2020 SRI LANKA TEA PRODUCTION AND EXPORTS

SRI LANKA TEA PRODUCTION – JANUARY TO DECEMBER 2020

Sri Lanka Tea Production for the period January-December 2020 totalled 278.5 million  kgs vis-à-vis 300.1 million kgs of January-December 2019, showing a decrease of 21.6 million kgs YOY. High Grown production for 2020 totalled 61.2 million kgs compared to  61.7 million kgs of January-December 2019, thus recording a decrease of 0.5 M/kgs (-0.85%). Meanwhile, Mediums totalling 45.6 million kgs have shown a marginal decline of 0.3 million kgs (-0.69%) as against  45.9 million kgs of January-December 2019, whilst Low Growns totalling 169.6 million kgs have recorded a significant decline of 20.1 million kgs (-10.63%) vis-à-vis 189.7 million kgs of January-December 2019.

CTC production for the period January-December 2020 totalled 24.1 million kgs, recording an increase of 0.5 million kgs vis-à-vis 23.6 million kgs of January-December 2019.

The available tea crop figures for January - December 2020 period are appended below (in MT)

 
CATEGORY QUANTITY (MT)
Orthodox 252,367
CTC 24,099
Green 2,023
Total 278,489
 
( SLTB )

SRI LANKA TEA EXPORTS - JANUARY TO DECEMBER 2020

Sri Lanka Tea Exports for the period January-December 2020 totalled 265.5 million kgs vis-à-vis 292.6 million kgs of January-December 2019, showing a decline of 27.0 million kgs. When analyzing the exports category-wise, exports in all segments ie. bulk tea, tea in packets , tea in bags , green tea and instant tea have declined in 2020.

Revenue of Rs. 230.1 billion realized from Tea Exports for January-December 2020 shows a decline of Rs. 10.4 billion  in comparison to the previous best of Rs. 240.6 billion realized in 2019. However , the total FOB value for January-December 2020 of Rs. 866.70 (USD 4.71) has shown a growth of Rs. 44.45 (USD 0.09) per kg  vis-à-vis Rs. 822.25 (USD 4.62) of January-December 2019, thus recording the highest ever FOB value surpassing the previous best which was realised during the corresponding period of 2019.

Turkey has retained the number one position as the largest importer of Sri Lankan tea in 2020 followed by Iraq and Russia with Iran occupying the 4th position. Although Iran occupies the 4th position, a fairly substantial decrease in imports is recorded during January-December 2020 compared to the corresponding period of 2019. Other noteworthy importers are China and Chile where they have recorded a fairly significant increase in imports by 19% and 30% respectively.

The tea export figures for January - December 2020 are listed below (in MT). 
 
DESCRIPTION QUANTITY (MT)
Bulk  118,251
Tea in Packets      118,176
Tea In Bags 22,173
Instant Tea 2,843
Green Tea 4,126
TOTAL 265,569
 

MAJOR IMPORTERS OF SRI LANKA TEA - JANUARY TO DECEMBER 2020

COUNTRY 2020 2019
TURKEY 38,866 39,087
IRAQ 33,377 38,408
RUSSIA 29,608 29,068
IRAN 15,127 22,263
CHINA 14,123 11,870
AZERBAIJAN 10,303 11,721
SYRIA 9,536 10,985
CHILE 9,419 7,231
U.A.E 8,670 9,901
LIBYA 7,806 12,329
 
(Sri Lanka Customs)

MARKET OUTLOOK FOR 2021

In projecting a possible market scenario, the following needs due consideration. 

As many tea producer countries continue to promote ‘tea drinking,’ the percentage of tea retained in producer countries have increased quite significantly over the last decade, resulting in a declining availability for exports.
Tea consumption continues to be dominated by Asian countries, particularly India and China, which together is estimated to be 55% and more of global demand.
Out of home consumption, which was adversely impacted due to Covid-19 is likely recover to some extent in 2021, particularly as the year progresses.
Weak market outlook from European countries following the economic downturn, which is unlikely to impact tea prices in a significant manner.
Uncertainty about US trade policy towards China poses a risk to tea sales. It is hoped that US policy will become less combative with the political change.
Oil prices moved higher during the first two weeks of December based on stronger Asian demand, effective OPEC+ supply management and positive news on the vaccine front, whilst Brent oil crossed USD 50 for the first time since March.
From a Sri Lankan perspective, it is most likely that the Sri Lankan Rupee would weaken once the imports on non-essential items are relaxed and in such circumstances, would augur well for Rupee tea prices considering that some of the key importer country currencies too have depreciated post the Covid-19 pandemic.
Sri Lankan tea output although is likely to recover in 2021, is unlikely to achieve the highs registered from 2010 to 2015. Therefore, the supply situation would continue to remain tight.

From a global perspective, tea production in 2020 is likely to record a deficit reflecting the crop shortfall primarily from India and Sri Lanka. Kenya, on the other hand, has recorded a fairly significant increase year-on-year, perhaps reflecting a cyclical recovery after a drought induced decline in 2019. Further, black tea production growth over a period of time has essentially been from the African Region, consisting mainly of CTC teas. From an Orthodox perspective, Sri Lanka as a prime supplier together with India and Vietnam have experienced a crop shortfall in recent times.

In the absence of a global measure of tea stocks, predicting tea prices becomes a near impossibility. Therefore, if the supply and demand equation would be a deciding factor, it would be reasonable to assume that prices in respect of Large Leaf Orthodox teas would sustain at these levels, perhaps even as a worse case scenario. However, prices for Orthodox Rotovane (Small Leaf liquoring teas) would largely weigh on the recovery of tea production in North India, which is unlikely to be regularised during the 1st quarter of 2021 as almost all producer countries experience dry weather conditions and often is a lean cropping period.

In these circumstances, tea prices are unlikely to show a dramatic change from its current levels up until end 1st quarter 2021 and perhaps on a cautiously optimistic note, we could expect these levels to remain till around mid- 2021. Tea prices thereafter would largely depend on the supply scenarios that unfold during the 1st quarter of 2021.

Amidst the optimistic outlook for prices, the industry continues to be challenged with constant wage increases and lower rates of mechanisation, which would continue to undermine the competitiveness due to higher average production costs than other large producer/exporter countries.
(Source: Forbes & Walker Tea Brokers)
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