Higher tea auction volumes drag down prices of key grades

Sri Lanka’s tea market showed signs of strain this week, as a sharp increase in the auction volumes and weaker quality in some categories dragged down the prices for several widely traded teas, even as the demand remained resilient for select premium varieties, Forbes and Walker Tea Brokers said.
The weekly tea auction saw the offerings rise to 5.8 million kilogrammes, while the Ex-Estate volumes crossed the one million kilogramme mark for the first time in nearly a year, reflecting a notable increase in the supply entering 
the market.
However, the larger volumes came with a catch.
Forbes and Walker Tea Brokers said the overall quality of the Ex-Estate teas had “shown a general decline”, resulting in price drops of Rs.50 to Rs.100 per kilogramme for the better Western High Grown teas, while the BOP grades weakened across the entire market.
The softer prices point to the growing pressure in parts of Sri Lanka’s orthodox tea segment, particularly as the buyers become increasingly selective amid the uneven quality and shifting 
overseas demand.
“The High and Mid Grown Small Leaf BOP/BOPFs encountered downward pressure, following plainer quality and increased availability,” the brokers said in their market report.
Still, not all segments struggled.
The demand for the Large Leaf Orthodox teas from Mid and Low Grown elevations remained firm, while several premium Low Grown teas continued to attract stronger prices, underlining the resilience of Sri Lanka’s speciality tea segment, even during the volatile 
market conditions.
The report also highlighted a widening price gap between the BOP and BOPF teas at the lower end of the market, with the BOPF teas now trading at premiums exceeding Rs.150 per kilogramme over the BOP teas in some instances.
Market activity remained largely export-driven, with the buyers from the UK and Europe purchasing selectively based on quality, while the demand from CIS and Middle Eastern markets continued at lower 
price levels.
“The shippers to the CIS and Middle East continued to be active at lower levels,” Forbes and Walker said, adding that the buyers from Japan and South Africa were also operating selectively.
Meanwhile, the Low Grown teas, which accounted for around 2.2 million kilogrammes of total offerings, recorded fair demand across most categories. The premium and tippy teas generally appreciated during the sale, suggesting that the buyers were still willing to pay more for cleaner and better-made teas, despite the broader market weakness.