Sri Lanka tea prices fall

Feb 06, 2009 (LBO) - Prices of Sri Lankan tea fell on lower demand at this week's Colombo auctions, breaking an upward trend that began with the first sale of the year, brokers said.
High-priced teas from the low grown regions, which produce the bulk of the national crop, suffered the worst falls. 

"The market for low grown varieties took a down word turn at this week’s auction," brokers Asia Siyaka Commodities said in a market report. 

In the large leaf catalogue, Select Best Pekoe 1 varieties, for example, could not maintain the previous week's high levels and prices fell 40-60 rupees per kilo. 

Some varieties remained unsold. 

In the small leaf catalogues too prices fell. 

Teas produced by listed regional plantations companies also fell. 

"The unusually large weight of 1.4 million kilos of Ex-Estate teas met with fair demand, but at lower rates," Asia Siyaka Commodities said. 

They said the backlog of stock from the end-December period was included in this sale. 

Large volumes of teas were unsold towards the end of last year when auction prices crashed with the bursting of the global commodities bubble. 

"It would have been prudent to spread this quantity out over three sales as fresh arrivals had been declining due to the dry weather," Asia Siyaka Commodities said. 

The next two auctions are down to a million kilos and fresh offerings will continue to slide but some of the unsold volume from this week’s auction will be put on sale again. 

Forbes and Walker Tea Brokers said crop intakes in most planting districts decreased in the past 10 days. 

They said that the quality of teas offered by the plantations companies was irregular. 

"Consequently, with the exception of select invoices which appreciated following airmail inquiry, the majority of the teas on offer lost 10-20 rupees per kg." 

This week's lower trend in prices could possibly be attributed to less demand from the UK and Pakistan combined with the larger volume on offer, Forbes and Walker said. 

Volumes from the plantations at next week's sale would be much lower while overall quality of offerings show an improvement, they said.