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TEA Chairman Sanjaya Herath
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The Tea Exporters Association (TEA) expressed confidence that the industry is likely to achieve the set targets of 280 million kg and $ 1.3 billion by end of this year, despite the multiple internal and external challenges.
“Tea exporters are determined to do their best without depending on Government assistance to increase tea export volume and value to around $ 2 billion in the short to medium time. It needs strong support from all stakeholders, including tea growers and manufacturers to achieve this task.
All should unite and work together, eradicate any malpractices to regain the glory of Ceylon Tea,” TEA Chairman Sanjaya Herath said at the 22nd Annual General Meeting on Friday via video technology.
The expected outcome will also be an increase of 8% over $ 1.2 billion achieved during the last calendar year. Sri Lanka could have exported another seven-eight million kg of tea if not for the supply chain constraints, whilst the estimated revenue loss due to shipping alone is about $ 35-40 million in the first nine months.
The favourable weather condition reflected a growth in production by 16% to 234.4 million kg in September over the first nine months of 2020. It was also slightly higher than the tea production of 232.9 million kg in 2019. In addition, the tea export volume also increased by 7% to 211.6 million kg in the same period last year.
Earnings from tea exports rose by 7% to $ 986 million during the first nine months compared to the corresponding period in 2020. Sri Lanka also recorded a higher FOB value of Rs. 922.79 ($ 4.70) per kg in the first nine months, a gain of Rs. 62.71 per kg compared to a year earlier.
Although the growing conditions were good compared to last year, he said due to shortage of fertiliser the desired results would not be achieved.
“The exporters were expecting a crop of 320 million kg for 2021 but achieving that target may be a difficult task given the present circumstances,” he added.
The global organic tea market represents only about 1% of the total world tea production and the organic tea concept is rather new in Middle East, Russia, CIS – the major markets for Ceylon Tea that absorbs 75% of Sri Lanka tea exports, he explained.
The TEA Chairman appreciated the Government decision to allow import of chemical fertilisers and other agrochemicals required for the tea industry, whilst hoping the availability of the same would be possible to arrest the decline in tea production and improve the quality of tea.
Among the external challenges, he said the disruption to supply chain logistics adversely impacted the tea export sector with shortage of empty containers, non-availability of vessels and rise in freight rates to an unprecedented level.
“The shipping rates to the US and continental routes went up by over 300% while Russian and Middle Eastern sectors too witnessed considerable increases. All predictions are that logistics issues will continue into 2022 as well and exports will continue to suffer for a longer period. Although the freight charges are a global scenario, State intervention can address the shortage of empty containers,” he said.
Herath said to build an export-oriented economy, one major critical factor is a stable foreign exchange rate.
“Given the imminent risks we may face, if the artificial pegging of the rupee to dollar is prolonged, we trust that the authorities will take corrective action soon, taking into account the challenges the exporters will face in maintaining its market share in traditional markets,” he stressed.
He pointed out that the current appreciation of the rupee has made Ceylon Tea more expensive than that of India and Kenya – biggest competitors whose currencies fluctuate based on market demand and supply. Further the depreciation of currencies in major importing countries such as Russia, Turkey, Iran, Libya, and Syria too have affected the prices at the Colombo Tea auction as it has negated any benefit of the depreciation of local currency.
“We earnestly appeal to the authorities to look into this exchange rate issue very seriously as our products are becoming uncompetitive and face an imminent threat of gradually forcing our traditional Ceylon Tea importers to seek other origin teas. It will be a challenge to regain the status quo, once we have driven them to seek alternate options, particularly from Kenya and India,” he added.
TEA Chairman also said they were concerned about the delay in introducing national legislation for Geographical Indication protection (GI) for Sri Lankan products.
“TEA requests the National Intellectual Property Office (NIPO) of Sri Lanka to expedite this process in order to obtain protection for Ceylon Tea and Sri Lankan tea brands in consuming countries,” he said.
Herath also said TEA has submitted a Budget proposal for 2022, to develop and upgrade the existing laboratory facilities in Sri Lanka to international standard by accrediting them self-conduct the much-needed sophisticated tests to avoid the delays and outflow of foreign exchange.
“Tea exporters spend a large amount of money on testing samples for chemical residues (Maximum Residue Limits) in shipments to Japan, Taiwan, the EU, the US etc. These countries have very strict food safety regulations. Most tests are carried out in foreign laboratories, as local laboratories are unable to conduct all tests in Sri Lanka. Therefore, developing a laboratory will benefit export of all types of food products from Sri Lanka,” he pointed out.
The TEA Chairman also called on the exporters to come out from the red ocean and swim towards blue ocean strategy as soon as possible.
“The world’s tea production is increasing by almost 10% whilst the exports are static. We need to change our mindset of being traditional bulk tea exporters and competing on price towards adding value to our products and selling it to the ultimate consumer in order to achieve premium prices, which could trickle down to the producer,” he added.
He pointed out that Ceylon Tea dominates the world’s orthodox tea production by producing more than 47%.
“We need to consolidate and further improve the product quality to be simply the best and cleanest in this category. To increase the revenue value, we have an opportunity to look at different products to cater to the new emerging market trends by supplying health and wellness teas, fruity and herbal infusions, bubble tea, immunity boosting tea products, tea beer and cocktails and other tea-based health products,” he said.
