Ceylon Tea (white) - International Market and Prices

International Market and Prices

Sri Lankan tea continued to have international success into the 2000s (decade). In 2001, despite falling tea prices in every major tea exporting country and increasing competition, Sri Lanka retained its position as the world's top tea exporter by selling a record 294 million kilograms (648.2 million lbs) in 2001 compared to 288 million kilograms (634.9 million lbs) in 2000. World tea production in 2001 rose 3.7% to 3.022 million tonnes (3.331 million short tons), but in Sri Lanka tea exports rose to an all-time high of $658 million from $595 million the previous year. Currently, however, Sri Lanka, whilst the world's largest exporter of tea, is far behind India and China in terms of total production.

In 2003 the government in Sri Lanka sought to protect the country's near $700 million tea industry during the 2003 Iraq War. The war in Iraq caused panic, particularly among small-scale Sri Lankan tea growers who represent 69% of all tea production in Sri Lanka, who demanded that the government bail them out. Iraq buys up to 15% of Sri Lanka's tea, and a third of this would enter the country illegally on small boats from Dubai as well as into neighbouring countries such as Iran. Exporters called for the government to assist them with concessionary bank loans and some tea factory owners in Sri Lanka demanded a moratorium on electricity bill payments. Prices fell in Colombo as a result of the crisis. Plantations Minister Lakshman Kiriella responded, saying, "tea promoters would receive diplomatic postings in Sri Lankan missions abroad to give an extra push to the island's 'green gold'". $15 million was funded to promote Sri Lankan brands on international markets during the Iraq war. Later in 2003 the island suffered severe floods in the lower growing tea areas of Sri Lanka. However production still increased slightly by 1.3 percent to 309,000 tonnes (340,614 short tons) in 2004, as the crop recovered. Kenya surpassed Sri Lanka as the largest exporter of tea with an 8.9 percent growth in exports for the year totalling nearly 293,000 tonnes (322,977 short tons). In 2004 actual tea production in Kenya had increased by more than 11 percent to reach 328,000 tonnes (361,558 short tons), as a result of a good harvesting season, wealth and improved processing facilities.

The Sri Lankan tea industry continued to grow into 2007 and 2008. Tea production hit a record 318.47 million kilograms (702.1 million lbs) in 2008, up from 305.2 million kilograms (672.9 million lbs) produced in 2007. In 2008 export earnings struck a record high of $1.23 billion for the full year, up from $1.02 billion in 2007. However, more recently the industry, like many others across the world, has suffered from the contemporary global financial crisis. The Sri Lanka Tea Board revealed in March 2009 that the industry had suffered a 30 percent drop in overseas sales in January 2009. The downfall in tea production has been felt not only by Sri Lanka but by all the major tea producing nations. Total volume of tea exports fell 25 percent to 17.76 million kilograms (39.2 million lbs) and sales from tea shipments fell to 6.9 billion rupees ($61.37 million ) in January, compared to 9.8 billion rupees in the same period a year earlier. Prices have collapsed to an average of $2.65 per kilogram ($1.20/lb) from record highs of $4.26 per kilogram ($1.93/lb) experienced between January and September 2008. Drought has also been a contributing factor to the 2009 crisis in Sri Lankan tea as it has in India. The Sri Lankan industry has been hit worst though with a fall of 8.7 million kg (19.2 million lbs) produced in January 2009.