307,080 MT registered during the same period of 2017.  The decline in tea production has reflected in two categories – orthodox and green teas  while CTC tea  production has rose over the previous years’ volume. The orthodox tea production has come down by 5,322 MT with green tea segment registering a decrease of 23 MT only over the  2017-2018 period .  The non-availability of an accepted weedicide , labour issues may have  contributed towards the decline in tea production in high and medium  grown elevations. The adverse weather conditions affected the low grown elevation tea cultivation to a great extent.

CTC tea  production for year  2018 recorded  23,902 MT, registering  the highest ever volume  surpassing the previous best of 23,303 MT achieved  in 2012. It also records a gain of 2,108 MT  vis-à-vis 21,794 MT  produced in  2017. The breakdown of 2018 tea production is appended below ( in MT ).

 

2018

Orthodox

277,340

CTC

23,902

Green

2,601

Total

303,843

Sri Lanka tea exports for the period January-December 2018 reached 282,363 MT  against the volume of 288,984 MT  registered for 2017 showing a decrease of 6,621 MT . The decline in tea exports is a result of some external and internal factors . Among the external factors the US financial sanctions on Iran was a key issue while the decrease in tea production in the country top the domestic issues . The decline in tea exports has witnessed in all categories of tea exports. 

The total export revenue of Rs. 231.7 billion  realized during January-December 2018 records a deficit of Rs.1.6 billion when compared with Rs.233.3 billion achieved during the   same period of 2017. However , it is  noteworthy that average  FOB value for January-December 2018 of Rs.820.75 per kg has shown a growth of Rs.13.31 vis-à-vis Rs.807.44 per kg of January-December 2017 thus recording the highest FOB value ever surpassing the previous best which was realized in 2017 in rupee terms. In Dollar terms however, 2017 unit rate is marginally higher than 2018. The total tea export revenue in USD terms is estimated at USD 1.4 billion .

Iraq has emerged as the number one importer of Sri Lankan Tea in 2018 followed by Turkey and Russia with Iran retaining the 4th position. Other noteworthy importers are Libya, UAE, Azerbaijan, Syria and China. Meanwhile, destinations such as USA, Saudi Arabia, and Belgium too have shown a fairly significant growth in 2018, whilst destinations such as Japan and Ukraine have shown a decrease YOY. The summary of Sri Lanka tea exports in 2018 are given below ( in MT ).

 

2018

Tea In Bulk

122,428

Tea In Packets

131,256

Tea In Bags

21,578

Instant Tea

2,481

Green Tea

4,620

TOTAL

282,363

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

COUNTRY

2018

IRAQ

38,435

TURKEY

35,634

RUSSIA

30,580

IRAN

23,914

LIBYA

13,686

U.A.E.

11,077

AZERBAIJAIN

10,550

SYRIA

10,180

CHINA

10,020

CHILE

7,540

JAPAN

7,416

GERMANY

6,042

SAUDI ARABIA

5,590

U.S.A.

5,561

HONG KONG

4,872

Tea Market Outlook for 2019

( An extract of Forbes and Walker Tea Broker Market report )

Global production, in all probability, may show growth in 2018 once statistical data has been tabulated, which would essentially be of CTC origin. Orthodox tea production could be considered in short supply considering the decline in Sri Lankan tea production commencing 2016.

Sri Lankan tea production in 2019, consequent to the Government’s decision to lift the ban on the use of glyphosate (weedicide) is likely to give much relief to the producers and in particular, to the large-scale plantations which would be able to carry-out the required agricultural practices to achieve the full potential of the plantations. Further the Government’s decision last month – to allow a more liberal policy on fertilizer – should contribute favorably. Needless to say, subject to extreme weather conditions not being a reality. However, ageing tea bushes and low productivity levels would be a downside.

Similarly India with its aged plantations is unlikely to show any significant improvement in its output. On the other hand, Kenya with its steady growth in production in the past several years is poised to achieve a 500 M/kg in 2018 and is likely to play a significant role when assessing the total global supply situation.

Demand growth in China and India, considering the magnitude of these two markets, is likely to influence prices and consumption is expected to outstrip production. USA too could be singled out as a fast-growing market, particularly for instant tea and iced tea segments, whilst imports from Sri Lanka to the US have shown quite a significant growth in 2018.

Other factors that is likely to impact Sri Lankan tea prices.

  • Colombo Auction prices have shown a significant appreciation in the fourth quarter, particularly in respect of Leafy orthodox teas.
  • Further, the first quarter traditionally is a low cropping period with enhanced product quality from most producer countries. This scenario will augur well for Small Leaf liquoring varieties that would be on offer.
  • Another important factor that might influence tea prices is the variation in exchange rates. The Sri Lankan Rupee, which was under severe pressure at the commencement of 4th quarter 2018, stabilized somewhat towards mid-December. If this trend is reversed and the previous depreciation pattern that was seen a couple of months ago is a reality, this too would help Colombo Auction prices in rupee terms.
  • Improved demand from Iran following the recent indications that tea would not be featured on the list of items attracting US import sanctions.
  • Importers of orthodox teas are likely to have lower inventory levels in the backdrop of deficits accumulated since 2015.

These factors would enable to predict an upward movement in prices, particularly in the first half for most varieties of orthodox teas. The market demand for teas thereafter, would greatly depend on how the global tea industry would progress during the first half. The market demand for good quality teas would command a premium consistently throughout the year.