Tea Biz
Tea Biz

Episode · 6 months ago

Tea Biz News and Insight - March 4, 2022


HEAR THE HEADLINES – Russian Invasion Roils Tea Trade | Duncans Troubled Tea Gardens are Bought Out of Bankruptcy | The Pandemic Transformed Tea Tourism, a TEAIN22 Forecast

| NEWSMAKER – Anil Cooke, managing director and CEO of Asia Siyaka Commodities 

| FEATURES – This week Tea Biz travels to Colombo, Sri Lanka to assess the impact of the war in Ukraine on one of the Russian Federation’s most important tea trading partners. Correspondent Dananjaya Silva spoke with veteran exporter Anil Cooke, managing director and CEO of Asia Siyaka Commodities. Cooke's insights offer clarity amid a fast-changing crisis that is disturbing global harmony in tea.

Sri Lanka's Close Ties to Russia and Ukraine –Russia, which annually imports 150,000 metric tons of tea faces an unprecedented combination of payment and logistics barriers that are already interrupting supply. The combined resolve of governments condemning the unprovoked invasion of Ukraine has created uncertainty over prompt clearance of payments. Sanctions that exclude Russian banks from the SWIFT global payment system and threats to the liquidity of Russia’s Central Bank led to a severe devaluation of the ruble making tea imports far more costly. In addition, closing airspace and the collective refusal of the world’s shipping companies to deliver or receive goods pose severe barriers to the movement of tea.

The Tea Biz podcast delivers tea news that you need to know, a recap of the week's major headlines, with commentary and cultural trends. Hosted by Dan Bolton. It is the voice of origin for tea professionals and enthusiasts worldwide. Think of us as a digital caravan of storytellers, bringing authentic, authoritative and exclusive stories to you weekly from the tea lands. Hello everyone here. This week's headlines Russian invasion, royals tea trade, the pandemic transformed tea tourism, the tea and twenty two forecast and Duncan's troubled tea gardens are bought out of bankruptcy. More in a minute, but first this important message. What makes a Perfect Cup of Ceylon tea? The Perfect Cup is from the tea businesses that ensure the protection of all the children living within their tea estates. We Salute Kailani Valley, tell a Wacky Lee, Bogajan, Thalawa, Harana and Eliptia tea estates. Support Save the children. Sri Lanka tea traders are contending with unprecedented economic barricades, as well as formidable logistics hurdles, as governments worldwide seek to prevent Russia from transacting normal business. Brokers say that exports from traditional supply origins have already stopped shipments, since there is little chance the containers will make it to Russian or Ukrainian ports. Immediate impacts include declining sales volume at tea auctions in India, Sri Lanka and Kenya, price volatility due to sanctions that make payments uncertain, rising energy costs. As oil hits hundred and thirteen dollars a barrel, expect a big spike in the cost of fertilizers exported from Belarus and Russia. Prices are currently elevated at seven hundred and five or short tons for Yurea and seven hundred and twenty five for a ton of potash. Add to the above, hundreds of ships delayed or idle, deadports, thousands of containers. POLYGUMP and warehouse has a shortage of truck drivers, elevated freight rates, the suspension of DHL ups and Fedex services to Russia, the closing of US and European airspace and extreme weather conditions. Russia's unprovoked invasion of Ukraine and ongoing deadly assault on its citizens is creating a global rift in the tea lands. China, the world's largest producers, is allied with the Russian Federation, but it is India, Sri Lanka and Kenya the make up sixty five percent of Russian tea imports. China, Vietnam and Malaysia together supply only twenty five percent of Russia's tea quote. If this drags on, I suspect that within a decade Russians will be drinking mostly Chinese tea and quote equipped one trader. On Wednesday, India, Vietnam and Sri Lanka abstain from UN resolutions toploring the invasion and destruction of Ukraine by the Russian Federation. The resolution demanded that Russia quote immediately, completely and then conditionally, and quote withdrawal from Ukraine. Bangladesh, Mozambique and Zimbabwe also abstained. Can you voted in favor, as did Rwanda and Malawi, joining Argentina, Japan, South Korea, Malaysia,...

