Ceylon Tea under pressure in Russian, Ukraine markets
Sri Lanka’s tea sales to Russia and Ukraine have come under pressure with exporters worried over delayed payments and a possible drop in pre-winter buying.
Asia Siyaka Commodities CEO Anil Cooke explained that “currently the tea market conditions were not reflective of the vibrancy associated with the markets as we go into the colder higher consumption period in most of our key tea consuming markets.”He believes that there would be a sufficient demand but this has been deferred, and in addition, the purchasing power has diminished due to the added complexities of doing business in these markets.
Average tea prices in Western High Grown were at Rs. 411.56 in mid August that came down to Rs. 398.22 at this week’s auction, he said. Low Grown which was at Rs. 484.44 in mid August were down to Rs. 459 this week.
With the Russian Rouble depreciating against the US dollar, Sri Lanka’s tea has become an expensive commodity for the Russian buyers resulting in further delays in payment.
It was pointed out that the Russian Rouble that was trading at around (Rouble) R34 to the US dollar was now at R37.50 to the dollar and this has also impacted on the demand.
Imperial Teas Managing Director Jayantha Karunaratne said in an interview with the Business Times that globally it was observed there was a downward trend in demand for commodities in general like tea, rubber, coconut and pepper.
He pointed out that the lowering prices of tea has impacted on the Colombo Tea Auctions as well.
Sri Lanka has experienced a surplus crop this year from January – July at 201 million kg compared to 196 million kg last year. Poor quality teas coming in for sale have increased in quantity with the demand increasing by an average of about 10-15 per cent.
Despite the crisis in Russia and the Ukraine, exporters were noted to have found that consumption has not reduced except for the fact that traders have reduced demand due to the high prices quoted.
Payment delays were a key factor highlighted by Regency Teas COO Harendra Kiridena who observed that orders would get delayed since they were unable to stretch the credit for clients and said “we can’t export until we get the funds and that could delay turnover.”
He pointed out that this was a huge issue for their organisation since it constituted 30 per cent of turnover mainly from Ukraine.
In addition, it was noted that free trade and movement was a problem that had resulted in distribution problems as well.
Mr. Kiridena said they had lost nearly 25 per cent of the business they did with Ukraine as the state was not buying that amount of tea since there was a restriction on trade and apart from that there was also delays in payments.
Heritage Teas Director Shiraj De Silva said the 60-90 day-payment period was now stretched to 60-120 days after the goods had arrived.
He pointed out that though there was a lot of demand as an exporter it was essential to be guarded at this time and there was need to make good calls with a lot of the bigger companies selling on a lot of credit.
The September – November period was not as usual, he said adding that last year prices were extremely buoyant with prices dropping mostly for high grown teas and in part for some of the low growns as well.