Chinese Agriculture Deputy Minister visits TRI

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Minister of Plantation Industry Navin Dissanayake and Chinese Agriculture Deputy Minister Chen Xiaohua inspected Sri Lanka Tea Research Institute in Talawakele recently, and initiated discussions on increasing exports between the two countries especially ice tea and green tea.  


Date- 19th May 2017, Daily FT


 

Rain boosts April tea output by 20%


Reuters: Sri Lanka’s tea output rose 20% in April compared to a year earlier after rains ended a six-month drought that had lasted to February, the state-run Tea Board said on Monday. 

Production in the first four months of the year edged up 1.8% compared to the same period last year.

Sri Lanka Tea Board Director-General S.A. Siriwardena said rains were good in March and April, helping lift production.

Sri Lanka faced its worst drought in 40 years in the six months to February, hurting the island nation’s economy. Tea is Sri Lanka’s top agricultural export and a major foreign currency earner.

Siriwardena said he expected 2017 output to be more than 2016’s 292.36 million kg if weather conditions continued to be favourable.

In 2016, agriculture contracted 4.2% from 2015 when it had expanded 4.8%. Agriculture accounts for about 8% of the country’s gross domestic product.

 Sri Lanka’s tea output hit a seven-year low in 2016, falling 11.1% in its third straight year of declining production due to adverse weather. 

Tea export volume dropped to a 14-year low in 2016, broker data showed. Export earnings fell 5.3% to $ 1.26 billion in 2016 from $ 1.33 billion in 2015. Sri Lanka recorded its highest earnings of $ 1.63 billion in 2014.

Russia was the largest importer of Sri Lankan tea in 2016, followed by Iran and Iraq. Turkey dropped to fourth position in 2016 from second in 2015.

Export volumes to other major buyers such as the United Arab Emirates, Libya, Syria and Kuwait fell last year, the broker report said. 

 

Date- 23rd May 2017, Daily FT

 

India’s 2016-17 tea exports drop by 4.3% to 223 m kilos

MUMBAI (Reuters) - India’s tea exports in fiscal 2016-17 fell 4.3% from a year ago to 222.93 million kg as Pakistan and Russia trimmed purchases, the state-run Tea Board said in a statement. 

The south Asian country’s export to Pakistan plunged 42.7% to 11.11 million kg in the year ended March 31, while Russia bought 44.17 million kg, down 8.4% from a year ago, it said. 

India, the world’s second-biggest tea producer, exports CTC (crush-tear-curl) grade mainly to Egypt, Pakistan and the UK, and the orthodox variety to Iraq, Iran and Russia. 

 

Date-18th May 2017, Daily FT

Delmar achieves yet another record price!

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Delmar Estate established yet another all-time record price of Rs. 740 for a BOP1 grade at the weekly tea auctions held on 8 May in the Uva/Udapussellawa elevational category. This invoice was purchased by M/s. Sunshine Tea Ltd. and marketed by M/s., Forbes & Walker Tea Brokers Ltd.

 

Delmar added another feather in its cap this week as they now hold the distinction of having established all-time record prices for OP, OP1, BOP1 and Pekoe grades in its elevational category.

 

Delmar Estate is situated in Halgranoya, at an elevation of 1,524 metres above sea level and is certified under ISO 9001:2008 & ISO 22000:2005 management system certified for manufacture of black tea food sector. This estate is managed by Sudath Liyanage and comes under the purview of Udapusselawa Plantations PLC.  

Date-15th May 2017, Daily FT

Tea Board Chief on brewing a perfect cuppa!

The tea industry is one of the key pillars of Sri Lanka’s economy. But for some time Sri Lanka’s tea cup has been in a storm and a new recipe for revival and sustenance is imperative at this point of time.

 

Mirror Business recently sat down with Sri Lanka Tea Board Chairman Rohan Pethiyagoda for a detailed discussion over the current status and way forward for the country’s struggling tea industry, which still earns over a billion dollars in revenue per annum. Following are the excerpts from the interview.

 

Could you provide a snapshot of the current status of the industry? 

 

The year I came in, 2015, was probably the worst in the industry’s recent history. The prices were depressed, largely due to political instability and trade or financial sanctions in several of our best markets, including Russia, Iran, Turkey and Iraq. These are powerful markets for Ceylon Tea. The production exceeded the demand and the prices crashed. 

 

The past year has arguably been the best in recent times but that is no credit to me. We experienced a severe drought and the production fell by about 15 percent. That was enough to send the prices rocketing up by almost 50 percent. A lot of people who made losses in 2015 were finally able to return to profitability.  

