High global black tea production threatens prices

Ceylon Tea is in for a tough time this year as large growth in global black tea pushes down prices for Sri Lankan tea, with current prices rapidly dropping below the cost of production, John Keells Tea Brokers said in a statement yesterday.  

Global black tea production in 2016 has increased, which could surpass demand pushing prices downwards, the tea report said.  

“We are already witnessing a drop in prices in the markets world over with each passing sale. In the case of the current prices at the Colombo auctions, price levels are rapidly dropping below the cost of production,” it warned.  

The dire situation is incurring heavy financial losses to plantations in all three categories. 

However, the drop in prices are not entirely due to over production, John Keells acknowledged,  as much of the woes appear to be self – inflicted due to the teas on offer being of poor product quality.

This week at the Colombo auction the 1.3Mkgs of Ex-Estate teas were met with lower demand. 

“Best Western BOP/BOPFs were firm following limited availability. The Below Best and plainer types were discounted, whilst the plainer varieties declined further. Nuwara Eliya BOP/BOPFs were easier following quality. Uva BOPs were barely steady, BOPFs were firm to easier. Low Grown CTC BP1/PF1s were firm to easier, whilst the High and Medium types were irregular following quality,” the report added.  

Prices for most varieties declined for the 3.1 Mkgs of Low Grown teas that were on offer at this week’s tea auction. OP1/BOP1s shed Rs.10 to Rs.15; OP/OPAs were lower by Rs.10 to Rs.20; Pekoe/Pekoe1s declined Rs.10 to Rs.20; select Best FBOPs advanced Rs.10 to Rs.15; others on offer however eased Rs.5 to Rs.10. FBOPF1s were lower by Rs. 10 whilst the Tippy varieties declined several rupees from last week’s levels.

Russian buyers were fairly active but selective in their purchases while Middle Eastern markets were less active.