- Sri Lanka Tea Board

Tea Market Update
V o l u m e
1 2
N o
2
A p r i l — J u n e
2 0 1 6
Drought and overcast condition in most tea districts affected
tea production
The tea industry in the first half had been hit hard
by various world events, including the ISIS
spreading of Middle East, the subsequent violence in the Eastern Europe, sanctions and economic embargoes on certain countries, recession,
and severe depreciation of ruble in Russia. These
situations meant that the number of orders from
these regions for Ceylon tea had fallen.
The production cost for most areas except
leaf cost is about Rs. 50-55. The removal of
the fertilizer subsidy also means that a 50
kilo of fertilizer bag, which was around Rs.
1300.00, has now gone up to more than Rs.
3000.00. Hence, taking into account of these
factors there was really no profit in the industry at these months.
Apart from above overseas factors, locally, the
prolong drought has had a severe adverse impact
on producers of all tea growing districts till April
this year.
Though rains were activated during mid of
April, it would be too late for most tea
growing areas as there were not enough
time to prepare a tea bush for peak production. From end of April however the weather pattern changed dramatically with heavy
rains and overcast conditions continuing to
end June on the Western slopes of the
Central Hills and some Low Grown areas.
As a result production from the Western
High Growns and Western Mid Growns
dropped dramatically. There was some compensation with better weather being reported
on the Eastern slopes with crops improving
when compared with the drought affected
first quarter in 2016.
Specially in Nuwaraeliya districts ,there has been
no rain for 40 days. As a result, during first quarter their production for March is down by 70 per
cent compared to last year. Following Maturata
and Udupussellawa factories registered their lowest production compared to recent years.
The situation was just as grim down south. There
was a 40 per cent drop in the supply of tea
leaves. Apart from the drought, removal of the
fertilizer subsidy and the drop in tea prices was a
double blow to low tea production.
Tea Production
2
Tea Marketing
3
Tea Exports
4
Continue in page …………….5
General Overview
Economy
Global Tea Scene
6
Trade Fair Participation
7
Article
8
Editors-Sampath Perera
Nalaka Sanjeewa
Tea Promotion Division
E-mail
[email protected]
Web-site
Earnings from exports for the period of second quarter 2016 stood a marginal decline
year-on-year, attributable to lower agricultural
exports as well as lower industrial exports.
Earnings from textiles and garments exports
increased reflecting increases in garment
exports to EU and USA markets respectively.
Further, export earnings from food, beverages and tobacco, base metals and articles, and
leather, travel goods and footwear, categorised
also increased slightly. However, a 12.4 per
cent year on-year reduction recorded in agricultural exports, led by tea and spices.
The impact of the policy measures adopted by
the government to curtail vehicle. transport
equipment, base metals, fertilizer, vegetables
and fuel imports contributed largely to the
decline the import expenditure during the second quarter.
As a result of increased workers remittance
and tourists arrivals earnings, rupee recorded a slight depreciation of 1% against the
US dollar though exports fallen modestly
during the second quarter 2016.
Tea Industry
Production continued to remain low at all sub
districts due to bad weather condition . Most
tea grades were quoted slightly higher than first
quarter. Good liquoring flowery along with
OPA grades remained steady, while prices of
finer varieties registered slight improvements.
As the prices did not rise up to expectations,
with lower disposals ,there were considerable
withdrawals reported from the market.
Earnings from tea exports declined considerably backed by lower FOB price and lower inquiries from our key destinations.
Continue in page …………….5
Tea market update Volume 12. No. 2
PAGE
2
+
Tea Production
Sri Lanka was suffered for a historical lower crop with a
11Mkg or 12% decrease in output, as the detriment of a
extreme weather pattern to the second quarter 2016. During the first half, the Low Grown production of
93.52Mkg, was a
decrease of 9Mkg compared to the
same period of last year. As a result April and June production registered lower figures whilst May figures registered moderate decrease compared to last year corresponding months.
