SRI LANKA TEA PRODUCTION - JUNE 2022

Sri Lanka tea production for the month of June 2022 totalled 20.15 million Kgs, showing a decrease of 5.92 million Kgs vis-à-vis 26.07 million Kgs of June 2021. All elevations have shown a decline over the corresponding month of 2021.

January-June 2022 cumulative production totalled 132.92 million Kgs, recording a significant decrease of 28.79 million Kgs vis-à-vis 161.71 million Kgs of January-June 2021. On a cumulative basis too, all elevations have shown a decline over the corresponding period of 2021.

When compared to 130.46 million Kgs of Covid-19 impacted January-June 2020, cumulative production of 2022 shows a marginal increase of 2.46 million Kgs. On a cumulative basis, High and Mid Grown elevations show a decline over the corresponding period of 2020, whilst the Low Growns record a gain.

The available tea crop figures for the first Six months period are appended below (in MT). 

CATEGORY

QUANTITY (MT)

Orthodox

120,401

CTC

11,659

Green

866

Total

132,926

( SLTB ) 


SRI LANKA TEA EXPORTS - JUNE 2022 

Tea Exports for the month of June 2022 totalled 23.58 million Kgs, showing a decrease of 3.41 million Kgs vis-à-vis 26.99 million Kgs of June 2021. All main categories (Tea in Bulk, Packeted Tea and Tea Bags) have shown a negative variance compared to June 2021.  

January-June 2022 cumulative exports totalled 125.29 million Kgs, showing a decrease of 11.69 million Kgs vis-à-vis 136.98 million Kgs of January-June 2021. All categories have witnessed a decline in comparison with the corresponding period of 2021.

FOB value of Rs. 1,310.74 records an increase of Rs. 377.56 compared to Rs. 933.18 of January-June 2021.

All categories show a negative variance in USD terms when compared to the same period of 2021.

Iraq has emerged as the No. 1 major importer of Ceylon Tea with an increase of 46% YoY in January-June 2022. UAE has secured second position with a total of 10.74 million Kgs, which is a 4% increase against total imports recorded for January-June 2021.

Russia sits in 3rd place with a total of 10.10 million Kgs followed by Türkiye, Azerbaijan, Iran and China respectively during the period January-June 2022.

A significant decrease in imports is reported from Russia (24%), Türkiye (58%), China (23%), Syria (24%) and Jordon (23%) YoY.

The tea export figures for the first six months are listed below (in MT). 

DESCRIPTION

QUANTITY (MT)

Bulk 

53,636

Tea in Packets     

57,320

Tea In Bags

10,992

Instant Tea

1,257

Green Tea

2,092

TOTAL

125,297

MAJOR IMPORTERS OF SRI LANKA TEA – JANUARY TO JUNE 2022/2021 - in MT  

COUNTRY

2022

2021

IRAQ

23,511

16,084

U.A.E.

10,740

10,287

RUSSIA

10,104

13,310

TURKEY

7,063

17,069

AZERBAIJAN

6,316

6,148

IRAN

6,229

6,303

CHINA

5,740

7,475

LIBYA

5,722

5,643

GERMANY

3,974

2,877

CHILE

3,894

3,554

(Source – Forbes and Walker Tea Brokers)

SRI LANKA TEA PRODUCTION - JANUARY TO DECEMBER 2021

Sri Lanka tea production for the month of December 2021 totalled 20.42 million kgs, showing a decrease of 8.24 million kgs vis-à-vis 28.66 million kgs of December 2020. All elevations have shown a significant decline, over the corresponding month of 2020.

It would be relevant to note in comparing the December 2019 production figure of 21.89 million kgs, December 2021 shows a marginal decrease of 1.48 million kgs.

January-December 2021 cumulative production totalled 299.34 million kgs, recording a gain of 20.49 million kgs vis-à-vis 278.85 million kgs of January-December 2020. On a cumulative basis, all elevations have shown substantial gains over the corresponding period of 2020.

