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To all EK Members work in Tea sector
- Thread starter joono
- Start date
moko me hadissiyak da
as far as i know, there is no such big danger as u worried.!
there are ups & downs in business. we cannot comment in such. unless ur an expert.
there are ups & downs in business. we cannot comment in such. unless ur an expert.
Yup true to a certain extend. I think the main reason is the current global credit crisis.
Many investors fear to invest in stocks now, as an indirect result the exportation goes down because people (investors) don't feel comfortable in investing... rather they tries to save their finances in order to spend it in the future when the crisis gets resolved.
Pretty sure this whole thing will be settled in few more weeks
Many investors fear to invest in stocks now, as an indirect result the exportation goes down because people (investors) don't feel comfortable in investing... rather they tries to save their finances in order to spend it in the future when the crisis gets resolved.
Pretty sure this whole thing will be settled in few more weeks
Tea Market Situation
[FONT="]The market for low grown varieties of tea has been easing in the last two months and has reached crisis proportions with many industry stakeholders facing liquidity shortages. The falling demand and the resultant accrual of out lots together with the drying up of bank facilities has made many players financially uncomfortable. The producers have as such fallen back on the broking fraternity to finance their short term financial needs. [/FONT]
[FONT="]The highest ever monthly average for low grown teas at Rs. 391.27 was recorded in July. The highest ever weekly average for low grown teas at Rs. 397.57 was also recorded in July at the sale of [/FONT][FONT="]16th July 2008[/FONT][FONT="]. This figure however was inflated by most poor selling grades remaining unsold. In the thirteen weeks since then the low grown average has shed Rs. 114.58 a 28.82% decline. This problem is compounded by the fact that 43.27% of all low grown teas offered for sale remain unsold.[/FONT]
[FONT="]Overview[/FONT]
[FONT="]The world economic crisis subsequent to the fall of leading Banks in the [/FONT][FONT="]U.S.[/FONT][FONT="] and the European Union has made banks in [/FONT][FONT="]Sri Lanka[/FONT][FONT="] curtail lending to exporters. This coupled with the fact that remittances from buyers overseas have being delayed, had lead to the purchasing power of the exporter community declining over the last few weeks. Importers of tea are also faced with their fare share of problems as a result of remittances due to them from forward links in the value chain being delayed. [/FONT]
[FONT="]Trade sources indicate that some importers have almost halved their purchases with most adopting a wait and see policy. Requests have also being made to delay shipments until further notice. [/FONT]
[FONT="]Key international currencies such as the [/FONT][FONT="]UK[/FONT][FONT="] pound, Euro, Russian Ruble and Irani Riyal depreciated against other currencies and the SL Rupee (SLR). This made prevailing auction prices much higher for the importers. The [/FONT][FONT="]US[/FONT][FONT="]$ has been left steady in [/FONT][FONT="]Sri Lanka[/FONT][FONT="] whilst appreciating against other currencies. This automatically increases the invoices payable of importers.[/FONT]
Depreciation of Currencies from 1st Aug – 16th Oct 2008
[FONT="]Russian Ruble[/FONT]
[FONT="]Iranian Riyal[/FONT]
[FONT="]Jordanian Dinar[/FONT]
[FONT="]Euro[/FONT]
[FONT="]Great Britain[/FONT][FONT="] Pound[/FONT]
[FONT="]Prior to this, sharp price fluctuations and reduced demand for poorer teas caused a fair weight of tea to be unsold. Much of the low value teas were re-printed twice over due to initial low offers and later a lack of interest. Sellers too were reluctant to meet the market in order to keep factory averages artificially high.
[/FONT]
[FONT="]The improvement of the standard of tea being shipped to [/FONT][FONT="]Iraq[/FONT][FONT="] by Iraqi authorities, which is a major market for teas in this segment, aggravated the situation.[/FONT]
[FONT="]The out lot problem has worsened over the last couple of weeks and came to a head at the auction of [/FONT][FONT="]15th October 2008[/FONT][FONT="].[/FONT]
[FONT="]Possible future direction[/FONT]
[FONT="]US and European Central Banks have come out with bail out plans for banks in those countries. This intervention will result in Banks slowly increasing their presence in trade finance. There is growing opinion that banks will gradually start lending to each other as a result and improve credit for trade. [/FONT]
[FONT="]Tea Market Situation[/FONT]
[FONT="]Sri Lanka[/FONT][FONT="]’s main tea markets (+85%) are the petrodollar economies of the Middle-East / [/FONT][FONT="]North Africa[/FONT][FONT="] and [/FONT][FONT="]Russia[/FONT][FONT="] / CIS. Even with lower dollar income these markets economies will remain relatively strong. Tea is a low price essential food that will be in demand. Ceylon Black Tea is consumed primarily as a hot beverage. Consumption is at its peak during the cooler months of autumn and will get colder as winter sets in. Thus there is no indication of consumer demand falling for tea in the short run. If the problems associated with trade finance are sorted out there is every possibility that the market would turn for the better.[/FONT]
[FONT="]What should we do?[/FONT]