Table 1 - Total and monthly tea Production
April-June 2016-2015 (Units :MT)
Month
Difference
2015
April
26,471
31,627
-5156
-16.3
May
30,627
32,432
-1805
-5.56
June
25,360
29,579
-4219
-14.26
Total
82,458
93,638
-11,180
-11.94
Change %
First six months tea production in all elevations reached a
notable decrease figure of 153.84Mkg at the end of June
2016 registering lowest record for the last six years. Analyzing the present record decrease of 19.14Mkg over the
production of same period of last year , it is very likely
that the this year tea production will decrease to below
300Mkg to reach a new lower record level surpassing the
2009 total figure of 291Mkg. Table 2 above, depicts the
cumulative production compared with the 2015 quantities.
It is evident from table 2 that the production of CTC tea
category maintained slightly increased of volumes while
orthodox and green tea categories registered lower volumes as against corresponding period of last year.
Table 2 - Cumulative tea production according
to elevation and category till June 2016 (Units :Mkg)
Jan-June (MKg.)
2016
Elevation
High
Medium
Low
Total
36.23
24.09
93.52
153.84
Processing Method
Orthodox
142.58
CTC
9.93
Green Tea
1.33
Total
153.84
2015
Change
Qty (MKg.)
Table 3 – Distribution of Tea Production
January-June 2016/2015 (Units: MKg)
Sector
2016
Category
Following private sector production would account for
the major decrease in volume share of total tea production, other notable fallen registered in plantation
companies with 55.55Mkg and government sector
accounted for 1.93Mkg. A production drop comparison
is shown in table 3.
%
42.24
28.24
102.51
172.99
-6.01
-4.15
-8.99
-19.14
-14.22
-14.69
-8.77
-11.07
161.6
9.81
1.57
172.99
-19.02
0.11
-0.24
-19.14
-11.77
1.16
-15.21
-11.07
Private
Plantation
Co.
Public
Total
2016 - Jan to
June
(Qty
MKg.)
2015 - Jan to
June
%
Change
%
(Qty
MKg.)
%
96.37
62.64
104.27
60.28
-7.58
55.55
36.10
65.72
37.99
-15.48
1.93
1.25
3.00
1.73
-35.72
153.84
100.00
172.99
100.00
-11.07
As shown in table 4 below, tea production in all districts showed a severe short fall except Kalutara district. In volume terms severe crop drop in Nuwara Eliya, Matara and Galle districts.
4.- District wise tea production comparison
as at June 2016 /2015(MT)
Admin District
2016
2015
Badulla
Colombo
Galle
Hambantota
Kalutara
Kandy
Kegalle
Matale
Matara
14,347
305
21,135
107
9,154
17,180
4,138
745
17,232
16,687
388
24,558
135
8,892
17,502
5,239
1,939
20,999
-2340
-83
-3423
-28
262
-322
-1100
-1194
-3767
-14.02
-21.49
-13.94
-21.06
2.95
-1.84
-21.01
-61.57
-17.94
Nuwara Eliya
33,448
39,671
-6223
-15.69
Ratnapura
36,055
36,979
-925
-2.5
153,845 172,989
-19,144
-11.07
Total
Growth
Growth %
The Sri Lanka Tea Board gave subsidy for 14 factories
under factory modernization scheme
and re-planted 190.85 hectares for the
first six months. Under the GMP certification programme, 7 programs
conducted in Tea growing districts
and planned more programmes rest of
the year 2016.
PUBLICATION OF TEA PROMOTION DIVISION—SRI LANKA TEA BOARD
Tea market update Volume 12 . No. 2
PAGE
3
Tea Marketing
Table 7: Teas sold and prices fetched by
distribution channels in second qtr
Most marketing theories acted in reverse order in Colombo
auction. Though prices would have increase with lower
Second Quarter
disposals, average price remained almost similar level
Different
2016
2015
attributed to lower demand compared to last year same
Price
channels
period. The Colombo auction sold quantity recorded for the
Qty
(Rs./
Qty
Price
period amounted to 72.9Mkg with the average price of Rs.
(MKg.)
Kg.)
(MKg.)
(Rs./Kg.)
441.25/Kg. Prices of High and Medium grown did not fall Public Auc71.73 439.20
83.88
399.66
below the price level of 2015. Although low grown eleva- tion
tion registered below the 2015 price level in US$ dollar Private Sales
0.69 555.34
0.95
511.64
term.