 

At the same time, all is not well. Almost two years ago the government banned glyphosate, the main weedicide used in the tea industry. That was done without any planning or warning. As a result, in many tea-growing regions weed control has gone completely out of control. 

 

For regional plantations the cost of production is already high, so they can’t afford to hand-weed tea; it is simply too expensive. The worst part of this predicament is that because there is no weedicide legally available, illegal weed-killers are being used, such as those meant for paddy cultivation. 

If traces of them are found in the exported tea, we could face serious difficulties in importing countries. We are monitoring exports very carefully while urging the industry not to resort to such practices. Hopefully the government will reverse its policy on glyphosate; if it does not, we can expect major problems.

 

There is no scientific evidence from anywhere in the world that glyphosate causes any harm to human health. In most developed countries, this herbicide is considered safe enough to be sold even in garden stores. How come the issue is only for Sri Lanka? The fact is that glyphosate, when correctly used within a scientific weed-control regime, is very safe, especially when compared to the alternatives.

 

Has the industry collectively expressed its opinions?

 

The industry has been complaining for quite some time. We need to remember that we are competing with other countries. No other competing countries such as India and Kenya have banned glyphosate. They are thus at a huge advantage. As it is, the cost of plucking a kilo of tea in Kenya is one-third the cost in Sri Lanka. They are simply more efficient. 

 

The ban on herbicides puts a further disability in the way of our manufactures. How can we compete in the global market? No importing country has raised even slight concerns about glyphosate within legally-established residue limits. 

 

The tea industry has repeatedly highlighted this issue but has had little success in changing the government’s mind. I hope the government will take serious notice of this crisis and act soon. I think it will eventually, simply because economic forces will compel it to, but by then the damage may be irreversible. Well, they can’t say they haven’t been warned.

 

What are the other threats the industry faces?

 

Climate change! It is happening so fast that we simply won’t have time to adjust. The rainfall patterns in the island are changing rapidly and a ‘dry hole’ is developing in the centre of the country, in the heart of the tea-growing region, which used to be the wettest part of the island. No longer. For all practical purposes, even Nuwara Eliya is now in the dry zone: it receives substantially less than 2000 mm of rain annually.

 

We have no option but to develop new varieties of tea that will be drought resistant. That is a very slow process. We are not talking here specifically about genetically-engineered tea, but varieties developed through conventional selection. That said, we should develop genetic engineering technology, too. All options should be on the table.

 

Alongside this, the present 50 percent hike in raw material prices is something no exporter could have foreseen. This cannot immediately be passed on to their overseas customers. Even the biggest exporters are getting badly squeezed. And then there is the rising price of finance, with bank interest rates steadily edging upwards.

 

Moving on to our status in the global front, how well is Sri Lanka performing on that stage?

 

I worry that, because of the rising cost of production, we’re struggling to maintain the superlative quality that made Ceylon Tea world famous. The solution to this lies in a closer integration of the production and export arms of the industry and especially a move to increase the present 40 percent market share of value-added teas. This is, of course, already a remarkable achievement compared to our competitors, but we’re in a different economic league from our competitors now and have to think in terms of value, not just volume.

 

Unfortunately for us, our best markets are politically unstable: Russia, Turkey, Iran, Iraq and Syria are all under stress. Selling to them is difficult. It is astonishing that Ceylon Tea still makes it into Iraq despite all the trouble there, even when such countries have economic problems. However, they tend to buy our cheaper teas and when they can’t afford even those, they turn to teas from our competitors. 

 

This has happened in the past. Egypt and Pakistan were among our best customers but we lost them for the simple reason that they could no longer afford to buy our tea and so turned to Kenya. These unreasonably high prices will damage us in the long term and—I never thought I’d say this but I would actually like to see the market cool down a bit. Our challenge is to improve our productivity. While a Sri Lankan worker plucks 18 kilogrammes of tea a day, Kenyans pluck 55 kilogrammes a day and get paid half as much. We need to realize that we are pricing ourselves out of our own market.

 

If you were to point out three areas that need urgent attention, what would they be and why? 

 

The reintroduction of glyphosate would be a good signal since it will reduce the cost of production and also deliver better environment and soil nutrition outcomes by reducing the silt run-off that results from manual weeding. 

