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Sept 20, 2011 (LBO) - Sri Lankan tea crops and prices have fallen below those of last year imposing losses on plantations whose costs also went up with a recent wage hike, a broker has said.
The 'Uva' quality season when teas grown on the eastern slopes of the island's central hills yield their best quality and fetch high prices has also been disappointing, brokers John Keells said.

Colombo auction average tea prices are now below those of the same sales in 2010, they said in a report.

"Crops from the Western and Eastern sector are yet to show any significant signs of improvement and continues slightly below last year levels, and along with recent wage hike is keeping cost of production at its highest ever levels," John Keells said.

"The last quarter of the year is normally associated with high crops, and producers will hope that things will turn around fast, as most of the plantations from these two sectors have suffered heavy financial losses in recent months, due to a combination of high production cost and depressed prices."

The brokers also said that from the point of view of the world supply and demand, there is "no pointer" towards improved prices.

"The Uva quality season this year has been somewhat disappointing with only a solitary estate recording a price of 1,000 rupees a kilo so far," the report said.

"One could argue that climatic conditions were not suited for the manufacture of top quality."

The brokers said that rains that fell on estates on the eastern slopes of the hills indicate the 'Uva' quality season might be over.

"The Eastern sector has been experiencing showers over the weekend which could be a precursor to the onset of the North East monsoon. The wet weather will bring to a close the seasonal teas from this sector."

Tea prices at the Colombo auctions are now about 20 rupees a kilo below the averages last year with all three elevations suffering.

"The drop in tea prices in August has affected the Sri Lankan averages for the month with an overall negative variance of 20.87 rupees compared to same period last year," John Keells said.

Low grown teas which make up the bulk of the crop were as much as 23.56 rupees a kilo below last year's levels.

"All three elevations recorded negative variances with low and medium grown in particular recording minus variances of 23.56 rupees and 18.50 rupees," the report said.