Direct Sales
0.44 593.07
0.55
480.36
Table 5 –Teas Sold and prices fetched in second
Total
72.86 441.24
85.39
401.42
quarter 2016/2015 Unit: Qty-Mkg, Price: Rs/Kg
Elevation
2016 - April to June
2015 - April to June
Qty
(MKg)
Price
(SL Rs)
Price
(US$)
Qty
(MKg)
Price
(SL Rs)
Price
(US$)
High
16.64
420.78
2.90
20.89
367.93
2.76
Medium
12.15
44.07
72.86
401.12
460.03
441.24
2.77
3.17
3.04
14.06
50.44
85.39
361.72
426.36
401.42
2.71
3.20
3.01
Low
Total
Nuwara eliya sub districts fetched below the last year unit
price level during the second quarter. Only Deniyaya sub
districts reached Rs 500/Kg during May and other areas
fetched below the Rs.500/.kg . The areas of Ramboda, Pundaluoya in Western, Watawala/Ginigathhena/Norton Bridge,
Gampola/Nawalapitiya/Dolosbage,Nilambe/Hantana/
Galaha,Kadugannawa,Madulkelle/Knuckels/Rangala, Hunnasgiriya/Matale/Yakdessa and Pussellawa/Hewaheta sub
districts in Medium registered below Rs.400/kg level. For
the Low grown areas Kandy/Matale/Kurunegala sub district
reported below Rs.400/kg during first half 2016.
Table 6 – First half Colombo Tea Auction sales
comparison 2016/2015 (Rs/Kg)
January to June 2016
Sub District
2016
2015
Price
change per Change %
kg
413.74
421.85
-8.11
-1.92
435.95
389.61
46.34
11.89
386.14
373.36
12.78
3.42
375.71
338.18
37.53
11.1
399.73
372.54
27.19
7.3
Low Growns(10
areas)
438.2
423.83
14.37
3.39
Average price
425.38
401.42
23.96
5.97
Nuwara Eliya
Westerns (8
areas)
Mediums(9 areas)
Uda Pussellawa
(2 areas)
Uvas(8 areas)
As shown in table 7 above, the lowest volume of
private and direct sales were recorded in second
quarter 2016, as a result of lower demand to specialty grades from premium markets.
Table 8 –Grade wise quantity sold and price
comparison during the first half 2016
Grades
Sold Qty (Kgs)
Avg.
Price
ORTH-FBOPF1/FBOPF
ORTH-BOPF
ORTH-FOP/OP1/OP
ORTH-FBOP1/FBOP
ORTH-FP/PEK
19,046,638.50
14,509,409.85
13,239,114.83
12,043,728.25
11,577,384.75
460.45
390.07
412.75
460.69
472.42
ORTH-OPA
ORTH-BP/BM
9,467,816.00
9,170,740.00
382.51
304.91
ORTH-BOP
ORTH-PEK1
ORTH-BOP1A
7,991,311.00
7,825,982.00
7,408,782.50
419.78
498.27
307.20
ORTH-DUST1
ORTH-BOP1
6,749,133.50
3,553,229.00
398.42
448.99
CTC-PF1
CTC-PD
2,362,775.00
683,849.00
372.10
367.49
658,986.00
373.71
OTHERS
39,284,380.59
392.89
Total
165,573,260.77
410.43
CTC-BP1/BPS
A diverse trend continued for almost all elevations
of orthodox tea grades, though the low grown leafy
grades witnessed a weak general demand, but it was
comparatively high for first quarter unit price and
last year same quarter price in Rupee terms.
Ceylon CTC tea category
fetched significant price drop
attributed to Eastern African tea
production improvement and
weighted on market re-capture
programme of Indian tea exports.