 

Second, the tea industry is heavily over-regulated. There are literally hundreds of circulars, rules, guidelines and regulations that the industry is bound by. Every little aspect is governed by some regulation. That doesn’t allow for a flexible industry. I would like to see a drastic reduction in red tape and give more responsibility to the industry to regulate itself. The industry must decide how it should operate, not the government. All governments are to varying degrees both inefficient and corrupt. We all know that. If the industry regulates itself, I think we will see much better outcomes. But Sri Lankans even in the private sector are suspicious of the private sector: in many ways, we have fallen victim to the Marxist rhetoric of the 1960s, which touted the government as the only honest broker for the popular interest. 

 

Thirdly, I would like to see a single IT system that monitors and auto-regulates the whole of the industry’s value chain, from the tea bush to the ship. This is the only way you can cut down excessive regulation. We should get to the point where we can use technology to audit the value chain in real time. 

 

There has been an ongoing issue on refuse tea. What measures have been taken to nip the problem?

 

A small proportion produced by every factory, 6 to 10 percent, is considered to have too much crude fibre to comply with the ISO3720 export standard. There are a few unscrupulous exporters who buy such teas from middlemen and mix them illegally in their blends. Refuse tea used to be sold at factories at around Rs.40 per kilogramme. By the time it reaches Colombo, the price approaches Rs.200 since a lot of people have to be looked after along the way. That’s why the STF has been to such pains to curb this illegal practice. It’s a bit like the ‘kassipu’ industry. 

Sri Lanka produces 25 to 30 million kilogrammes of such tea a year. So we decided to try an innovation. We told the refuse tea operators in Gampola that if they build processing centres to extract the good tea from it, we would allow this to be legally sold through the Colombo auction. We registered the first six centres that achieved 80 percent in the good manufacturing practices (GMP) scale. 

 

We licensed them to sell the reprocessed tea at the auction. By this means, those who were operating in the black economy came into the white economy. The processed tea they were illegally selling for Rs.200 now fetches more than Rs.500 at the auction. Now dozens more want to join the legal framework. We might not approve all but would encourage them to form cooperatives. This type of innovation is important. I am not saying it is perfect. There are issues and some are trying to exploit the system. If the initiative does not succeed, we will shut it down.

 

Ceylon Tea is considered premium in most part of the world due to its quality. However, a section of the industry players have alleged there is a drop in the same due to lack of focus on quality control.

 

Could you shed light on the efforts taken to ensure quality?  

 

This is a huge challenge. We produce about 300 million kilogrammes of tea a year. Kenya generates about 30 percent more than us. Yet, they have only some 110 factories whereas we have 715. They produce 30 percent more tea with one-seventh the factories. Almost 70 percent of Sri Lanka’s tea comes from smallholders and given the large number of factories, there is strong competition for the available leaf. When prices are good, like this year, there is huge demand to set up new factories and when times are bad they come to the government for handouts.

 

I would like to see maybe 150 fewer factories than we have today. My view is that the next time they are under stress the weaker factories should not be given subsidies but allowed to go out of business. Creative destruction is an important part of a successful economy. For the good to succeed, the bad must be allowed to fail. 

 

The same principle applies also to the regional plantation companies (RPCs). By continually forgiving their debts and defaults the government is not doing the country a favour. So, if 100 factories shut shop, I won’t be shedding any tears. The industry will be the better for it. The quality must be underpinned by market demand, not regulations.

 

Cost of labour is quite significant in the industry and the extension of the minimum wage bill was more of a patch-up to buy more time. Any long-term win-win solution being thought out?

 

The cost of living goes up as a result of several factors, including inflation, currency depreciation and, of course, economic growth. Sri Lanka is subject to all these forces and, of course, labour will demand ever higher wages. There is nothing wrong with this. However, unless wage increases are tied to productivity increases, no business model can succeed.

 

Up to now it has been the government that has been the middle-man in wage negotiations. That is very dangerous because it interferes with the employer-employee collective bargaining process. Also, the governments are by definition political and tend to look at wage increases as vote-winning handouts. The unions need to realize that productivity is the key to sustainable growth. We need to allow a free dialogue between the unions and RPCs. Unfortunately, I don’t think any Sri Lankan government will let that happen; the temptation to pander to unions, which are themselves politicized, is too high.

 

The truth is our plantation workers are not paid enough. Let’s face it; Rs.700 or Rs.800 a day is not enough to live on. Our cost of living is very high. Yet, Ceylon Tea is expensive to produce for a reason. Our per capita GDP is about US $ 4000 a year. That of India, our nearest competitor, is US $ 1800, less than half ours, whereas Kenya’s is just US $ 1400. So our tea is expensive and will become more expensive still. We must remember that as our cost of living goes up, our earnings expectations too will go up and we will have to meet that demand. Up to now the message to the industry has been ‘produce more tea!’ But my message to the industry is, ‘produce better tea!’ Factories and plantations 

that cannot do that should look at doing something else.

