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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Turmoil in the Middle East could affect Ceylon Tea

Turmoil in the Middle East could affect Ceylon Tea

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CSE.SAS

CSE.SAS
Global Moderator
Collective agreement averts worker upheaval in the Plantations
By Steve A. Morrell

Tea circles in Colombo were not overly enthusiastic that the Tea market, although declined slightly over the past few weeks, still maintained their price levels. They said the pal of gloom hanging over Colombo reflected declining trends subject to the Middle East crisis, and record crop harvests in Kenya.

The collective agreement decided last week at a wage of Rs. 620. per day per worker was also significant in its negotiating status; that its conclusion was not shrouded in trauma and upheaval. But the question persists ‘Could the plantation companies sustain this wage increase.’ As expected the agreement was relative to attendance, and productivity. If enforced could have salutary repercussions on plantation companies. The Employers’ Federation of Ceylon (EFC) commented the out - come of negotiations were not universally accepted among Unions. However the agreement was signed and expectations were that industrial peace would prevail in the plantations the next two years.

The EFC said the agreement was equitable and afforded opportunities to both workers and Plantation companies . We enquired of two Plantation Companies if their bottom line would show profits. They replied that considering their investments in the past on property improvement, the collective agreement was workable and they could continue to make profits. They declined identification. Others said they would find it difficult to make ends meet.

JKH Tea brokers report last week said effects of the new wage structure was yet to be worked out. Labour costs were approximately 68 % on cost per kilo of Tea. As conceded by the EFC they agreed the imperative need to improve productivity.

Of concern was that the work force on Estates were not young. Young men and women opted for labour jobs in Colombo and other cities rather than work on Plantations. Most were educated to O’level.

Working conditions on Estates were harsh. They had to cope with drastic weather changes which led to man power shortages.

Unless plantation companies could formulate an action plan for worker retention there could be decline in man days and eventual shut down of vast tracts of plantation lands those we consulted said.

Although Colombo was a comparatively expensive tea auction center, Ceylon Tea had not lost its competitive edge irrespective of Kenya’s high crop harvests. Kenya’s January crop was 45 Million kilos. February crop returns too were good at about 39 million kilos. Heavy crops in Kenya brought down their prices to $2.60. per kilo. The Colombo Average last week was $3.50 propped up by the low growns which were yet vigorous. Crop returns in Sri Lanka were 1.9 million kilos above last year. January / February crop 2013 combined, recorded 48.4 million kilos. Last year the same period crop harvested was 45.3 million kilos.

Egypt who fill their tea orders each week buying ex Kenya have reportedly not been buying. Ceylon Tea buyers in the Middle East, particularly Iran, Syria, Libya, too have reduced their buying levels.

This could mean glut of tea in the world market with no takers. Brokers concerns that the bottom would fall off is not unfounded. Both India and China consume most of their tea production internally.

John Keels Holdings, Tea Brokers , said low growns continued to prop the Tea industry. Crop harvests continued to record high growns and Westerns, achieving 11.49 million kilos. Conversely, low grown crop was 29.5 million kilos over shadowing the high grown figure by almost 70 %. Low growns were essentially small holders; who continued to be the main stay of the industry.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=77044

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