Drought drives up costs for tea sector

Tuesday, 21 August 2012 01:27 - - {{hitsCtrl.values.hits}}

The current drought conditions are impacting the tea sector with cost on the up apart from the overall agriculture industry.

“A shortfall in crop intakes has taken a heavy toll on the cost of production with majority of estates registering production cost exceeding Rs.450,” said commodity broker John Keells Ltd.

It said except for two days of light rainfall in the Western and Eastern Sectors the previous week, and overcast conditions over the weekend, weather has remained mainly dry over most parts of the Island.

“The prevailing drought has affected the Agricultural sector with paddy, vegetable and food cultivation from all major cultivation areas recording severe shortfalls in production. The Plantation Sector too has felt the impact and specially Tea Production continuing to record crop shortfalls in the past few months,” John Keells said.

“The usual rains have failed to materialize this Monsoon Season which has not only affected tea production, but has also delayed important agricultural inputs, such as planting and fertilizing. Electricity generation has been another Sector which has been badly hit with water levels in most reservoirs receding to alarming levels. A shortfall in crop intakes has taken a heavy toll on the cost of production with majority of estates registering production cost exceeding Rs.450,” the broker said in its weekly report.

At last week’s auction Ex Estate teas met with very good demand. Western High Grown BOPs appreciated Rs. 20/- to Rs. 30/- and more following quality. Best BOPFs on offer gained Rs. 20/- to Rs. 30/-, whilst the below best and plainer types gained Rs. 30/- to Rs.40/- with the gap between the best and the plainer teas narrowing further and many number of invoices selling above Rs.500/-. The few brighter Nuwara Eliya BOPs on offer appreciated substantially as much as Rs.20/- to Rs.30/-, whilst the few brighter BOPFs gained even more. Other BOP/BOPFs gained, but to a lesser extent. Uva BOP/BOPFs gained by Rs.50/- to Rs.100/- following quality with the best BOPs selling in the range of Rs.700/- to Rs.1500/-, whilst BOPFs in the range of Rs.500/- to Rs.930/-. Some of the Pekoe invoices too are selling in the range of Rs.450/- to Rs.780/-. Best Low Grown CTC PF1s were firm to a little easier, whilst others too were mostly firm. High and Medium types were irregularly dearer with some invoices gaining Rs.20/- to Rs.30/- and others Rs.10/- to Rs.15/-. There was good support from the tea bag sector and Russia, whilst UK, Japan and Continental buyers were more forceful on some seasonal teas.

The 3.4 Mkg of Low Growns on offer met with good demand. Prices for Small Leaf varieties appreciated in value with the Tippy sorts at times advancing sharply. In the Leafy category too bold Pekoes had better demand although prices for OP/OPAs were barely steady. BOP1/OP1s too had a reasonably good sale.

There was excellent demand from Russia, Iraq and Libya whilst Saudi Arabia, Jordon and Iran also lent useful support.