Sri Lanka tea earnings for January to June 2022 posted a growth of 28.0% YoY to Rs 164.2 million against Rs 127.8 million recorded for the same corresponding period in 2021.
Export earnings were largely boosted by the price leap upon the steep depreciation in Rs against the USD since Mar 2022, despite the subdued production output, according to First Capital Research –Plantation Sector Update report.
Accordingly, total tea production in all elevations plunged by c. 18% in 1H2022 yielding only 132.1MT compared to 161.7MT produced in 1H2021. Reduction in volume is largely attributable to the absence of required fertilizer, lack of weedicides and other production inputs coupled with fuel and electricity shortages which led to a lack of labour input.
Therefore, the optimal harvesting cycle of 7-days were extended up to 14-days bringing down the leaf standards. However, while sailing through all these challenges, tea producers see a beacon of hope in the weekly tea auctions in terms of the average price levels for all elevations which are moving above the levels which prevailed in 2021.
Accordingly, monthly average price for June 2022 stood at Rs 1,254.54/Kg (+114.0%YoY) or USD 3.51/Kg (+20.0%YoY) and the YTD price improvement in both Rs and USD terms was c. 97.0% and 10.0%, respectively. Iraq was the number one destination for Sri Lankan tea during 1H2022 with a significant increase of c 46.0% (23.5MT), followed by UAE, Russia and Turkey.
The newly proposed state policy to cultivate the uncultivated lands was welcomed by the Regional Plantation Companies (RPC) showing green signals for the future tea production.
However, despite the issue of finding labour left unaddressed, the fertilizer issue was solved to some extent as Sri Lanka Tea Board intervened in obtaining required fertilizer, and the low-cost funds were arranged for both tea smallholders and plantation companies to purchase fertilizer for immediate application. This is expected to uphold the production and anticipate a boost in harvest during 2H2022 and beyond. Moreover, upon achieving economic stability, the plantation sector is expected to witness an ease of operational tightness enabling them to gear the maximum contribution towards the external sector developments. Thus, the largest tea producers possessing a higher capacity may be top in the line to reap the benefits that are yet to come.