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Sri Lanka Jan-April tea output drops to 3-yr low; fertiliser price surges

COLOMBO, May 26 (Reuters) – Sri Lanka’s tea production in the first four months of 2023 dropped 20% to a three-year low of 84 million kg, an industry official said on Friday, as the key sector struggles with the impact of a chemical fertiliser ban and economic crisis.

The island, hit with its worst financial crisis in seven decades, implemented a now-scrapped ban on chemical fertiliser early last year, which caused tea production to drop by 16% in 2022 from 2021, government data showed.

Despite the reversal of the ban, months passed before sufficient fertiliser stocks were imported and prices have soared in the interim, industry experts said.

“Now there is enough fertiliser in the market, but the cost is very high. A 50-kg bag of fertiliser that was 1,500 rupees in 2021 is now 20,000 rupees and other input costs have also quadrupled, so this has led to a drop in production,” said Planters Association spokesman Roshan Rajadurai.

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Production in the first four months of this year is the lowest since 74 million kg produced in 2020 when the Indian Ocean island was hit by a severe drought.

From January to April 2021 Sri Lanka produced 104.5 million kg of tea, which dropped to 84 million kg during the same period this year.

Globally know as Ceylon Tea, the 150-year industry is the country’s largest foreign exchange earning crop. It exports about 95% of its produce and the sector supports about 1.5 million people.

Sri Lanka produced 251 million kg of tea last year and earned $1.25 billion.

“We’re still hoping to reach $1.4 billion in export earnings for 2023 but for that we need to produce at least 250 million kg,” Rajadurai said.

The sector has also been hobbled by an appreciating rupee, which has strengthened about 15% against the dollar this year.

“Tea producers have only about a 10% profit margin and they have no confidence of prices increasing,” Rajadurai said. 

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