 

You must realize that tea plantation workers too have aspirations. Even today, 70 years after independence, plantation workers remain to be fully invested in the mainstream of Sri Lankan society. They are ‘given’ housing and social services but do they own any land? No. Are they part of a revenue-sharing model? No. The most fundamental thing a person wants his child to have is a piece of land. But plantation workers are perpetual tenants. There is simply no land to buy in the plantation areas. No government or union will address this. The unions won’t do it because the moment a worker owns a piece of land she will cease to be a union member. The fundamental issue is land. This is a politically toxic subject but it must be faced. And we need to come to grips with the fact that land reform in Sri Lanka was a farce that hugely hurt the plantation economy with no compensatory social dividend. The state is hogging all the land. My view is that land should be the property of the people, not the state.

 

It’s no doubt the industry is facing challenges from all sides. If this situation continues to persist do you opine the industry would diminish?

 

In a sense, I hope it will diminish! I would like to see a cleaner, smaller, higher-value tea industry, like Japan’s. We should not emphasize volume over value. We should be producing the world’s best tea and selling it at the highest price. The bottom end of the producers should be allowed to drift out. 

 

Sri Lanka is never going to succeed by producing cheap tea and competing with countries that can do it at half the cost. Our cost of production is too high for that. We need to look at US $ 5 as a minimum price per kilo at the auction. We need to strengthen value-added exporters and not strangle them with red tape and taxes. And we need to look at tea as part of our national value chain, not in rupees but in social dividend. 

 

Why is branding Ceylon Tea on a global scale a hassle? There are the funds, commitment of the industry, but still for all a five-year delay.

 

I am very frustrated by this. The government’s tender process for intangible services such as advertising is very cumbersome and inefficient. When you are buying such a service how do you demonstrate objectivity?

 

Appreciation of an advertisement is subjective. This is something the government is not well equipped to do as they are averse to risk. When you do take a risk and something goes wrong, as in the oil hedging deal, the public has no mercy. So the mantra is to avoid risk.

 

So what do you suggest be done?

 

We need to think carefully whether the government should do this at all. This is the stakeholders’ money, not the government money. The basic problem is having to go through these rigorous procedures. Even I am cautious since I am accountable. The best way is perhaps to have the industry collect the money through one of their institutions, such as the Tea Traders’ Association (TEA), and then conduct the campaign through an international media firm. 

 

But that would mean the government handing over much of its control to a private-sector stakeholder and the governments hate to give up control of billions of rupees! For the moment, we don’t have a choice but to go with the system: once the money comes to the government there is no provision to give it away.

 

How are the industry stakeholders reacting to this? The fund is built by them by way of a levy.

 

They are very frustrated. So am I. They have been putting pressure on me to stop collecting the money and frankly, I think they have a good case. I am willing to have that discussion with them. The decision is not mine alone to make but I am sure the minister too will be open to discussing this openly and finding a solution that would work best for all. But I do admit that there is a lot of justifiable irritation in the industry about the money not being spent. 

 

Is the Tea Board supported well enough by the Plantations Ministry? I ask this because with the earlier leadership there were hiccups and delays in implementing strategies and they were partly attributed to that.

 

The ministry is responsible for financial and administrative oversight and I am okay with that. The minister directs policy and that is how it should be too. Things go wrong when these roles are switched. For example, if a minister directs finance or administration, you have a disaster. But I think that we have the right balance. Of course there are tensions to deal with, but these result more from style than substance.

 

In many cases this is because I see myself as a servant of the industry and not as a servant of the government. But we always seem to find a constructive way forward. The more important thing is that the industry’s voice gets heard, both at the Tea Board and the ministry. 

 

I think anyone in the industry will confirm that they have an unprecedented level of access both to me and the minister and everything is open for discussion and debate. My mobile number is openly available and I take every call and return every missed call within the day. All my commuting time is spent on the phone. The answer may be ‘No’, but everyone is heard. And that’s how it should be.

 

Venturing into new markets has been on the cards for quite a few years, given the volatile situation in the Middle East. How successful such efforts have been? 

 

Most certainly. Both China and the US are going well. China has been growing by 20 percent to 30 percent a year for the past several years. Similarly, the US too is performing well. There are lots of innovative Sri Lankan companies operating there. Ceylon Tea has made huge inroads in hotspots such as California and New York and even into multinationals such as Coca Cola. 

