Burdened with an overall tea production dip of 400,000 kgs during the period up to August when compared with 2010 and increased wages, plantation companies are facing losses, industry data showed yesterday.
Sri Lanka has recorded a lower crop of 23.9 million kgs for August, 2011, which shows a drop of two million kgs over the same month last year, a Lanka Commodity report quoting Sri Lanka Tea Board data stated. Brokers insist that there is no indication that world market prices will increase on higher demand.
It is estimated that plantation companies will have to spend an extra Rs. 10 billion to meet the responsibility of the wage hike given earlier this year.
High Growns yields show a month on month drop of 20%. Medium production during the month has declined 23.5% when compared to August 2010, whilst only the Low Growns sector has shown a marginal improvement.
During the period January to August, 2011, a total crop of 220.8 million kgs has been recorded which is 397,932 kgs lower when compared to the crop of 221.2 million kgs recorded during the corresponding period last year.
On analysing the cumulative position, the crop achieved so far this year in respect of the High and Low Grown sectors have shown gains of 1.7 million kgs and 0.6 million kgs respectively, although the production of Medium elevation teas has recorded a sharp decline of 2.7 million kgs (7.30%).
“During August only the Low Grown sector has shown a marginally increased crop of 141,690 kgs month-on month, whilst lower crops have been harvested both from the High and Medium Grown elevations. During the month under review, the weather conditions were not at all conducive for growth particularly in the High and Medium elevations, which indeed resulted in very high costs of production in estates and heavy losses in consequence,” the report added.
To add to the woes of the producer, the prices recorded at the Colombo auctions during August for the greater majority of the High and Medium teas was disappointing and much below actual costs.
Meanwhile, John Keells Tea Brokers in its report emphasised on the disappointing yields and dropping prices. Crops from the Western and Eastern sector are yet to show any significant signs of improvement and continues slightly below last year levels, and along with recent wage hike is keeping cost of production at its highest ever levels, John Keells said.
The report went onto say that the last quarter of the year is normally associated with high crops, and producers are hoping that things will turn around fast, as most of the plantations from these two sectors have suffered heavy financial losses in recent months, due to a combination of high production cost and depressed prices.
The Tea Board is targeting $ 1.5 billion in earnings this year, which is an increase of 16.1% from $ 1.4 billion last year. This is despite tension in the Middle East and North Africa that accounts for about 55% of Sri Lanka’s tea exports.
Sri Lanka’s earnings from tea exports rose 8.5 per cent to $ 704.6 million in the first six months of 2011, according to the latest data from the Central Bank.