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Sri Lanka’s tea industry to collapse despite some progress last year

Sri Lanka’s drive to become the world’s first 100 percent organic food producer threatens its lucrative tea industry and has triggered fears of a wider crop disaster that could deal a further blow to the beleaguered economy.

Tea production output could fall 40 percent in 2022 although it has managed to record excellent performance in the just concluded 2021, despite the many challenges faced by the stakeholders industry officials said.

“In 2022, all experts estimate that we will record reduction in tea exports over 40 percent,” Bathiya Bulumulle, President of Sri Lanka’s Planters’ Association representing managers of commercial tea plantations and factories, who was re-elected for a second time said at its annual general meeting.

 “With an immediate halt to use of fertilizer of agro-chemicals, the consensus is that there will be severe crop losses, and as a result, a reduction in export revenues by as early as the end of this year, he disclosed.

The Sri Lanka Tea Board  Chairman Jayampathy Molligoda, citing provisional numbers  said that the total export revenue from tea in 2021 was Rs. 264 billion (approximately $ 1.32 billion). 

The total export quantity was 288 million kilos. In 2020, export revenue was Rs. 230 billion ($ 1.21 million) and export quantity was 266 million kilos. 

“It is significant to mention the average fob price at customs, which was Rs. 867 per kilo in 2020 has further increased to Rs. 915.97 per kilo, whereas in 2019 it was only Rs. 823 per kilo of tea exported,” Molligoda said. 

The sales and tea production statistics for the month of December are yet to be finalised, however some 296 million kilos have been sold and closer to 300 million kilos of tea production has been achieved for the full year. Last year tea production was only 279 million kilos.

The negative side is that our tea estate productivity has been declining over a period of time. In 2000, the production was 305 million kilos and rose to 328 million in 2010. The highest crop of 338 million kilos was in 2013 and since then there has been a gradual decline amounting to 2.6% CAGR,” the SLTB Chairman revealed. 

According to Molligoda, the cost of production has been increasing due to many factors including low productivity, both land and labour, high overheads and adverse impact of climate change and COVID-19. 

He said that Kenyan tea production (the main competitor for Sri Lankan teas) has been increasing rapidly and that Sri Lankan tea production has been declining over the last 10-15 years. 

“This is due to lack of tea replanting and infilling undertaken and the producers’ inability to address climate change effects and other factors, as there has been a gradual erosion of soil and land degradation, despite application of fertiliser,” Molligoda added. 

Kenyan tea auction price in US Dollars is lower compared to Sri Lanka and their growers are getting lower tea prices, whereas in Sri Lanka, small holders are getting a reasonable price and it is being regulated under Tea Control Act No. 51 of 1957. 

SLTB said the Ceylon Tea was one of the most expensive teas in the global market – gram to gram – and as a result, there is a tipping point in the tea pricing structure for Sri Lankan tea exporters and marketers to be competitive in the global marketplace

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