 

What are the targets set for the industry in terms of export earnings?

 

At the moment we are looking at US $ 1.3 billion a year. I have seen a target of US $ 5 billion by 2020 being mentioned but that was contingent on the free import of foreign teas for blending and re-export. That did not happen and the exporters are constrained to buying only Ceylon Tea at the auction. I think even US $ 2 billion is ambitious at present. Such targets need to be based on fact, not wishful thinking.

 

Our challenge is to establish a premium. Yes, high-end Ceylon Tea is streets ahead but we are still producing 40-50 percent of our tea that is substandard compared with the rest of the world. Our challenge should be to deliver better quality and add value, rather than hoping that somehow the world market will pay a higher price. 

 

Any other areas that require emphasis?

 

I am disappointed that we have still not been able to give a legal meaning to the word ‘Ceylon’, which is such a great brand not just for tea but also for the country itself. How much Coke would be drunk if ‘Coca Cola’ changed its name to ‘Another Fizz? Brands must never be discarded: they must be built on. 

 

Just look at Singapore and the Raffles brand. Buyers may not know what Ceylon was, just as they do not know who Raffles was, but they associate good things with it. But without a legal recognition for ‘Ceylon’ we cannot stop others from using it in their branding, since legally the name doesn’t belong to us. 

Date-04th May 2017, Mirror Business

Adisham Estate brews all time high price

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Dickoya Estate which markets its produce under the ‘Adisham’ selling mark achieved an all-time record price of Rs. 715 for a FNGS1 grade in the Western High Grown category at the weekly tea auctions held on 2 May. This line of tea was purchased by M/s Vivo Tea Company Ceylon Ltd., and was marketed by M/s., Forbes & Walker Tea Brokers Ltd. Dickoya Estate is situated in the Hatton Dickoya region at an elevation of 1292mts above mean sea level. Interestingly Sir Thomas Lister Villiars who bought over Dickoya Estate in 1900 changed the selling mark to Adisham since he was born in a town by the name of Adisham in the English county of Kent. 

 

This estate produces thick coloury teas throughout the year and is ranked number one in the Hatton/Dickoya agro climatic region. Currently Adisham is a Rainforest Alliance and fair-trade organisation Cartified facility. This estate is managed by Mihiraj Samaraweera and comes under the purview of Watawala Plantations PLC. 

Date-08th May 2017, Daily FT

 

Ministry of Plantation Industries takes on TEA


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The Ministry is of the view that certain aspects and facts have been left out so that a more complete and holistic view of the industry was not given and the TEA media release gives a totally negative view of the tea industry which is incorrect.

 

The broad categories of TEA’s concern are:

 

1.Falling tea production

 

2.Liberalising tea imports 

 

3.Delay in launching the global campaign and 6

 

4.Tax issues concerning the exporters 

 

We would like to take these issues up individually.

 

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The falling tea production has been a case of concern for everybody. In 2014 the highest tea production was reached at 340 m MT and since then 320 m MT and 292 m MT was recorded in 2015 and 2016. The reasons for this are several. Incre

mental weather patterns, the weedicide issue and falling tea prices are the main reasons. While TEA gives the low figures for January and February this year it conveniently omits the fact that in March tea production came to normalcy as 26 m MT was produced as the drought conditions were reversed. 

 

To state that tea production has drastically come down is not correct as tea production is continuing in a stable manner. When the current minister took office tea prices were at an absolute rock bottom with a price range of Rs. 400-450 and there was much protest, agitations and threat of social unrest if subsidies were not increased. However today the prices have 

increased between Rs. 550-600 and a large sector of the tea industry is satisfied with the current situation. 

 

The Government has despite financial problems maintained the fertiliser subsidy allocating Rs. 1,500 million for years

 2016 and 2017 separately giving weight and importance to the small tea producer. The minister has also ensured a more transparent and democratic process in the tea board where all stakeholder ideas and inputs can be expressed and if consensus is obtained to make it into policy.

 

The ministry and its officials together with the minister and the chairman tea board are fully aware of the arguments for and against the importation of teas to Sri Lanka. While appreciating the arguments stated in the TEA statement producers are highly concerned that importation of teas even under strict conditions will impact the price of Sri Lankan teas and this will have a severe impact on the current financial models in place and a collapse of the prices will lead to a severe social c

haos especially among the small holders. 

