Sri Lankas tea production and export revenue are expected to fall to multi-year lows in 2009 due to drought, low fertiliser usage and low global demand, the countrys tea board said on Wednesday. Tea is Sri Lankas largest agricultural export and fetched a record $1.27 billion in 2008, and is its third-highest foreign exchange earner, after garments and remittances.
"We may reach something less than 300 million kgs, but not beyond that," Sri Lanka Tea Board Chairman Lalith Hettiarachchi told Reuters of this years output forecast. That would be a seven-year production low, and revenue will fall accordingly amid lower demand caused by the global financial crisis, he said.
"We may get export revenue of around $1 billion, but we dont even expect to reach the 2007 level" of $1.02 billion," he said. Provisional Tea Board data showed output had plummeted 41 percent to 30.1 million kg in the first two months of the year. Hettiarachchi estimates first quarter output will be down at least 25 percent year-on-year.
"For almost the last four months, tea growers have cut production and fertiliser application. So tea that is coming to auction has been low," he said. Tea brokers said volumes at the main Colombo tea auction this week fell to almost half the weekly average of 8 million kg, threatening export supply. "Buyers may not be able to get the total from us and they may have to look for others. But as far as our quality is concerned, we still have the buyers confidence." Hettiarachchi said.
He said that Sri Lanka fell behind Kenya last year in terms of exports, and he said Indias exports were improving. "That doesnt worry us so much, as long as we maintain our quality and our name," he said, referring to Sri Lankas trademark Ceylon tea brand. Last year, Kenya exported 383.4 million kg compared to Sri Lankas 320 million kg, but the island nations export revenue was around $500 million higher due to an edge on export quality.
Industry analysts say Sri Lanka tea exports are at risk due to low productivity, high labour charges decided by politicians to boost their vote bases, a lack of credit in the financial system and an overvalued rupee currency. "Cost of production is very high as 60 percent of the cost is for labour charges," said Hasitha De Silva, promotion director at the Board. "Lack of currency depreciation compared to our competitors and buyers also has reduced the demand.
Comments
Comments are closed.