Consequent to banning of glyphosate by the Government of Sri Lanka, tea growers and large plantations, in particular, were forced to use alternative products for the control of weed growth, resulting in MCPA levels higher than permitted for exports to Japan.
As the year unfolded, purchases from Japan declined due to purchases/shipments being made only following prior testing for chemical residue levels. This brought about a market – unrelated to quality – with greater emphasis on the MCPA levels and its suitability for the Japanese market.
In and around May, US sanctions on Iran were imposed which had a cascading impact on Auction prices in Colombo, particularly for the Low Grown (Tippy) teas. There was some optimism for tea prices to turn around towards June/July following the strengthening of oil prices and the weakening of the Sri Lankan Rupee. However, this too did not work out to be a reality following the weak economies in most Middle Eastern countries and Russia, resulting in currencies in the importer countries also depreciating against the US Dollar.
During the second half of 2018, there was ample evidence of global production increasing significantly, primarily due to increased production in the African region. These increases did not reflect too adversely on Colombo Auction prices, as most of the increase comprised of CTC teas.
After much deliberation, stakeholders were successful in negotiating with the Government of Sri Lanka to remove the glyphosate ban through a Special Gazette dated 11 July 2018, a welcome relief to the industry. However, the modalities have taken a considerable period of time for these shipments to be available for the plantations on a regulated basis.
Commencing around September 2018, the Sri Lankan Rupee began to show a significant devaluation against the US Dollar, which possibly to some extent made Sri Lankan tea prices attractive to importers. Since then, we have seen reasonable momentum although the current Auction price levels are below the corresponding sales of last year by approximately Rs. 50 or $ 0.27 per kg. Cumulative Colombo Auction average up to the penultimate sale stood at Rs. 619.11 compared to Rs. 582.17 in 2017, a variance of Rs. 37 per kg. A synopsis of the tea industry’s performance during the year 2018 is set out below.