 

It is too much of a risk to take as one erroneous policy decision can severely hamper the industry for years to come. A majority of the stakeholders are against the idea of importing tea. The ministry has asked TEA to come with a viable and practical model to be implemented even on ‘pilot project’ basis but TEA has not done so. As TEA is promoting the importation of teas isn’t it the duty and function of TEA to involve the other stakeholders in a more meaningful dialo

gue and obtain their consensus for their idea?

 

TEA has also raised the issue of the global tea campaign to be launched by the ‘export levy’ on tea exports that is in

 

place. The ministry sincerely thanks all the exporters who contributed to the export levy that has now accumulated to approximately $ 50 million. The current minister and the chairman tea board went out of their way to ensure these funds remain in the tea board as they realise the value and the need of a well targeted global campaign for Ceylon Tea. “Unfortunately Government regulations and procedures have meant some unwanted delays have arisen. The ministry also wants to absolutely ensure that the content is well targeted and has some real returns for the brand ‘Ceylon Tea’. It will be a pity if $ 50 m is just

 spent for the sake of spending it. Therefore the ministry is confident that this campaign will kick off in the next three-four months. TEA is fully aware of all these developments yet it repeatedly keeps coming in their media releases.

 

Tax issues concerning the TEA have been fully looked into. The minister and the chairman tea board have 

met representatives of TEA on numerous occasions to sort out their issues. The minister submitted a cabinet paper on the SVAT issue and it was decided by the Economic Sub Committee chaired by the prime minister to suspend the proposed new structure.

 

Under the current administration a large amount of funds and development work are envisaged to the tea sector. Among them are:

 

a) Strengthening of the plantation management monitoring unit, already underway

 

b) Development of the small holder sector under funding from FAO, a $ 65 million project already underway

 


c) A project to modernise tea factories under funding from JBIC, negotiations progressing well, and

 

d) A World Bank project to improve and modernise the regional plantation companies, negotiations almost complete

 

Hence these funds will be the largest amount of funds received by the tea industry at particular moment of time.

 

The ministry and the tea board have repeatedly asked for more unity among the stakeholders so that a single master plan taking account of the interest of all stakeholders together could be implemented. We urge that this happens. It will be more helpful to the industry than individual stakeholder organisations issuing media releases that portray a negative image about the Sri Lankan tea industry.

 

Date-04th May 2017, Daily FT

 

 

German Tea Association to support Ceylon Tea promotional campaign

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German Tea Association Chairman Jochen Spethmann during his meeting with Ambassador Karunathilaka Amunugama, assured his Association’s fullest cooperation in promoting Ceylon tea in Germany and in other European markets. Spethmann also appreciated the commitment and the efforts of the Sri Lanka Tea Board and the tea trade in producing quality products. The meeting took place on the sidelines of the 100 years anniversary celebrations of the German Tea Association which was held on 26 April in Hamburg. 
 
The German Tea Association, the largest and the strongest Tea Association in Europe was founded in 1917 and has focused in promoting its members’ particular interests relating to importing, manufacturing, packaging and marketing of tea in all its varieties and forms of presentation. At present the German Tea Association represents 35 member companies and 21 associate members and stand for 90% of the German tea trade. The Association is mainly engaged in importing tea to Germany and a substantive portion of it is been re exported to the rest of the European countries. 
 
During the event Ambassador Amunugama also met a number of other reputed tea importers in Germany including Tea and Herbal Infusions Europe Secretary General Monika Beutgen and Teekanne Holding GmbH CEO Reinhold Schlensok.
 
The Ambassador also invited the Chairman and the Executive Board members of the German Tea Association to attend the International Colombo Tea Convention scheduled to be held in August 2017. In response to the Ambassador’s invitation German Tea Association Secretary General Maximilian Wittig stated that a strong delegation which would include himself and Monika Beutgen will participate at the upcoming event in Colombo.
 
Honorary Consul of Sri Lanka in Hamburg Olav C. Ellerbrock, who is a pioneering tea importer from Sri Lanka and a past Chairman of the German Tea Association also joined the discussions and elaborated the plans for the joint efforts with the Sri Lanka Embassy, German Tea Association and the Honorary Consulate in celebrating the 150th Anniversary of Ceylon Tea in Hamburg.
 
Date 04th May 2017, Daily FT

 

TEA shows way forward for tea exports beyond 150 years


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The members of Tea Exporters Association are concerned over the current status of Sri Lanka tea industry as tea production is on a declining trend in the last few years due to many issues. According to Sri Lanka Tea Board statistics the tea production has declined by 36 million kg or 11% last year compared to 2015. The tea crop figures registered for the first two months of 2017 also indicate a drop of 8 million kg or 20% against the corresponding period in 2016. 

