Sri Lankan tea trade does not foresee any immediate threat to its business due to the economic troubles in the island nation. It has played down heavy tea purchases by overseas buyers from South Indian auctions, saying that it is hard to substitute the tea varieties from the country.
“We do not anticipate much competition from any tea producing countries. Around 62 per cent of Sri Lanka’s tea from low elevation is very unique, difficult to substitute and much sought after by the West Asia countries and Russia. None of the other producing countries could supply such a steady volume all year round” said Niraj de Mel, Chairman, Colombo Brokers’ Association, which comprises all eight tea broker firms operating at the Colombo auctions.
Vietnam a threat
Vietnam is possibly a competitor, but unable to fully match the cup of Ceylon tea, he told BusinessLine over the phone from Colombo.
Any importer—at times of possible disruptions or uncertainties—looks for adequate supply from various sources so as to ensure a constant and consistent supply. It is with this intention that some buyers would turn to South Indian auctions, he said.
At present there are some disruptions in logistics, but the Sri Lankan authorities have started resolving the issues and the supply is expected to be stabilized shortly, he said.
He pointed out that prices of high-grown teas, which usually witness a downward trend at this time of the year have also started picking up, which is an indication of demand revival. This was evident from the last auctions when the commodity fetched better prices.
Asked whether the current issues will have any impact on production, he said there could be a 1-2 per cent drop from the 299 million kg achieved last year. However, the government has taken steps to ensure adequate fertiliser applications in tea gardens that would enable a good production in the latter part of current year. The production in the first four months ending April was 18 million kg below last year, he said.
Average realisation up
The average price realisation in the auctions in May is also up at approximately $3.66 per kg which is high compared to last year, he added.
Meanwhile at Cochin auctions, orthodox leaf market continue to witness a strong buoyancy in overseas buying with 90 per cent of the offered quantity of 4,03,821 kg was sold.
There was an active participation of exporters especially from West Asian markets and CIS countries. Prices of several grades was up ₹5-10 and sometimes more. The arrivals to the auctions has also registered a rising trend, thanks to the surging export demand, traders said.