Prices in Colombo auctions increased by 8% m-o-m and 5% q-o-q in November. The strong demand for orthodox tea also benefitted Sri Lankan tea exports. Exports volumes increased by 5% y-o-y (January to October), at 247m kg, adding upward pressure on Sri Lankan prices in the last few months.
Sri Lankan tea exports increased as a result of the high imports from Turkey (+10% y-o-y) and Iraq +(1% y-o-y). However, the declining demand from Russia lowered its imports by 8% y-o-y, as Russia is currently aiming at limiting its dependence on import goods. Moreover, tea exports benefitted from the depreciation in the Sri Lankan rupee against the dollar (USD), driven by the uncertainties over the presidential elections in November. The weaker domestic currency increased the Sri Lankan tea’s competitiveness in USD term, thus adding upward pressure on prices.
Sri Lankan tea production remained stable in 2019 and is likely to show only a slight increase by the end of the year compared to 2018. The output from January to October reached 254m kgs, a slight increase by 0.5% y-o-y, thus unlikely to substantially weigh down on auction prices in December.