Sri Lanka’s tea exporters are likely to sell Kenyan teas in future if the current scenario on fertiliser creates unfavourable conditions to produce the quality Ceylon Tea the world knows too well about for over a century, according to industry officials.
While some of the larger
Sri Lankan exporters are already in other key tea producing countries, it is likely that the rest of the exporters too will gradually seek other teas to continue their operations.
Tea exporters in Sri Lanka believe that they can get better opportunities in competitive countries like Kenya as authorities here are determined to shift to the organic fertiliser catering to just a niche, high end clientele.
Tea Exporters Association (TEA) Chairman Sanjaya Herath told the Business Times on Thursday that the producer should carry out good agricultural practices and good manufacturing processes which will enhance the quality of tea.
He noted that the tea producers are most important to the exporters as they have to make quality teas that could fetch good prices in the global market.
“If the local scenario gets tougher and you are passionate in tea, you will look outside,” Mr. Herath said. He explained that since Dubai is too expensive to work with and India stringent on its regulations Kenya is a promising option to turn to.
Moreover, Africa itself is a growing market and the East and West African markets are getting interesting and “we can go into niche markets”, he said.
Although the lack of fertiliser issue is a little too early to comment, however, in about a months’ time there will be a crop drop and winter buying, Mr. Herath explained.
Similar to what happened to the apparel industry when they found cheaper labour overseas and set up their operations, tea exporters would also be driven to places like Kenya that offer more for value addition.
The revenue was US$1.3 billion last year and they expect this to increase in line with government expectation to reach US$1.5 billion which is an achievable target, it was noted.
“We feel the plantation and management companies have sufficient stocks till the end of the year but the smallholders are affected,” Mr. Herath explained.
With the drop in the quality of tea in future as a result of a lack of or inadequate fertiliser the quality of tea may deteriorate and Sri Lanka is likely to face a risk of losing the 40 per cent of the global market share they hold currently for orthodox black tea.
Colombo Tea Traders Association Chairman Jayantha Karunaratne told the Business Times on Thursday that though exporters may not close shop they are likely to scale down operations here and will not develop any new machinery and have no big plans in Sri Lanka.
In fact, exporters will set up overseas in consumer or producer countries like Kenya, Russia, Dubai and Turkey.
Meanwhile, the authorities have issued a circular dated July 20, effective from August 1 ( to ensure the domestic producer is taken care of) where exporters must use 30 per cent of Ceylon Tea to blend with imported green tea fannings; and imported CTC tea. Further, a minimum of 30 per cent value addition should be achieved at the point of re-export. However, the circular also states that prior approval should be obtained from the Tea Commissioner for any deviation of the amount that should be blended.
Sri Lanka Tea Board (SLTB) Chairman Jayampathy Molligoda said that this circular gives effect to a previous decision taken in 2009 and noted that this would ensure that the local producer is protected and the cheaper teas could also obtain a market.
Sri Lanka fetches highest FOB prices for black tea
Sri Lanka recorded increased earnings in 2020 due to the high prices paid for Ceylon Tea at the Colombo Tea Auctions and the nation’s strong marketing sector adding value to exports despite a local and global lockdown, Asia Siyaka Brokers stated.FOB value of tea per kg shipped in 2020 was US$4.67 compared with $4.61 in 2019 and by June 2021 the average FOB value of tea per kg had risen to $4.75. The Indian FOB value was US$3.21 and Kenya recorded a figure of $2.17 in 2020.
By June 2021 Sri Lanka had exported 137 million kg of tea compared with 124 million kg during the period 1H 2020. This resulted in earnings recorded at $651 million from these shipments compared with $571 a year ago.
Asia Siyaka notes that should the country’s favourable weather conditions continue and agricultural inputs are available as and when needed the country could easily more than double its 1H earnings and move towards the national target of $1.5 billion for the year.