Tea Outlook 2012 Sri Lanka Industry

Tea outlook 2012 for Sri Lanka tea Industry is likely to be a ‘cautiously optimistic’ market scenario, projects a top tea brokering firm. According to the recent report titled ‘Tea Industry Overview - 2011’ prepared by Forbes and Walker Tea Brokers (Pvt) Ltd, it states that in the backdrop of the uncertain conditions that exists in some of Sri Lanka’s key tea exports destinations, attempting to analyze market prospects could have a strong element of ‘crystal ball’ gazing. Nevertheless, it stated that a logical approach would be to analyze the past performance of the industry and equate it to supply/demand scenarios that are likely to emerge during the year.
“A cautiously optimistic market scenario for 2012 is projected with the expectation that the Colombo Auction averages should move up from the low levels decreased to during the last quarter of 2011, whilst, it may be over optimistic to predict the dizzy heights that we reached during the first quarter of 2011 at this point of time,” the report stated.
It stated that it is also important that the cautious optimism for the tea market in 2012 be linked with the accent on maintaining a reasonable and consistent quality throughout the year.
“Global Tea Production during the first quarter is normally the lowest during the year and all indications as of now, is that this year would be no exception. Therefore, the weekly auction quantities during the first quarter of 2012 are likely to be low in most Auction centres,” the report noted pointing out that from a Sri Lankan’s point of view additional buying interest is likely to emanate for seasonal teas from the Western slopes whilst greater interest was expected from some of Sri Lanka’s key export destinations as they are showing some element of stability following the political unrest last year which disrupted the smooth flow of tea.
“The 3% devaluation late last year which created an immediate impact on prices at the Auctions that followed will help to make Sri Lanka tea more competitive in the export market. It would be relevant to note that most other key producer/consumer nations have experienced devaluation in their currencies during the last year,” the report highlighted.
The Forbes and Walker tea report stated that the growth in tea consumption from India and China as a combination of its increasing population and the rising per capita income levels would result in the availability for exports declining from these countries, due to their internal consumption increasing.

“Yet another, development is the increase in popularity of Black Tea in China particularly amongst the younger age groups,” the report noted adding that improved market activity from most importing countries is likely to emerge as the current price levels are significantly lower than the corresponding levels in 2010 and 2011.

“In addition, inventory levels in most importing countries are unlikely to be higher than the corresponding level of the previous year, particularly the tea importing nations from the Middle-Eastern regions,” the report further projected.
In 2010, Global Tea Production crossed a new milestone of 4bn kgs, consequent to some key producer countries achieving all time record crops. However, the report stated that based on the availability of data as of now, 2011, is likely to record a positive variance of approx 90m/kgs, which would mean the Global Tea Production is mostly likely to better its previous record.
“However, the majority of this increase is from China which is predominantly a ‘Green’ tea producer. Furthermore, with the normal increase in global consumption per annum at a conservative 2.5%-3% would require a further 60-70m/kgs. Therefore, we could even predict a tight supply position as we approach 2012,” the report noted.