Russian Market Critical For Sri Lanka Tea

Behavior of the Russian market would be critical for Sri Lanka tea this year, notes a Sri Lanka Tea Market review 2014 and Outlook 2015.

Weakening of the Rouble would place Sri Lankan Tea Exporters and Russian Importers under extreme pressure. Sri Lankan Exporters who have shipped on credit could have complications with receipt of full payment; whilst brand marketers of teas packed in Sri Lanka could see a sharp erosion of margins if tea prices do not reflect the changes.

More than 90% of Sri Lanka’s tea exports are shipped to the Middle East, North Africa and Russia / CIS Countries. Many critical markets have significant domestic issues that will impact on prices at the Colombo Tea Auctions.
The impact of crude oil prices on the price of tea has been studied by the FAO and confirms a linkage, which has been known by the trade for some time.

On the demand side for Sri Lanka however, the impact is more significant. Markets such as, Russia, Iran, Saudi Arabia, Iraq, and Kuwait and to a lesser extend Libya and some of the Gulf countries are all major oil producers, consumers of Ceylon Tea. The impact on their currencies and other domestic factors resulting from sharp drop in national income could be significant if oil prices continue to weaken in the medium term. Additionally social unrest in Syria, Ukraine and Libya has already had its impact on tea prices at the Colombo auctions.