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Tea estates in Sri Lanka's central hills have had no respite from a market downturn and continue to incur losses of 150 rupees a kilo owing to lower prices and crops, a broker said.
However, despite lower crops in recent months, an anticipated recovery in production in the last quarter could enable the island to match last year's record output, John Keells tea brokers said.
"With eight months of the year gone by, plantations have had no respite from the low crops and weak markets we have witnessed, particularly during the third quarter of 2011," they said in a report.
Although at recent sales, there has been a slight revival in prices particularly for the BOPFs grade with Russia showing good inquiry, price levels for the 'Below Best' and plainer teas continue to fall "well short" of current production cost, they said.
The situation has been made worse with low crop intakes from all three elevations owing to erratic weather.
Most estates in the high and medium elevations are run by plantations companies listed on the Colombo bourse.
"The present cost of production (in) most estates in the 'High Grown' sector in the past three months have been averaging above 450 rupees a kilo, whereas the sale averages have been in the region of 300 rupees, (with) losses of around 150 rupees per kilo and more," John Keells said.
Analysts said global commodity prices have been falling as the US dollar strengthened in recent weeks.
According to the Sri Lanka Tea Board, the August tea crop was eight percent lower than the same month last year with the high and medium elevations having shortfalls in excess of 20 percent.
"The reports that we have had from plantations suggest that even the September crop would fall short of last year’s harvest of 25 million kilos," the brokers said.
However, they said that despite the crop shortfall in the second half of 2011, Sri Lanka’s production to end-August is only marginally lower than the same period last year.
"Given a strong showing in the last quarter of the year, production could yet match up to last year's all-time record crop of 331 million kilos," the brokers said.
However, despite lower crops in recent months, an anticipated recovery in production in the last quarter could enable the island to match last year's record output, John Keells tea brokers said.
"With eight months of the year gone by, plantations have had no respite from the low crops and weak markets we have witnessed, particularly during the third quarter of 2011," they said in a report.
Although at recent sales, there has been a slight revival in prices particularly for the BOPFs grade with Russia showing good inquiry, price levels for the 'Below Best' and plainer teas continue to fall "well short" of current production cost, they said.
The situation has been made worse with low crop intakes from all three elevations owing to erratic weather.
Most estates in the high and medium elevations are run by plantations companies listed on the Colombo bourse.
"The present cost of production (in) most estates in the 'High Grown' sector in the past three months have been averaging above 450 rupees a kilo, whereas the sale averages have been in the region of 300 rupees, (with) losses of around 150 rupees per kilo and more," John Keells said.
Analysts said global commodity prices have been falling as the US dollar strengthened in recent weeks.
According to the Sri Lanka Tea Board, the August tea crop was eight percent lower than the same month last year with the high and medium elevations having shortfalls in excess of 20 percent.
"The reports that we have had from plantations suggest that even the September crop would fall short of last year’s harvest of 25 million kilos," the brokers said.
However, they said that despite the crop shortfall in the second half of 2011, Sri Lanka’s production to end-August is only marginally lower than the same period last year.
"Given a strong showing in the last quarter of the year, production could yet match up to last year's all-time record crop of 331 million kilos," the brokers said.