 

Though the decline in tea production last year and during the first quarter of this year is largely attributed to the adverse weather conditions prevailed in the country, the overall downward trend in the tea production is due to a number of other factors such as aging tea bushes (on average over 80 years), non-availability of an alternate weedicide and low application of fertiliser, etc.

 

The tea producers are required to maintain a replanting level of 2-3% of the tea land extent annually but the actual replanting level is less than 1%. Most of the small holder farmers do not replant their tea gardens and it is the plantation companies that undertake some replanting. Sri Lanka crossed the 300 million kg mark in tea production in year 2000 and even after 16 years the country has not been able to reach the 350 million kg mark as yet. Although the Government provides a subsidy for replanting, most small holders are reluctant to undertake replanting as they have to wait for about four years to harvest the tea. However, the global tea production has increased steadily and recorded at 5.4 million metric tons or 5.4 billion kg in 2016. The Sri Lanka share in world tea production has now come down to 6% from 10.5% in 2000. 

 

The tea export sector cannot grow beyond the available tea crop volume in Sri Lanka. The declining trend in the tea crop has restricted the growth in tea export volume and value. The tea production issue also affects the growth of Sri Lankan tea brands and also the processing of Global Tea Brands by Sri Lankan companies. Since, importation of tea is not allowed the exporters are unable to improve their business and bring more revenue to the country. They are of the opinion that tea sector will find it difficult to achieve the revenue target of $ 5 billion by 2020 under the prevailing situation.

 

The decline in tea production has also led to increase in cost of production and deterioration of tea quality. The current high tea prices are mainly due to the crop shortage and not due to any enhanced demand for Ceylon Tea from consuming countries. The exporters are of the view that, the current prices are somewhat artificial and make our tea non- competitive in some tea importing countries. The country loses foreign buyers and markets to India, Kenya, and Vietnam etc due to crop shortage and high prices. Once the foreign consumers get used to other origin teas, it would be difficult to regain these markets. In view of the current situation in the tea production front, the exporters strongly request the government to liberalise tea imports at least on a control basis to resolve the current tea production issue in the country.       

 

The exporters have proposed for liberalisation of tea imports more than 15 years ago. The TEA request was included in the 2016 government budget approved by the parliament. However, it was not implemented due to strong objections from some stakeholder members. The current policy discourages any major investment by tea companies in the tea sector that is needed for expansion of the economic growth in the country. Some exporters are unable to cater to certain market segments due to non- availability of suitable type of tea locally. It has a negative impact on the growth of brands. 

 

In most markets the importance of origin of tea is gradually phasing out to the strength of brands. The exporters also believe that protection given to tea producers / manufactures does not expose them to real competition. The producer segment will not make any serious effort to improve tea quality, reduce COP and improve management efficiency. They will continue to depend on government protection and subsidiaries that would be a burden on the entire economy. 

 

The tea exporters are also concerned of the recent developments in Syria which may lead to a bigger military conflict in Middle East. Approximately 52% of Sri Lanka tea exports reach Middle Eastern countries and further escalation of military conflict in the region will have an adverse impact on the local tea industry. Therefore, finding new markets for Ceylon Tea is more important now than before. However, Sri Lanka will not be able to expand their business to more secure Europe or USA without having the right type of tea mix at competitive prices. The retail sale segment in these countries is controlled by hyper markets/ super markets and they maintain the retail prices without any change for 6-12 months. The high cost of production in Sri Lanka does not allow the Sri Lankan tea brands to get in to the mass market segment controlled by super market chains.   

 

The tea exporters are also worried about the long delay in launching the Global Ceylon Tea Campaign by Sri Lanka Tea Board. The need to introduce a Tea Promotion Levy arose when Government was not allocating any funds for tea promotion activities from the Tea CESS. In 2010, then Minister of Plantation Industries proposed to introduce a levy of Rs. 3.50 per kg to be used only for tea promotion activities. The Minister consulted members of TEA and got their consent to introduce a new levy with the assurance that it would be levied only for a period of five years but collection of levy continues indefinitely.  

 

Since the establishment of the fund from November 2010 only a few useful promotional activities have been under taken in foreign markets and as a result the accumulation of the fund has now reached Rs. 6-7 billion. TEA members strongly believe that further accumulation of funds may prompt the Treasury to force Tea Board to use the idling funds for recurrent expenditure or for other non-promotional activities. The delay in implementation of the global Ceylon Tea campaign is not due to any fault of the tea exporters but due to strict government tender procedures and other regulations. 

