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Weak Sri Lankan tea production support bullish Q3 2020 prices

October 9, 2020

1 mins read

Slide1-Oct-09-2020-03-37-26-12-PMSri Lankan tea exports totalled 22 million kg in August 2020, representing a year-on-year (y-o-y) decline of 4 million kg tonnes (-15% y-o-y). The dip in y-o-y sales was primarily the result of poor growing conditions, which has affected the industry over a number of years, in addition to low mechanization fuelling low productivity among the predominantly smallholder farming population. However, lower sales volumes were partially offset through higher realised prices at the Colombo auction, which increased by 2% month-on-month (m-o-m) in August 2020 and 1% m-o-m in September to LKR 629/kg. Indeed, the Q3 2020 average auction price of LKR 622/kg was almost one-fifth higher than the Q3 2019 average of LKR 522/kg.

Data from the domestic Tea Exporters Association shows Sri Lankan tea exports for the first eight months of 2020 (8M 2020) reached 174 million kg, which was a 20% shortfall against the same period of the previous year. Weaker y-o-y sales were recorded to all, except one, of the top ten destinations. Most notably, cumulative exports to the Middle East (Iran, Iraq, Libya, Syria, Turkey and UAE) contracted by almost 10 million kg tonnes y-o-y (-12% y-o-y). In January, the Sri Lanka Tea Board (SLTB) announced a target of 340 million kg of tea to be produced in 2020, compared to 300 million kg produced in 2019. Based on production n 8M 2020, this production target seems increasingly unlikely, thus lending weight to tight supply expectations supporting firm prices through Q4 2020.

Topics: Beverages
Ibi Idoniboye
Ibi Idoniboye

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