Sri Lanka tea price fall hits producer margins

Apr 10, 2010 (LBO) – Sri Lankan tea prices have fallen after hitting record highs at recent auctions, although still higher than last year, squeezing profit margins of producers faced with rising costs, brokers said. While prices of high grown teas made largely by plantations companies fell, those of low grown teas, cultivated mainly by small farmers, had mixed fortunes.

Crops have also been falling because of the effects of drought and auctions volumes will decline further this month but are expected to pick up in May.

“Most Western high-priced teas of last week declined substantially,” Bartleet Produce Marketing said in a report on this week’s Colombo auction.

The high prices seen recently had contributed to the drop in demand.

Asia Siyaka Commodities said low grown varieties faced mixed fortunes at this week™s auction with prices of some types falling while others held firm or rose.

John Keells tea brokers said the drop in prices of high grown teas meant that auction average prices have fallen despite declining crops following the dry spell.

“..[M]argins for the producers have reduced,” they said. “It can be argued that prices have fallen from high levels and this can be considered