PUBLICATION OF TEA PROMOTION DIVISION— SRI LANKA TEA BOARD
Tea market update Volume 12. No. 2
PAGE
4
Tea Exports
PAGE
4
Sri Lanka earned 9 percent less from tea exports in the first Table 11 -Top ten destinations of Ceylon tea during
half of 2016 over the same period of previous year, deJan– June 2016/2015 Units: Qty - MKg
creasing US$64 million, as indicated in table 10. The data
Total Exports
Change
%
shows that Sri Lanka’s Tea exports have been on a constant Country 2016 2015
decrease since last year, attributed to continues slowdown
Qty
%
2016 2015
of global economic arena due to unpredictable market Iraq
18.4
14.41
3.99
27.65 12.9
9.8
fluctuation for major commodities. Country’s tea exports
17.85
16.79
1.06
6.3 12.5 11.4
volume were drop from 78Mkg in second quarter 2015 to Russia
72Mkg in same quarter 2016. The figures depicted in table Iran
16.52
11.96
4.56
38.12 11.6
8.1
9 below.
Turkey
11.94
18.56
-6.62 -35.66
8.4 12.6
Table 9 - Export Statistics for each month during
UAE
10.77
13.02
-2.25 -17.28
7.5
8.8
second quarter 2016/2014 -Units : Mkgs
2016
Category
Qty
FOB
April
22.18
604.77
May
21.26
June
Total
2015
Qty
Change
Syria
5.89
5.05
0.84
16.67
4.1
3.4
Azerbaijan
4.74
5.6
-0.87
-15.48
3.3
3.8
Japan
3.94
4.01
-0.07
-1.71
2.8
2.7
FOB
Qty
FOB
22.92
591.52
-0.75
13.25
China
3.64
3.6
0.04
1
2.5
2.4
617.51
27.62
597.39
-6.35
20.12
Germany
3.61
3.23
0.38
11.68
2.5
2.2
28.57
619.91
27.79
587.50
0.77
32.41
Total Exports
97.29
96.24
1.05
1.1
68.1
65.2
72.01
614.54
78.33
592.16
-6.32
22.37

except re-export volume
Iraq and Russia combined to remain as main tea buySri Lanka exported 8 percent or 6.32 million kilograms less ers from Sri Lanka again, accounting 25 % of total tea
tea in the second quarter of 2016 over the same period of exports during the first half of the year 2016. Figure of
previous year.
Russia made very disappointing trend though they
imported significant amount for the period of previous
Table 10 – Tea Exports comparison during first Half
years.
2016 Units: Qty-MT, FOB—Rs/Kg, Value– Rs. Millions
2016
Category
Qty
FOB
Bulk
87,809
507.07
Packets
42,004
Tea Bags
2015
% Change
Qty
FOB
Value
Qty
FOB
Value
Qty
FOB
44,526
93,111
519.91
48,409
-5,301
-12.84
-3,884
-5.69
-2.47
600.80
25,236
42,393
596.48
25,287
-389
4.31
-51
-0.92
0.72
10,611
1,162.72
12,338
9,895
1,095.82
10,843
716
66.90
1,495
7.24
6.11
Instant Tea
1,077
1,233.34
1,328
1,061
1,016.97
1,079
15
216.37
248
1.42
21.28
Green Tea
1,271
1,271.74
1,617
1,136
1,189.95
1,352
135
81.79
265
11.90
6.87
Sub Total
142,773
595.66
85,044
147,597
589.25
86,971
-4,824
6.41
-1,927
-3.27
1.09
3,686
1160.6
4,278.26
3,950
964.56
3,810
-264
196.04
468
-6.67
20.32
146,459
609.88
89,322.18
151,546
599.03
90,780
-5,088
10.85
-1,458
-3.36
1.81
Re-Exports
Total
Value
Change
Value added tea exports
An analysis of first half exports of 2016 reflects, 58Mkgs
of value added teas which accounts for 39% of the total.
This emulates 58.5Mkg exported in 2015 which constituted 38.5% value addition to the total exports of the period.
This is the results of the improved performance in the
Iraq tea packets category. Exports of green tea improved to
1.27million kilograms and it helped to improve value
added share slightly. The re-exports of imported teas registered a sizable decrease of volume by 7% to reach
3.6million kilograms.
Market rebound in Iraq and Iran compensated sudden
drop of Turkey and UAE imports volume but not in a
value terms.
