US sanctions on Iran, Turkish currency crisis hit Colombo tea auction prices

Lanka Commodity Brokers Ltd. said yesterday that US sanctions on Iran and the Turkish currency Lira crisis had impacted Colombo tea auction prices. 

It said apart from the best available Low Grown teas, most other grades saw a further lowering of prices at this week’s auction, which is sending shockwaves to the producers of Low Grown and Low Grown type teas of Medium elevation.  

“The economic sanctions on Iran by the USA which came into force this week, has seriously affected this major buyer of our Low Grown teas. Iran is facing a huge currency crisis which has delayed payments being received by Sri Lankan buyers in respect of teas already supplied. This is in turn is creating a chain reaction as many buyers in Colombo are facing difficulties in servicing new orders due to the long delay in the receipt of funds for teas already shipped to Iran,” Lanka Commodity Brokers said.

“Turkey, which is another major market for Sri Lanka teas, is also facing its worst-ever currency crisis with the Turkish Lira plunging to a record low this week,” it added.

The plunge in the Lira which began in May, now looks certain to push the Turkish economy into recession, which will have a cascading effect on the Colombo Auction tea prices as it would only mean that Turkey will have to pay more money to source their favourite tea from Sri Lanka. Buyers in Colombo are closely following the developments that are unfolding in the wake of Turkey’s deteriorating relations with the United States and its impact on our tea prices.  

At this week’s Low Grown sale a total quantity of 2.9Mkgs was on offer. Apart from the best available leafy grades and FBOP/FBOPF1, all other grades declined in value with PEK grades showing the sharpest drop of Rs. 20-30 per kg and more. Demand from Iran and Turkey was much weaker whilst other Middle Eastern markets active at the lower levels.  

“The crisis following the non-receipt of funds for shipments already made by Colombo Tea Auction buyers did have a domino effect on this week’s High Grown teas sold in the Ex-Estate catalogue,” Lanka Commodity Brokers said. 

Apart from the best available Westerns and seasonal Uvas all other categories received weak demand and where sold the prices recorded sharp declines. A large volume of teas remained unsold as well. Buyers for Japan was more selective whilst there was more widespread interest for the best available Western and Uvas for buyers from Europe.  There was significantly lower demand for “tea bag” types for the Russian market.