[FONT="]Producers should be aware of these market dynamics and ensure that pressure is exerted on leaf suppliers to up the quality of the raw material supplied. It would be a prudent decision to make even if the intake drops considerably. However the fixed overheads and the break even point will have to be considered prior to making such a decision. The tea board and the trade are coming down hard on teas that are of an inferior standard. Producers should immediately take measures to not dispatch teas below ISO 3720 quality standard. “Unorthodox” means of blackening tea should be halted immediately if employed by factories. [/FONT]
[FONT="]The market for low grown varieties of tea has been easing in the last two months and has reached crisis proportions with many industry stakeholders facing liquidity shortages. The falling demand and the resultant accrual of out lots together with the drying up of bank facilities has made many players financially uncomfortable. The producers have as such fallen back on the broking fraternity to finance their short term financial needs. [/FONT]
[FONT="]The highest ever monthly average for low grown teas at Rs. 391.27 was recorded in July. The highest ever weekly average for low grown teas at Rs. 397.57 was also recorded in July at the sale of [/FONT][FONT="]16th July 2008[/FONT][FONT="]. This figure however was inflated by most poor selling grades remaining unsold. In the thirteen weeks since then the low grown average has shed Rs. 114.58 a 28.82% decline. This problem is compounded by the fact that 43.27% of all low grown teas offered for sale remain unsold.[/FONT]
[FONT="]Overview[/FONT]
[FONT="]The world economic crisis subsequent to the fall of leading Banks in the [/FONT][FONT="]U.S.[/FONT][FONT="] and the European Union has made banks in [/FONT][FONT="]Sri Lanka[/FONT][FONT="] curtail lending to exporters. This coupled with the fact that remittances from buyers overseas have being delayed, had lead to the purchasing power of the exporter community declining over the last few weeks. Importers of tea are also faced with their fare share of problems as a result of remittances due to them from forward links in the value chain being delayed. [/FONT]
[FONT="]Trade sources indicate that some importers have almost halved their purchases with most adopting a wait and see policy. Requests have also being made to delay shipments until further notice. [/FONT]
[FONT="]Key international currencies such as the [/FONT][FONT="]UK[/FONT][FONT="] pound, Euro, Russian Ruble and Irani Riyal depreciated against other currencies and the SL Rupee (SLR). This made prevailing auction prices much higher for the importers. The [/FONT][FONT="]US[/FONT][FONT="]$ has been left steady in [/FONT][FONT="]Sri Lanka[/FONT][FONT="] whilst appreciating against other currencies. This automatically increases the invoices payable of importers.[/FONT]
Depreciation of Currencies from 1st Aug – 16th Oct 2008
[FONT="]Country[/FONT]
[FONT="]% of depreciation against the [/FONT][FONT="]US[/FONT][FONT="]$[/FONT]
[FONT="]-10.70%[/FONT]
[FONT="]-6.21%[/FONT]
[FONT="]-0.81%[/FONT]
[FONT="]-13.34%[/FONT]
[FONT="]-12.62%[/FONT]
[FONT="]Prior to this, sharp price fluctuations and reduced demand for poorer teas caused a fair weight of tea to be unsold. Much of the low value teas were re-printed twice over due to initial low offers and later a lack of interest. Sellers too were reluctant to meet the market in order to keep factory averages artificially high.
[/FONT]
[FONT="]The improvement of the standard of tea being shipped to [/FONT][FONT="]Iraq[/FONT][FONT="] by Iraqi authorities, which is a major market for teas in this segment, aggravated the situation.[/FONT]
[FONT="]The out lot problem has worsened over the last couple of weeks and came to a head at the auction of [/FONT][FONT="]15th October 2008[/FONT][FONT="].[/FONT]
[FONT="]US and European Central Banks have come out with bail out plans for banks in those countries. This intervention will result in Banks slowly increasing their presence in trade finance. There is growing opinion that banks will gradually start lending to each other as a result and improve credit for trade. [/FONT]
[FONT="]Tea Market Situation[/FONT]
[FONT="]Sri Lanka[/FONT][FONT="]’s main tea markets (+85%) are the petrodollar economies of the Middle-East / [/FONT][FONT="]North Africa[/FONT][FONT="] and [/FONT][FONT="]Russia[/FONT][FONT="] / CIS. Even with lower dollar income these markets economies will remain relatively strong. Tea is a low price essential food that will be in demand. Ceylon Black Tea is consumed primarily as a hot beverage. Consumption is at its peak during the cooler months of autumn and will get colder as winter sets in. Thus there is no indication of consumer demand falling for tea in the short run. If the problems associated with trade finance are sorted out there is every possibility that the market would turn for the better.[/FONT]
[FONT="]What should we do?[/FONT]
[FONT="]Producers should be aware of these market dynamics and ensure that pressure is exerted on leaf suppliers to up the quality of the raw material supplied. It would be a prudent decision to make even if the intake drops considerably. However the fixed overheads and the break even point will have to be considered prior to making such a decision. The tea board and the trade are coming down hard on teas that are of an inferior standard. Producers should immediately take measures to not dispatch teas below ISO 3720 quality standard. “Unorthodox” means of blackening tea should be halted immediately if employed by factories. [/FONT]
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