For the sake of Syria and Turkey
war situation intensified, Germany
has made significant improvements
of Ceylon tea imports backed by
Turk and Syrian refugees tea consumption.
PUBLICATION OF TEA PROMOTION DIVISION— SRI LANKA TEA BOARD
Tea market update Volume 12. No. 2
PAGE
5
The Participants are Ceylon Tenny Teas (Pvt) Limited,
Regency Teas (Pvt) Limited and Venture Teas (Pvt)
Besides severe cash flow problems, the likely drop in pro- Limited.
duction due to abnormal weather conditions would result
th
th
in significant revenue loss not only plantation companies Global Dubai Tea Forum – Dubai (5 to 7 April 2016)
but also small holders and private tea factories. Hence, The SLTB has been the bronze sponsor of the above
many factories halt their manufacture or operate one dryer event during 2014 as well. The Tea Center at DMCC is
offering the same sponsorship for Ceylon Tea during the
temporary for existence.
2016 Dubai Tea Forum which is scheduled for 5th to 7th
April 2016.
Tea Industry………………………...from page 1.
Green leaf prices maintained about Rs.65 per kilogram,
but medium grown rates far below the national averages. Anufood Euro Asia Trade Exhibition 2016 - Turkey
Anufood Euroasia Trade exhibition 2016 was held in Istanbul, Turkey, from 14th to 16th April 2016. SLTB reserved a total space area of 51 SQMT for the stand, space
scheme ,05 Nos of booths ( 04 individual privet sector
booths) .
Seoul Food 2016, South Korea– 10th -13th May
I. A.F.Jones (Pvt) Limited
Sri Lanka Tea Board arranged country pavilion and
II. Ceylon Tea Marketing (Pvt) Limited
coordinated following participation.
III. Ceylon Fresh Teas (Pvt) Limited
IV. Empire Teas (Pvt) Limited
I. Ceylon Tea Marketing (Pvt) Limited
General Overview………..………….from page 1.
Trade Fair Participation
II. Mabroc Teas (Pvt) Ltd
III. Lumbini Tea Exports (Pvt) Ltd
IV. TEA TALK
Summer Fancy Food Show - 2016
Sri Lanka Tea Board arranged special tea promotion programme with Hon. Plantaion Minister Navin Disanayake
and Tea Board officials .Following private sector companies showed their products at the Sri Lanka Pavilion.
Singapore Expo 2016—12th -15th April
Sri Lanka Tea Board along with three other exhibitors par- Fresh Tea Exports (Pvt) Ltd, Enrich Tea & Food Export
ticipated the national pavilion and showcased a wide range (Pvt) Ltd, Shan Teas (Pvt) Ltd, Ceylon Tenny Tea (Pvt)
Ltd, Annverally & Sons (Pvt) Ltd, Euro Scan Exports
of value-added teas produced by them.
Lumbini Tea Exports (Pvt) Limited, Green Horizon Enter- (Pvt) Ltd, Bogawanthalawa Tea Marketing (Pvt) Ltd.
prises (Pvt) Limited and Venture Tea (Pvt) Limited.
World Food Azerbaijan 2016—25th– 27th May
Sri Lanka Tea Board with following tea exporters
participated at the above fair.
I. Ceylon Tenny Tea (Pvt) Ltd,
II. Ceylon Tea Land (Pvt) Ltd
III. Ceylon Fresh Teas (Pvt) Ltd
Food Taipei 2016 —22nd –25th June
Sri Lanka Tea Board with following tea exporters
participated at the above fair.
Southern African International Trade Exhibition
(SAITEX) -19TH - 21ST June 2016
I. Millennium Tea (Pvt) Ltd,
Sri Lanka Tea Board and Sri Lanka High Commission in
II. Basilur Tea Export (Pvt) Ltd,
Johannesburg ,
III. Venture Tea (Pvt) Ltd,
South
Africa
IV. Ceylon Tea Marketing (Pvt) Ltd,
arranged special
V. Sunshine Tea (Pvt) Ltd,
Ceylon Tea proVI. Fresh Tea Exports (Pvt) Ltd
motion stall with
VII.Mabroc Teas (Pvt) Ltd.
