Sri Lanka Tea Sees Strong Demand from Consuming Countries

17th July 2010, www.lankabusinessonline.com

Sri Lankan tea prices are likely to stay strong on good demand from consuming countries and possible shortages caused by disruption of production at key origins like India, officials said.

India's tea industry is reportedly worried about crop loss due to heavy showers in June and a pest attack.

Production in Assam, a key Indian tea growing region, is expected to have dropped in June compared to the previous year, with reduced arrivals at the Guwahati and Kolkata auctions pushing up prices of quality teas.

Sri Lankan tea industry officials said if the crop loss in India was serious, if could result in more demand for certain types of Ceylon teas at the Colombo auctions.

Although Sri Lankan tea prices are high they are below the highs seen last year when lower crops in key origins created a global shortage of tea and pushed up prices.

"If Indian tea production drops it could be a reason for increased demand at the Colombo auctions," said H D Hemaratna, director general of the Sri Lanka Tea Board.

He said that going by previous experience, if India diverts tea from exports for local consumption the vacuum has usually been filled not by Kenya but Sri Lanka.

Any drop in the crop in India, a big exporter, would affect global supply of tea, he added.

Tea Exporters Association chairman Jayantha Keragala said Sri Lankan tea prices were attractive right now.

"At the moment we're enjoying very good prices for good teas and the 'below best' and 'bottom' teas as well," he said.

"One reason for high prices is demand ahead of Ramazan in August. Buying for the winter will start from there onwards."

He said a crop loss in Assam could push up prices for CTC type teas which are used in tea bags.

"There won't be a significant change in demand but definitely there will be an impact on CTC teas which have gone up at this week's auction by about 15-20 dollar cents. So there's a slight change there."

He said good Sri Lankan teas still enjoy high prices and are expected to continue to do so.

Tea industry officials in India have said heavy rains prevented the application of pesticides to control pest attacks as well as fertiliser to boost yields.