Low grown prices dip as US sanctions on Iran affect Colombo Tea Market

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By Steve A. Morrell

US sanctions against Iran and the depreciation of the Turkish Lira contributed to a debilitating effect at the Colombo Tea auctions.

In addition, drought conditions in Uva and uncertain weather conditions in the Western hills combined to register low crops on estates. The smallholder sector as well reported low crop.

As a result of depleted crops, particularly in Uva, the Cost of Production (COP) on some Uva estates were high. Brokers said the COP on these estates exceeded their net sales averages contributing to alarming conditions all round affecting tea.

Explaining the influence of Turkey and Iran, they said both countries were major buyers of low growns. Depreciation of the Turkish Lira affected Ankara’s buying as much as US sanctions against Iran continued their debilitating effects on the Colombo auctions.

John Keells weekly Tea Market Report said comparative prices revealed physical conditions of the tea market.

Net Sales averages recorded to date were that 2018 sales up to August 8 was Rs. 591.47 per kilo in comparison to 2017, where prices were Rs. 611.58. This indicated a substantial drop of about Rs. 20 per kilo overall.

Elevational averages too had bad news. Uva 2018, recorded Rs. 534.75 per kilo, while the corresponding price in 2017 was Rs. 563.22, a price drop was about Rs. 30 per kilo.

However, they said Uva quality may yet rescue some credibility to market conditions. Quality Uvas would yet bring in a rear end reprieve expected end August or early September.

Turkey and Iran were alarming circumstances the tea market would have to contend with, Brokers said. The Russian Ruble depreciation too affected Russian buying causing further trauma for tea. Russia and CIF countries account for about 18 percent buying in Colombo.

Plantation Industries Minister Navin Dissanayake’s recent visit to Tokyo achieved results. Japan will continue to purchase Westerns, but estates were cautioned to ensure standards were maintained.

Reverting to last week’s auctions Asia Siyaka Tea Brokers reported low grown Pekoes remained unsold.

Ceylon Tea Brokers PLC ( CTB) confirmed lower demand for low growns. The report said bold Pekoes declined Rs. 70 to 80 per kilo, aggravating market repercussions following issues in Iran and Turkey.

However, the silver lining to the dark cloud was that some Uva’s sold well. Notably, Aislaby Bandarawela BOPF sold at Rs. 1,050 per kil while St. James Hali Ela achieved Rs. 1300.

Crop achievement to end June recorded by producing countries indicated Sri Lanka, Kenya, Malawi and Tanzania recorded plus variances. Kenya was the highest at 30.8 percent.

Bilateral talks between Sri Lanka and Pakistan were that they would increase their buying of Ceylon Tea. However, this did not happen. The CTB reported said Sri Lanka did not sell any tea to Pakistan in July this year. At a press conference last month, they said they were now more in favour of tea from Kenya.