Thailand and a hundred forty one other countries. Five nations, including the lar of Syria North Korea, join Russia in voting against the UN resolution. India's tea auction and Knor is a favorite of Russian buyers, but in recent weeks thirty two percent of the tea has remained unsold. Demand is evident, but some ers are concerned about receiving payments, as Western nations exclude Russian banks from making swift system transfers. The US and EU countries are also limiting Russia's central bank from accessing reserves. India can easily sell more of the tea previously bound for Russia in the fast growing domestic market. Shri Lanka predicts a decline in production this year, doing part to limited availability of fertilizer. Russia imports seventy million worth of tea, cut flowers and fruit annually from Kenya and Ukraine by three million of the same. Russia is the top exporter of nitrogen fertilizer, accounting for seventeen percent by volume. Russia and blars of the second and third largest potash producing countries in the world, and Russia is the third largest fosse fate exporter. According to The Wall Street Journal, quote, expected global supply crunch prolonging the current shortage and exacerbating the already high prices for farmers and quote, experts warned business inside Russia's spend four hundred and forty two million importing tea in the past twelve months, down from the more than six hundred and eighty four million the country produced in twenty thirteen, according to Russia's Federal Customs Service. Russia is home to a hundred and forty five million people, but declines in volume and value have made Russia a much less appealing tea market in the past decade. According to Euromonitor, the Black Tea category continues to struggle in two thousand and twenty one due to the growing popularity of fresh coffee and botaticals. As consumers their confront double digit inflation and reduced availability, many will trade down to instant coffee or switch back to tea a year from now. Te draker's belonging. They recall a time when they paid only two hundred and twenty seven ninety nine rubles, or about two dollars and twenty five cents us, for two hundred grams of mid grade may ski Corona Tea, the crown of the Russian Empire. The pandemic transforms tea tourism. The final of twelve tea and twenty two forecasts tourism thrives on people in motion. There's little hopeful recovery amid lockdown's travel restrictions, in forced quarantines, rigid immunization protocols and, in the past week, closure of airspace by governments in respects flaunts to the Russian federations, invasion of Ukraine and retaliation, Russia refused aircraft landing rights for flights originating in thirty six countries. In March two thousand and twenty the tourism industry was in shock as international travel virtually ceased. Airlines mothballed planes, hotel shuttered locations, restaurants required masks and resorts promoted affordable stacations for at home workers experiencing...

...cabin fever. Optimism prevailed as sports venues and musical concerts downsized and trade events went virtual. In Two thousand and twenty one, pessimist reigned as the second and third waves of the pandemic arrived. Recovery has been slow, with many setbacks, but is progressing. As Almacron waynes tourists in China took three point two five billion trips in two thousand and twenty one, up twelve point eight percent compared to two thousand and twenty, but only fifty four percent of two thousand and nineteen levels, according to the Ministry of Culture and tourism. Last January, authorities urge families not to travel for the traditional Lunar New Year's holiday, and the peak daily travel declined seventy six percent compared to twenty twenty. According to the South China Morning Post, last year the country enforced thirty eight interprovincial travel bands. News reports state that coronavirus disruptions led to the closure of eleven thousand Chinese travel agencies. Chanjang based you tour group experienced a sixty percent decline in international travel in twenty twenty, but persevered, only to find twenty twenty one worse. Quote. We became really depressed after a series of batterings, especially when you held high hopes that the whole year would be great. Then you had to cancel the business you'd already retrieved. is completely different from not being able to achieve anything from the start. End. Quote. Said you two owner, Guan Win. You. There are in estimated six thousand tea estates operating outside China, but only a few hundred host tourists. According to the book tea and tourism, tourists, traditions and transformation, edited by the Jolife these are concentrated in India, Japan, Taiwan, Tri Lanka, South Korea, Kenya, Vietnam and Malaysia. Of these countries, Sri Lanka appears the most vulnerable to setbacks. In Two thousand and twenty two, franc is, an island literally covered in tea, in one of the world's premier tourist destinations. Tourism earned the country two hundred and sixty million last year. Quote. There's an unbreakable bond between tourism and Celon tea since tourism was introduced to Shri Lanka and quote. According to a report by the University College of Bantagala, Sh Lanka is a haven for tea tourists, contributing to greater awareness of Ceylon. Tea One of the country's top five sources of foreign income. Lonely Planet named Sri Lanka, it's number one travel destination for two thousand and nineteen, deciding two point three million visitors. In two thousand and eighteen, the number of travelers declined to five hundred thousand. In Two thousand and twenty with only a hundred and ninety five thousand visitors in two thousand and twenty one. This year, Russian's account for eighteen thousand, or about fifteen point eight percent, of the hundred and thirteen thousand who visited from January through February. Eleven Ukrainians accounts for an additional nine thousand eight hundred, or about eight point seven percent of total of visitors during the same period. A quarter of all tourist rivals last year were from Russia and Ukraine. Economic sanctions will hit hard...