 Interestingly, compared to 300.12 million kgs of January-December 2019, cumulative production of 2021 shows a marginal decrease of 0.78 million kgs. On a cumulative basis, High and Medium elevations have shown gains with the Low Growns showing a decrease by 6.67 million kgs over the corresponding period of 2019.

The available tea crop figures for the twelve months (January to December 2021) period are appended below (in MT). 

CATEGORY

QUANTITY (MT)

Orthodox

270,571

CTC

26,195

Green

2,572

Total

299,338

( SLTB ) 


SRI LANKA TEA EXPORTS – JANUARY TO DECEMBER 2021

Tea Exports for the month of December 2021 totalled 24.17 million kgs, showing an increase of 0.24 million kgs vis-à-vis 23.93 million kgs of December 2020.

Main categories of Bulk Tea and Tea Bags have shown an increase, whilst Packeted Tea has shown a decrease when compared to the corresponding period of 2020.

January-December 2021 cumulative exports totalled 286.02 million kgs, showing an increase of 20.45 million kgs vis-à-vis 265.57 million kgs of January-December 2020.  

All main categories of exports (Bulk Tea, Tea Bags and Packeted Tea) have shown an increase compared to the corresponding period of 2020.

Revenue of Rs. 263.35 B realised from Tea Exports for January-December 2021 shows an increase of Rs. 33.18 B in comparison to the Rs. 230.17 B of January-December 2020. It also surpasses the previous best of Rs. 240.6 B realised in January-December 2019.

FOB value of Rs. 920.76 records an increase of Rs. 54.06 compared to Rs. 866.70 of January-December 2020, thus recording the highest ever FOB value surpassing the previous best which was realised during the corresponding period of 2020

Total Rupee FOB value has increased considerably in 2021, although in USD terms it reflects a marginal decrease.

Tea in Bulk and Packeted Tea FOB values show a marginal negative variance in USD terms, whilst Tea Bags have shown a healthy increase when compared to the corresponding period of 2020.

Iraq has emerged as the No. 1 major importer of Ceylon Tea following an increase of 27% YoY in January-December 2021. Turkey has moved down to the No. 2 position with a decline in imports (23.5% YoY) followed by Russia, which has also declined (7.6% YoY). The U.A.E. has moved up to the 4th position having increased imports significantly (167% YoY). Iran, which has moved down by a position to the 5th shows a marginal gain (4.7% YoY) in imports during January-December 2021. Other notable importers are China, Libya, Azerbaijan Chile and Syria. Meanwhile, destinations such as Chile, Syria and Saudi Arabia have recorded a decrease in imports during the period under review. It is noteworthy that imports to Libya and Japan have increased significantly YoY by 58% and 17% respectively.

The tea export figures for the twelve months (January to December 2021) are listed below (in MT).   

DESCRIPTION

QUANTITY (MT)

Bulk 

125,388

Tea in Packets     

128,344

Tea In Bags

24,665

Instant Tea

3,032

Green Tea

4,587

TOTAL

286,016

MAJOR IMPORTERS OF SRI LANKA TEA - JANUARY TO DECEMBER 2021 - in MT 

COUNTRY

2021

2020

IRAQ

42,455

33,377

TURKEY

29,741

38,866

RUSSIA

27,356

29,608

U.A.E.

23,149

8,670

IRAN

15,833

15,127

CHINA

14,237

14,123

LIBYA

12,339

7,806

AZERBAIJAN

10,591

10,303

CHILE

8,834

9,419

SYRIA

7,779

9,536

(Source – Forbes and Walker Tea Brokers)

 

MARKET OUTLOOK FOR 2022

In projecting a possible market scenario, the following needs due consideration. Predicting the market outlook for Ceylon Tea for the year 2022 at this juncture amidst much uncertainty seems a difficult task. Nevertheless, we have analysed the supply and demand situations that exist, and projected based on the likely market scenarios and the recent developments in importer countries.

