The Planters’ Association of Ceylon sounded a cautionary note with regard to the health and sustainability of the entire tea industry, including Regional Plantation Companies (RPC), and Government and smallholder sectors at large - as tea and rubber prices at the Colombo auction continuously plummeted in 2019.
Issuing a press release the PA pointed out that at the start of 2018, the high grown sales average – which is comprised mainly of RPC teas – stood at Rs. 636.8 per kilo, before dropping to an annual low of Rs. 495 per kilo and concluding the year at a price of Rs. 565.3 per kilo.
Similarly, the high grown average in 2019 peaked in January at Rs. 577.2 before plummeting over each successive month down to Rs. 449.1 per kilo by July while all indications point to a continuing weakening of prices across the high grown sales average.
By way of contrast however, the PA drew attention to a substantial and growing discrepancy in the trends of export price of bulk tea which had essentially been kept stable – if not improved - despite plummeting auction prices – an unprecedented development in the local industry.
According to the PA these sharp reductions in the price available to Sri Lankan tea producers at auction are also clear evidence of the entire tea industry’s urgent need to rapidly transition into a revenue share model for plantation sector workers, and away from the traditional wage models introduced during the time of colonisation and state control of the tea industry.
“It has become clear beyond a shadow of a doubt that the current wage model which remains totally uncoupled from productivity simply cannot stand – let alone current demands for a Rs. 1,000 daily wage irrespective of tea prices or productivity. Aside from the fact that Sri Lankan plantation workers are comfortably the best-paid in the global tea industry – our industry is increasingly unanimous in our demand for an immediate shift to a revenue share model as the only feasible path to long-term sustainability.
These are serious challenges that threaten the stability of the entire industry.
Low prices have already resulted in factory closures, and even smallholders are facing severe difficulties. Without a rational and supportive policy framework in place, such reforms will not be possible. The Government must intervene in consultation with all stakeholders on a priority basis,” the PA stated. Moving forward, the PA also highlighted several areas in which stakeholder action could be mobilised to help revive Colombo tea auction prices including the development of mechanisms to secure payments from exports to major tea importing nations like Iran and Russia which are currently under sanction. Meanwhile, RPCs and tea producers around the country would have to continue to maintain a rigorous focus on quality throughout the value chain in order to preserve the strong brand equity of Pure Ceylon Tea.
Crucially however, the PA advocated for immediate steps to be taken to protect the local industry through the imposition of a minimum value of at least US$ 3 per kilo on speciality teas in order to prevent US$ 1.5 South Indian teas from being included in the same category. In this manner, local producers would be provided with even a small measure of immediate protection which would support efforts to maintain and enhance quality in the local production process
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