...as quote, Central Europe has been a major source of arrivals, especially from Ukraine and Russia, and quote the rights M Shawn the Kamar, president of the Hotel Association of Shri Lanka. Russia purchased about a hundred and forty million of Shri Lankan tea in two thousand and twenty one. Bus insign amid mounting losses and tour industry chaos, tea destinations have evolved into sustainable retreats, the focus on hands on educational experiences and low impact interaction with growers at origin. The rise of the conscious traveler presents an opportunity for communities to grow their local economies off the back of the travel rebound and also welcome and evolving form of wind wind tourism that emphasizes genuine connection. According to the economist impact research carried out for air B and B quote, people are thinking deeply and holistically about sustainable travel and their understanding of it encompasses social, economic, cultural, community and environmental aspects and quote. According to authors of the study, the survey of four thousand five hundred travelers found that two and three say it's important to them to create a positive impact for locals, and fifty eight percent that it's important they do not contribute to issues such as over tourism. Almost three and five surveyed is that they will be more conscious about familiarizing themselves with what is important to the communities they're visiting and how they can make a contribution. Duncans Industries Limited, India's oldest tea company, was bought out of bankruptcy March first by a consortion of of investors led by uniglobal papers in Kolkata. Duncans produces fifteen million kilos of tea on twelve thousand hectors across fourteen tea gardens in North Bengal estates include Marabong and Rung Lee Tea in Darshaling. The rest of the gardens are in the doors and tera packet. Tea Brands Include Double Diamond, Rung Lee, Sargum and Shakti. The firm is part of the larger Duncans GOWINCA condelomered Duncans has abandoned several underperforming gardens beginning in two thousand and fifteen. In Two thousand and twenty, representatives of fifty four thousand two hundred and fifty workers from nine Duncans Industries Gardens filed a claim amounting to one one five hundred car or about two hundred million US dollars. The claim was for a rare wages, over time, rations leave and failure to contribute to the workers provident fund. India's corporate insolvency resolution process, CIARP, notified creditors of the insolvency in March two thousand and twenty. In late February two thousand and twenty two, the committee of creditors assented to the resolution with a ninety nine percent vote. Business Inside Duncan T is founded by Walter Duncan of Scotland. In one thousand eighteen fifty eight. It is one of the oldest continuously operated tea companies in the world. The GOWINCA family, under the leadership of GP Gowinca,...

Acquired Duncan's brothers in one thousand nine hundred and fifty one. Current Holdings include power generation, petrochemicals, software development and biotechnology. Our VENDA and in there amen in Bengaluru reports on this week's Te auction prices. INDETE price support for the weekend in Twenty Six, February, twenty twenty two. All eyes out on new KREEN's this week. Specific to tea in trade, Russia is the biggest buyer of Indian tea and between April to November two thousand and Twenty One, India exported twenty two point five seven million kilos of tea to Russia and also one point one two million kilos of t to Ukraine. At the moment, the indeedity industry does not expect to see an impact, but everyone's waiting to see how things unfold and for more clarity on the situation. Meanwhile, exposed to Australia once again open, which is good news, because Australia reportedly paid an average of five dollar seventy six cents, but kill of tea, which is up twenty two sends for the same period last year. Australia have closed borders due to the pandemic, but and this reopening of borders somewhat offsets losses from low exports to the US, Canada and Europe. And across India, the first flush season is officially open. Some dagling gardens have begun showcasing their offerings, although they've not yet made it to auctions or retail channels, and all signs point an excellent first flush. In auctions of sale. Eight GOHATI's had no auctions last week, but the other auction centers were on. In north India, CTC leaf sold the most quantity and in the south of the CTC dust that's sold the most quantity. And now a word from our sponsor. Huge trade understands that a successful tea blend goes beyond the creative fusion of appearance, are Roma and flavor. Are Multi Award winning product development team is passionate about converting natural ingredients. It's a sense re experiences that customers crave. Every recipe is formulated with a commercial backbone of dependable quality sourcing with a pricing structure that supports a safe, regulated, profitable and scalable plant. Q trade meets every brand's retail, food service and ECOMMERCE need. For more information, visit our website, que trade tiscom. This week, T B is travels to Colombo, Sri Lanka, to assess the impact of the war in Ukraine on one of the Russian Federation's most important TA trading partners. Correspondent and enjoy a Silva spoke with veteran exporter and Neild Cook Managing Director and CEO of Asia Siaka Commodities. Cooks insights are for clarity amid a fast changing crisis that is disturbing global harmony in tea, Russia faces in the unprecedented combination of payment and logistics barriers that are already interrupting tea imports. The combined resolve of government's condemning the unprovoked invasion of Ukraine has created uncertainty over prompt clearance of payments by Russian firms. Sanctions that exclude Russian banks from the swift gloable payment system and threats to the liquidity of Russia's central bag led through a severe devaluation of the ruble this week, making tea imports far more costly. In addition, closing air space and the collective refusal of many of the world shipping companies to deliver or receive goods complicated the delivery of tea. Russia's tea market is valued at...