Akbar Brothers
TH
ST
World Food Warsaw 2016 -19 - 21 April
at the SAITEX
World Food Warsaw 2016 Trade exhibition is organized
fair.
by Famous ITE Group in United Kingdom . Sri Lanka Tea
Board organized a group stands occupying four booths
PUBLICATION OF TEA PROMOTION DIVISION— SRI LANKA TEA BOARD
Tea market update Volume 12. No. 2
PAGE
PAGE
6
6
Global Tea Scene
Table 14. Global tea Exports Comparison
(2016/2015) Unit: MT
Tea Production
Country
World tea crop shows an increase in year 2016 till May
over same period of last year. But Sri Lanka, Uganda,
Malawi and South India record moderate drop in production for the period. Spurred by a dramatic rebound in
Kenya, China, Tanzania, and Bangladesh, accounted
output in 2016 is forecast to increase by around 120 million kilograms, while the world price is forecast to
decline by a similar intensity and the global stocks are
expected to continue to develop though they experienced
hot climate prevailing at the end of second quarter.
Months
2016
2015
Growth
Change
%
Kenya
4
156,484
147,269
9,215
6.26
China
6
161,379
150,549
10,830
7.19
Sri Lanka
6
146,459
151,546
-5087
-3.36
Taiwan
5
2,038
1,937
101
5.21
Bangladesh
6
247
345
-98
-28.41
Indonesia
3
12,886
16,786
-3900
-23.23
Malawi
5
13,651
15,009
-1,358
-9.05
Uganda
6
17,864
23,967
-6,103
-25.46
The recent tea production data
published by Interna- Total
511,008
507,408
3,600
0.71
tional Tea Committee showed in following Table 12.
Both Black and Green tea registered a similar pattern
Table 12 -Global tea production comparison in of export increasing trend attributed to export imfirst half 2016/2015(MT.)
proved by Kenya and China compared to last year
same period. Dominant by Morocco and other Western
Months
Change Change African countries accounted higher share of China tea
st
Production from 1
2015
2016
%
exports. Hong Kong, Russia, Uzbekistan, Pakistan and
qty
Jan
Japan made highest ranked in China destination list
N E INDIA
5 183020 195930 12910 7.05 over last year same period.
SOUTH INDIA
5 98730 76620 -22110 -22.39
For the first six months period, Kenya crowned as
BANGLADESH
5
8736 13747
5011 57.36 leading exporter improving exports to UK, USA, PakiSRI LANKA
5 143104 128293 -14811 -10.35 stan, Egypt, Sudan and other EU countries. Sri Lanka
KENYA
4 105454 177170 71716 68.01 was placed at third position while second place maintained by China in tea exports.
MALAWI
5 28963 28402
-561 -1.94
TANZANIA
3 10866 11779
913 8.40 A greater part of the tea exports increase would take
UGANDA
5 20605 14434 -6171 -29.95 place in tea growing nations of Eastern African counTOTAL
599478 646375 46897 7.82 tries where currently the rate of growth of production
is higher than its domestic consumption. Most major
Mombasa with highest disposals and Colombo tea auc- tea exporting countries in Asia are expected to experition center witnessed a moderate prices declined by US$ ence slight declines in exports in line with expected
0.28 per kg and US$ 0.18/kg respectively during the first growth in income and population that would foster
half as against last year same period. Kolkata and Jakarta domestic consumption. For example, exports from Inregistered slight improvement in unit price backed by dia, Indonesia, Sri Lanka are expected to decrease exproduction shortage.
ports slightly in rest of the year.
