A leading tea broker expects prices of Ceylon tea to sustain at current levels over the short-to-medium term betting on a continuous demand while the prices normalizes with supply constraints posed by COVID-19 pandemic eases down.
Ceylon tea prices improved by an average of 11 percent YoY in the first quarter of 2020/21 financial year as trading activities of key tea exporters came to a halt amidst COVID-19 pandemic related travel restrictions. However, the world oldest tea auction, Colombo Tea auction was able to carry out trading activities on an online platform ensuring continuous supply of teas.
“Tea auctions around the world were suspended following the outbreak of COVID-19; Colombo was the first auction to commence trading as industry stakeholders worked together to successfully transition to a digital auction platform by early April. This marked an important milestone in the evolution of Sri Lanka’s tea industry, with the 137-year-old outcry auction system replaced by an online platform,” Asia Siyaka Commodities PLC told their shareholders.
The company noted that the move enabled Sri Lankan producers to obtain significantly higher prices for the produce as pent-up demand and inactivity in other regional markets led to higher demand in the ensuing weeks.
Asia Siyaka belives that current tea prices in the world market has gone through a price correction as the adversely impacted tea exporting nations resumes their supplies.
“while prices have normalized following the opening of other regional markets, they are expected to sustain at these levels over the short-to-medium term supported by strong demand conditions,” it added.
However, the Tea Broker noted that key downside risks such as rising cost of production, implications of adverse weather patterns and geopolitical tensions in key buying markets could influence the future market prices.
“’The long-term survival of the country’s tea industry will depend largely on manufacturers’ ability to increase productivity and yields, while sustaining the strong brand and value proposition of Ceylon Tea,” Asia Siyaka Commodities PLC, Managing Director / CEO, Anil R. Cooke stated in a cautionary tone.