Planters’ Association Chief says turbulent times for tea

By Shanuka Tissera

A year to date, since the last annual general meeting of The Planters’ Association of Ceylon, there have been some turbulent changes in the tea, rubber and coconut industries due to the crisis in the Middle-East and EU. The 158th AGM of The Planters’ Association of Ceylon took place on 17 August at the Galadari Hotel with Chief Guest Mahendra Amarasuriya.

Tea, rubber and coconut industries are doing well as they are key components of trade for Sri Lanka. There have been wage revisions for the labour intensive jobs, cost of capital seems tricky to handle and there is a shortage of labour. Labour costs are now too high with results dawning on low productivity. The main topic for discussion at the AGM was how to increase worker productivity and what the industry should prepare for in the future.

The Planters’ Association of Ceylon Chairman S.K.L. Obeyesekere announced his concerns and accomplishments of the year gone and made clear that there are some serious challenges ahead that need to be dealt with. “We must become smart in our relatives industries, we must ensure that our factories are fully efficient. Within the next few years, there is potential for us to experience high levels of growth so preparation must begin today.”

The total extent of the major crops under the management by The Planters’ Association members is as follows: Tea – 91,400 hectares. Rubber – 48,800 hectares and coconut/other products – 39,600 hectares with membership of the association managing a total of 437 factories/production units. The budget proposal to take over 35,000 acres of uncultivated land from RPC estates also was a matter of concern where adequate safeguards had to be brought in to ensure that plantation activities are not hindered. The issue of tea re-planting arose once again to whether re-planting at a rate of 2-3% per annum is feasible. Re-drafting of the Tea Board Act and Regulations were also matters addressed by the board.

The volatility of the plantation sector is often subject to external pressures outside the control of the industry such as oil and weather changes. There is a need for long term planning to meet future demands for all products. Rising interest rates, along with poor yields are some areas calling for the attention of research institutes along with encouragement of the government that cannot ignore an industry that contributes Rs. 346.8 billion in export earnings in 2011.

Wages

The first collective agreement was signed in 1998 and this wage package was revised to Rs.101 per day. Today, plantation workers enjoy a wage package of Rs. 515 per day, an increase of approximately 500%, and Obeyesekere said there cannot be any industry which can boast of an increase on a wage package of this magnitude during the period under consideration.

Tea

Tea production recorded a slight decline in 2011 at a level of 328.6 million Kgs down 3 million Kgs in 2012. The year started of slow due to excessive rains but recovered thereafter. High Grown sector recorded a marginal increase of 0.2 million Kgs, the Mid Grown were down by 3.5 million Kgs and Low Grown picked up slightly by 0.3 million Kgs.

The Colombo auction average for 2011 dropped to Rs. 360.68, down by 3% compared to the previous year. However, increasing costs, coupled with 27% wage hikes for estate workers resulted in a sharp rise in the cost of production.

The volume of tea exports totalled 323 million Kgs reflecting a marginal decrease of 1.5% in the year 2010. Despite low prices, there was a slight increase in export earnings totalling Rs. 164.85 billion for 2011 as against Rs. 162.80 billion for 2010. Sri Lanka will continue to maintain its favoured position in the global tea market thanks to the unique characteristics of Ceylon Tea. Kenya, China and Vietnam continue to dominate when it comes to exports.

Rubber

Prices for all grades of natural rubber reached record levels in 2011 where prices began to decline during Q4. The average price for RSS1 was Rs. 508.8, while Latex Crepe 1X was at Rs. 574.93. Attractive prices along with favourable weather conditions encouraged producers to nurture their plantations and smallholding with better fertiliser applications and sound agricultural practices results in increased production from 152.9 million Kgs in 2010 to 157.9 million Kgs in 2011.

Based on Central Bank statistics, the national average yield was 1,552 Kgs per hectare, whereas the yield in the corporate sector estates was a relatively low 888 Kgs per hectare. Although rubber exports recorded a yield decrease of 17.9% over the previous year to reach 42.6 million Kgs, the earning from exports grew by 16.5% to Rs. 22.81 billion in 2011.

Domestic consumption of natural rubber continued to increase to a record 115.3 million Kgs which is 73% of the total national production. The export value of rubber products increased by 55.4% to Rs 97.83 billion in 2011.

Coconut and other crops

Imports of coconut oil and palm oil increased by 79% in 2011. A new demand for desiccated coconut resulted in growth levels of 62% y-o-y to 46.62 metric tons while production of coconut cream and milk powder also increased by 14%.

Other exports such as cinnamon, cloves, nutmeg, pepper, arecanut, cocoa and coffee showed mixed performance in 2011. Cinnamon and Cardamom had yield increases of 11% and 19% respectively. Pepper and Cloves recorded a significant decline in production of approximately 40% due to heavy rain fall.

Amarasuriya addressed the AGM with a detailed talk on what is required for the relative industries to continue growing with given uncertainty in the world economy. He said, “We must take the near future very seriously, most plantations have increased the working conditions of workers, changing of working titles, but really it is a question of how we improve efficiency.” The Chief Guest went on to share that more workers are needed. In the early 90’s, there was an estimated 430,000 workers, today there are only 240,000. This is due to a number of factors mainly being education for workers therefore they do not wish to pursue a career in harvesting.

Mechanical harvesting and research and development took a priority seat in Amarasuriya’s speech, “Drip irrigation is tested and proven to give exact levels of water and nutrients. We are seeing innovation in how to pick tea leaves mechanically, we must invest in these ideas but it is vital that we do not hinder the quality.” Strong branding will help Sri Lanka dominate world trade markets, thinking outside of the box is a must and there is a strong need for Government subsidies in re-planting.