Table 13- Average prices in major auction centers
as at June 2016/2015(Qty:MT)
2016
2015
Change 2016 / 2015
Auction Centers
US$/Kg
Qty (MT)
Qty (MT)
US$/Kg
Qty (MT)
US$/Kg
Kolkata
44,704
2.29
48,450
2.17
-3,746
0.12
Cochin
24,459
1.75
28,775
1.56
-4,316
0.19
Chittagong
25,931
2.46
21,628
2.36
4,303
0.10
Mombasa
234,484
2.26
181,619
2.54
52,865
-0.28
17,278
1.71
10,663
1.48
6,615
0.23
Colombo
149,369
2.94
163,412
3.12
-14,043
-0.18
Guwahati
Malawi
World
49,081
6,821
552,127
1.99
1.54
2.38
44,167
6,787
505,501
2.01
1.51
2.55
4,914
34
46,626
-0.02
0.02
-0.16
Jakarta
PUBLICATION OF TEA PROMOTION DIVISION—SRI LANKA TEA BOARD
Tea market update Volume 12 . N o. 2
Creating an organic tea industry as a way
to beat the crisis in the sector
By P. Abeygunawardena, PhD. - Director, Ahinsa Organic Tea
The tea sector is facing perhaps the biggest crisis ever since
the plant was introduced to Sri Lanka in the 1820s. There
seems to be no way out unless we think completely afresh
or out of the box. There are no signs of market improvement. I would argue this is more than a crisis or perhaps it
is better to say Sri Lankan tea sector is at a cross-road. The
traditional way of supplying tea to the world market is no
longer possible. Today we are compelled to make hard and
bold decisions for survival. Unfortunately, we do not have
many options. In many ways we are helpless. There is no
point in claiming that the (i) Rouble crisis, (ii) Middle East
unrest, or (iii) oil price decline were reasons for the tea sector crisis. Most of these reasons are far beyond our control.
However, it is important to ask as a country what can we
do when we are compelled to operate under these conditions?
I argue that the present crisis was an inevitable outcome of
reckless exploitation of natural resources of the country
and poorly coordinated and selfish activities of most parties
in the tea industry. We practiced under-cutting each other
by each and every other player. One factory owner overpowered the other factory owner buying poor quality green
leaf paying a higher rate than the other. They also added
various chemicals, sugar and other things illegally. The
green leaf suppliers have supplied course leaf, wet leaf, and
imposed high pressure on the factory owners.
What we have observed in the last five decades is not a
competitive tea industry in the country. It is a cut-throat
“war” by various players. Regulators have become part of
the problem. They failed to look at how the industry as a
whole could gain. At the same time world-wide consumers
have changed their consumption pattern and are looking for
healthy products. This is the shift in the world market that
our tea sector could not grasp.
In this regard I propose a paradigm shift in our tea industry
in a very carefully designed and planned manner. A new
paradigm of the Sri Lankan tea sector is to convert its tea
into a healthy drink-producing industry. A healthy product
cannot contain pesticides residues. It cannot contain heavy
metals. So, we need to convert our tea sector into an organic or natural tea production industry wherever possible
without further delay. This will be a bold initiative. It will
require major adjustments in the sector while reaping the
benefits will take several years. Firstly, we cannot continue to do business as it is. Secondly, Sri Lanka’s reputation
as quality tea producer is insufficient for us to thrive in this
business. As much as we produce high quality tea, we also
produce very poor quality tea. It is impossible to sell bad
quality tea for high prices in the world market as high quality tea. Tea lands cannot be converted into other land use
easily.
PAGE
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Value addition can be done only to some extent. If we
produce high quality products to the world market should
not they be healthy products too? Would not it be easier
to promote healthy organic high quality tea in the world
market more than promoting unhealthy products with
pesticides residues and heavy metals, etc? I propose we
convert one third of tea lands in strategic locations to organic tea. They will be certified organic tea fields in three
years. What they produce will be supplied to the world
market as high quality and healthy Ceylon organic teas.
Our reputation will be to re-build not only as a quality tea
producer but also as a healthy tea producer. Depending
on the progress, over time in a proper manner the entire
tea sector will be converted into ecologically friendly tea
producing nation. This will be achieved as a private sector initiative with the government’s monitoring and advisory support. In this regard the following 10 steps need to
be taken:
(1) As of today, there is no clear understanding about
organic teas in the country. Producers do not know what
specific requirements they need to follow. For many it is
just another type of tea that is cultivated without any fertiliser and agro-chemical applications. Sometimes buyers
know what they want to buy but most brokers and other
domestic tea exporters and sellers are not fully aware of
it. Therefore there is a felt need to recognize organic tea
as a specialty category of tea such as Dimbula, Nuwara
Eliya, Udapussellawa, etc. Organic tea is not another type
such as green tea.