...four point one billion in two thousand and twenty two, according to German market research firms to Tista. Ukraine's tea market, estimated at four hundred and forty three million in two thousand and twenty two, is one and ten that of Russia. Russians drink a hundred and two thousand, two hundred and forty grams of tea monthly, spending twenty eight dollars and fifty cents per person per year. Ukrainians, on average, brink half that amount. This is not just over reporting from Columbus Tri Lanka on the latest trends that are affecting the three lunk tea industry, which is a major employ in the country. Will you discuss the CON situation in Ukraine? It's critical for Sri Lanka because last year Russia import at Twenty seven million kilograms and twenty nine million Kilo Umza before and Ukraine has been steady at around four million kilos each year, or the last three years, so that that's approximately ten percent of all t ship by Sri Lanka. The impact of these two markets is varied in the sense that they buy a whole cross section of grades, from small leaf high groans to a mix of blackly Orthodox these and there could be a definite if to with the depth of demand at the digital auctions, given the uncertainty over trade with these countries at the moment. There's tea that has already been shipped and often the importers are operating on a degree of the credit, sometimes thirty sixty days. We are not certain how these proceeds will reach Sri Lanka. The other is that it looks like shipping and movement of cargo to these markets will be restricted in the immediate short term. We find the fewer lines are operating at the moment. So, the way it goes, we'll have to wait and see. Will you provide some insight on the current price realization and do you anticipate workarounds offering of commodities? Who will clearing payments with Russian given the magnitude of sanctions prevent tea transactions. Auction prices are beginning to reflect slackening demand for Russia and Ukraine. The positive aspect is that it's gradual. Right now, Cola Sri Lanka is in the midst of its western quality season and it's been pretty dry with production law. So I don't see this being felt until a few weeks further down stream, because there is ample demand to take up the available quantities on offer right now. The impact of sanctions on the banking system is also unclear. We are aware that there are yet some banks that have not been prevented from doing business now. The impact of swift will also be visible later, but on the face of it, these sanctions could bite and I'll stop movement of goods, even though in most cases sanctions are not supposed to block the movement of food. You see a system that was developed with a round developing here with Russia. The system with Iran was unique. It was in relation to historic debt on previous oil shipments. It may not be the case here, assuming hostilities and cycles continue. How thetistics impact sales? Given the discopies of delivering cargo, it appears that it will be simply to the...

...fifty elsewhere. Is this sufficient demand in the rest of the world or should leave the Orthodox producers struggle back? The biggest challenge is movement of tea to Russia, and Russian impact on most black team markets is significant, particularly the Orthodox producers. I would say Sri Lanka, south India and Vietnam would feel it to a great extent and Ken hear to a less extent. But from Sri Lanka's point of view we can cope without this demand because I anticipate a drop in production this year. Sri Lanka has already been struggling with shortages of fertilizer. Even if the rains are on schedule, I believe that the crop loss would about balance the reduced demand from the from Russia and and Ukraine, and even a movement of cargo to Bel Ros wire is likely to be the restricted. So this is a transitional phase. Immediately, I would think we would overcome this rediuced demand simply because there's plenty of interest from North Africa and Middle East. We also believe that some of the Russian tea drinkers who moved to coffee may come back to tea due to less discretionary income with the depreciation of the ruber. Again, hopeful interpretation of the how them, but customer would behave. But this is a complex situation and I think it's going to be tough on the world for tea, particularly the most vulnerable people in the value chain, the farmers and the workers and the the tea produces, because we don't really need this kind of disruption to a situation that is already complex and has, you know, people suffering and not making ends meet in the in that the at the producer level. So this is a totally unnecessary problem and if one considers the absolute destruction in Ukraine, we don't know when this people will be able to return to some sort of normalcy and I think they there will be a price that the Russian public will also have to pay for this, because the sanctions would buy team and long and invariably it's the most innocent who are the victims of all of this. Intrigued by what you've heard in today's podcast, would you like to learn more from our global network of teams, journalists and t experts? Remember to visit the Tev is website for more comprehensive coverage. That's a wwtz b zcom thanks for listening. Farewell till next week.

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