In analysing the supply situation, it would be relevant to segregate the Orthodox and CTC tea production. 2020 Ceylon Tea production of 278.8 M/Kgs records the lowest since1997. 2021 has shown a welcome recovery primarily following favourable weather conditions, which in all probability is unlikely to be maintained in 2022. Therefore, Kenyan tea production will play a significant role when assessing the total global supply situation. Perhaps another factor that needs due consideration as we have regularly highlighted is the growing demand for tea in producer countries, which has left lesser exportable volumes.

Source: International Tea Committee

India with its aged plantations show little promise in growth when reviewing data over a period of time. On the other hand, Kenya and the African Region, in general, have shown steady growth in production over the past several years recording a historical 569 M/Kgs in 2020. Although 2021 records a decline on its historical performance in 2020, still shows a growth of approximately 15% in comparing a 5-year average.

Production prospects for 2022 are fairly firm and global tea production may revert to approximately 2% growth. Sri Lanka may be an exception owing to the withdrawal of chemical fertiliser in and around mid-2021, and its ill effects which are likely to take its toll in Q1 of 2022. Since the Government has recently reversed the ban on chemical fertiliser some degree of recovery is anticipated commencing Q2 of 2022, subject to extreme weather conditions not being a reality. However, ageing tea bushes and low productivity levels continue to be a downside. 

The market deficit expanded in 2020 as production fell significantly in most producer countries largely due to the Covid-19 pandemic and perhaps to a lesser extent due to climatic conditions.

In 2021, both production and consumption would record a growth with perhaps production increasing more rapidly. Therefore, the market deficit is likely to have narrowed in comparison to end 2020.    

Tea consumption is likely to be dominated by Asian consumers, particularly China and India. China, in particular, has been an important market for Ceylon Tea in recent times. Analysts predict that out of home consumption in China is likely to recover in the coming year helping to drive stronger growth in overall tea consumption. Similarly, consumption in India too is likely to show further growth on 2021 data which remained weak with the closures amidst surging Covid-19 cases. The Indian market would have significant potential from its sheer size and India’s average per head consumption.

The United States could be singled out as a fast-growing market, particularly for instant tea and the iced tea segments. Interestingly, imports from Sri Lanka to the United States too have shown useful growth in recent years.

As highlighted previously in the report, Colombo auction prices have shown a significant appreciation in the 4th quarter vis-à-vis Q3 – a combination of factors triggering improved demand, lower volumes, better quality and in anticipation of the unusually lower volumes in the forthcoming quarter of 2022.

Other factors that are likely to impact on prices:

·         The likely devaluation of the Sri Lankan Rupee in early 2022.

·         Improved demand from Iran following the Sri Lanka tea for oil payment deal.

·         Importers of Orthodox teas are likely to have lower inventory levels in the backdrop of the deficit in the availability of Orthodox teas since 2015.  

·         Higher oil prices and greater demand from oil-rich Middle Eastern countries.  

These factors would enable us to predict stronger rupee tea prices for the first half in 2022, in general and Q1 in particular. Market demand for teas thereafter would greatly depend on how the global tea industry would progress during the first half. However, as we have periodically highlighted, market demand for good quality teas will continue to command a premium consistently throughout the year as it is envisaged that there is a dearth of good quality teas.                                                                                                                          

Amidst this optimistic outlook for tea prices, the industry continues to be challenged with ‘climate change’ and constant wage increases, more so in the current context of high inflation, which would continue to undermine the competitiveness due to the higher average production cost compared to other larger producer/exporter countries.

In our view, the industry as a matter of urgency needs to adopt and mitigate the adverse effects of ‘climate change.’ Rehabilitating and improving the water retention capacity of the soil should be a priority followed by a systematic in-filling programme carried out in the short term. In the medium term, a structured re-planting programme should be pursued in a manner in which a high degree of mechanisation can be achieved in agricultural practices, particularly the harvesting function. Therefore, the global competitiveness of ‘Ceylon Tea’ in the short to medium term will depend on how quickly the industry addresses these vital issues.

(Forbes & Walker Tea Brokers (Pvt) Ltd)