Asia Siyaka Commodities Ltd., Tea Outlook 2009 predicted optimism for the tea industry this year although the credit crunch persists. While the phenomena influencing the industry shows some negative trends general aura was that the situation would not be too bad after all.

The report also indicated wage negotiations would have to start now with the collective agreement on wages expiring this month.

Regional Plantation Companies (RPCC) have already incurred heavy losses because of the credit crunch not least that 4th quarter (Q4) production and sales were inexorably stifled. Mainly because they were strapped for cash.

Additionally, small holders were not spared. Fertiliser inputs were virtually non existent. Also to circumvent production drop, some small holder fields were pruned.

However, irrespective of these down casts, Russia and CIS countries which have always supported Ceylon tea would continue in 2009 as well. Additionally, Iran would also continue their supporting trend, but that sphere presented an ‘on again off again’ atmosphere which left the industry somewhat in quandary.

Quick assessment of export trends last year indicated Middle East and North African buying exceeded all others with 57% absorption to those countries. CIS and Russia bought 21%. Those were Sri Lanka’s major export markets. Others included UK and Europe 9%, Japan and Australia 5%, North and South America 3%, others recording 5% were other export markets absorbing Ceylon Tea.

Question was who would take responsibility to expand tea trade to countries that did not feature as our main consumers. This aspect has been banged around quite regularly between the Tea Board and the private sector ad nauseum. There appears to be no end in sight to this perennial bickering.

The World Bank in its Commodity Markets Review of February 2009 said Tea prices rose 13.8 percent on higher imports by China and several European countries. Cocoa prices rose 9.6% but there was a problem there. Reports indicating cocoa markets were heading into deficit had significant impact on tea. Additionally, coffee prices rose 7.8% on reports that 2009 and 2010 seasons would record minus entities of approximately 5 million bags because of reduced output in Brazil.

Price increases for tea are therefore consistent with other essential food crops.

Would this mean a ‘hail fellow well met’ attitude all round in tea circles?

‘Don’t run into quick fire conclusions that all is well in the tea world. From a marketing angle indicators are positive, but at base they are not,’ Planters said.

The Asia Siyaka report authored by its Chairman Anil Cooke further said Q1 prices would hold, because there were first class teas being produced at all elevations. That too irrespective of the financial downtrend in most money centers world wide.

Assuming weather patterns would remain constant usual drop would be experienced Q2, and with Uva quality coming up Q3 would record upsurge in prices. That would lead to winter buying in Russian and European destinations. Water shed values could be added on, and prices would stabilize because of these trends.

Additionally, most competing beverages as indicated by the World Bank, would also be costly. Stemming from these trends Ceylon tea would benefit.

Last year, tea production was the highest on record at 318.4 million kilos exceeding previous best 2005, which was 314.3 million kilos.

The Sri Lanka Tea Board reviewed its procedures in July last year and amended previously published monthly figures for the first half 2008.

Amended monthly totals are yet to be published but they do not add up.

There is also simultaneous phenomenon that could plague the tea industry that being buyers not paying their bills. The Russian Ruble has seen devaluation so too the Sri Lankan Rupee. (Rs.114 to the US Dollar at present).

It may be old hat that tea earned some 1.3 billion dollars last year, but factual though it was forex earnings amounting to this figure did not quite earn its kudos in most Central Bank literature.

Plantation sources said tea continued to contribute in tangible terms to government coffers.