(2) After such identification then “Pure Ceylon Organic
Tea” as a promotional tool of the Sri Lanka Tea Board
(SLTB) should be considered. Establishment of a mechanism to fund the overseas promotional work of organic
tea producers may be beneficial in marketing their products.
Organic brand promotion should be supported. Awarding
the lion logo and allowing the use of “Pure Ceylon Organic Tea” specification has to be scrutinized rigorously.
Such recognition should be awarded only to organic tea
producers who have not mixed “Pure Ceylon Organic
Tea” with various pesticides and heavy metal, etc.
(3) Until such special recognition for organic tea is established, it must be treated equally with other specialty tea
categories. Organic tea producers should be treated
equally.
(4) Organic tea sales are not happening in regular intervals, unlike non organic tea sales at the Colombo auction.
There is no organized tea auction or marketing system
PUBLICATION OF TEA PROMOTION DIVISION—SRI LANKA TEA BOARD
Tea market update Volume 12. No. 2
PAGE
available for organic teas. Therefore, organic tea producers frequently face serious cash flow problems. By
way of mitigating these problems a special working
capital fund may be created similar to the working
capital loan facility extended few months back only for
organic producers to maintain their stocks. This can be
a typical commercial loan but with a reasonable interest rate. A Colombo auction of organic tea should be
developed in the future.
(5) Organic tea production and promotion must go
through regular market mechanisms. Let the market regulate the organic tea industry while any specific barrier that exists should be removed. The
SLTB as the regulator must step in whenever there
are incidents of wanton harm to the organic tea
integrity as such incidents would bring disrepute to
the country’s organic tea industry. For example, if
any producer’s tea is detected with various chemicals, pesticides, heavy metal and other harmful
materials the SLTB must remove such producer/
seller from using the organic tea label in his/her
products.
(6) Those who damage the integrity of the organic tea
market should be penalized. On the other side,
there should be a programme to reward those who
safeguard the organic tea industry.
(7) The SLTB and other relevant agency officials of
the government and semi government institutions
should be made aware of the nature and mechanisms of the organic tea industry and provided
some exposure as to how international organic
markets work. Their lack of understanding of the
organic sector related matters makes it extremely
difficult for producers, processors and packers to
function harmoniously and in a mutually respectable manner.
(8) Establish a division within the Ministry of Plantation Industries to look after organic tea production,
sales and promotion activities. This division must
be given adequate resources to undertake its tasks
such as
(i) Appointment of Pure Ceylon Organic Tea International Ambassador(s),
(ii) Identify organic tea broker(s) to promote sales and
marketing, and
8
(10)The Sri Lanka Tea Research Institute and other relevant research bodies, universities and private sector
R&D arms should get together to promote
(i) Organic tea production
(ii) Organic tea fertilizers
(iii) Organic tea processing methods and techniques
(iv) Organic tea sales and marketing
(v) Value added products for organic tea in the country.
These proposals won’t work if various players of the
game don’t function prudently. It is essential to establish
a transparent, respected and trustworthy organic tea subsector if we are to harness the potential benefits from
this new emerging trends. Any form of corruption must
not be tolerated. Ground level tea growers must be empowered and they must be made responsible for their
product quality. The certification system must be allowed to function in private hands. All players in the
organic tea industry must work for the sake of the integrity of the organic tea sub-sector. Trust is the basis of the
success with the consumer being the judge in the organic
tea sub-sector. A paradigm shift of this nature is needed
for the sustainability of tea as an important contributor to
the country’s export earnings and national income
Trade and statistics inquiries:
Sri Lanka Tea Board
574,Galle Rd, Colombo – 03.
Tel :2587814,2582122 Fax : 2587341
(iii) Appoint local focal person(s)to assist this tea industry in the country. Additional tasks can also be
identified as needed.
(9) Sponsor organic tea education, promotion, competitions, and award ceremonies nationally and internationally.
PUBLICATION OF TEA PROMOTION DIVISION— SRI LANKA TEA BOARD