 

In view of the current situation, TEA has requested SLTB to initiate action to suspend the tea promotion levy until the launch of Global Ceylon Tea Campaign is finalised and the accumulated funds are sufficiently utilised. This would be a relief for the tea exporters who are undergoing a difficult period due to the turmoil in leading tea importing countries in CIS and Middle East. 

 

The tea exporters also complain of the high taxes imposed on the sector. The CESS and Promotion Levy paid on export of value added teas come to Rs. 7.50 per kg and about Rs. 17.50 per kg on export of bulk tea. In addition, every exporter should renew their license with SLTB annually at a cost of Rs. 500,000.00 for large and medium tea companies and Rs. 50,000 for small companies. The income tax payment, economic service charge and other fees paid to SLTB and other state organisations also add to the operational cost of tea exporters. According to Sri Lanka custom data over Rs. 2 billion per annum is collected from tea exporters as CESS on bulk and value added tea exports. Further, Rs. 1 billion is collected as Tea Promotion Levy by SLTB from the exporters. The total CESS and tea promotion levy paid by the exporters’ amount to approximately 1.5% of the annual tea exports revenue. This may be the highest CESS payments made by the tea exporters in a tea producing country.  

 

The exporters are also worried about the slow implementation of budget proposals related to tea export sector. It has been proposed  to abolish the Import and Export Control Department Fee of 1% of CIF value on import of tea for re-export purposes to support the tea industry through a more simplified tax and tariff structure in the 2017 Budget.

 

In fact, Tea Exporters Association had been lobbying for removal of this fee as Tea Exporters pay a license fee of Rs. 5 per kg to Sri Lanka Tea Board also when importing tea for re-exports. The dual taxation on tea import licenses currently applicable for the import of CTC/Green and Specialty teas is negatively affecting the competitiveness of Sri Lanka tea brands. However, this proposal is yet to be implemented by the government. 

 

Although the Government has deferred the implementation of termination of SVAT system, the exporters strongly urge the government to continue with the SVAT system to facilitate their cash flow requirement. The termination of SVAT will  affect the competitiveness of Sri Lankan tea brands also as the exporters will have to borrow funds from banks at high interest rates which will naturally increase the cost of operation. 

 

Tea is the most regulated export industry in the country. This has caused delays, increase in operational cost etc. of the exporters. Therefore, the members of TEA urge the government to appoint a committee to look in to deregulating the tea industry to enhance its competitiveness.    

Date-02nd May 2017, Daily FT

 

Delmar establishes yet another record on bearish market!

DFT-6-5

 
Delmar Estate established an all time record price for the third consecutive week at the weekly tea auctions held on 25 April. A price of Rs. 730 per kg was achieved for a Pekoe-1 grade in the Uva/Udapussellawa elevational category. This invoice was purchased by M/s., Mabroc Teas Ltd. and marketed by M/s., Forbes & Walker Tea Brokers Ltd.
 
Currently Delmar has the distinction of having established all time record prices for OP, OP1 and Pekoe grades in its elevational category. Interestingly, the record price of 600 for an OP grade established by Delmar in 2016 was continuously bettered by them, and currently stands at 700; similarly the record price of 670 for an OP1 grade established in 2016 was also bettered by them and currently stands at 720.  
 
Delmar Estate is situated in Halgranoya, at an elevation of 1524 metres above sea level and is certified under ISO 9001:2008 & ISO 22000:2005 Management System Certified for Manufacture of Black Tea Food Sector. This estate is managed by Sudath Liyanage and comes under the purview of Udapusselawa Plantations PLC.  
 
Date-02nd May 2017, Daily FT

 

India’s February tea output drops 21%


MUMBAI (Reuters): India’s tea production in February fell 21% from a year earlier to 13.54 million kg as a severe drought in the southern state of Tamil Nadu hit plucking, the state-run Tea Board said.

 

Tamil Nadu produced 8.41 million kg of tea in February, down 20% from the year-earlier period, the Board said in a statement.

 

India, the world’s second-biggest tea producer, exports CTC (crush-tear-curl) grade mainly to Egypt, Pakistan and the UK, and the orthodox variety to Iraq, Iran and Russia. 

Date-21st April 2017 Daily FT

 

About F&W

Forbes & Walker was set up in 1881 as a partnership between James Forbes and Chapmen Walker. Although there is no actual record of the date on which it was established the very first cash book, still in the possession of the Finance Director, indicates the brokerages were earned from 1st August 1881. In Sir Thomas Villiers' book “Mercantile Lore” the date of establishment of Forbes & Walker has been put down      Read More...

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