PA calls for urgent facilitation of crop diversification after sharp price reductions in tea and rubber

The Planter’ Association of Ceylon (PA) renewed calls for urgent action from policymakers to greenlight diversification into more lucrative crops like oil palm, in the wake of a sharp reduction in prices of tea and rubber over the first half of 2023 (1H23).

Following on record prices in 2022, when tea moved from Rs. 704.7 per kilogram up to Rs. 1,245.2 per kg in June, and up to an all-time high of Rs. 1,599.5 per kg by September, prices have been on a steady decline in 2023.

Starting from Rs. 1,466 per kg in January 2022, average prices have since reduced to just Rs. 974.4 per kg by June 2023. This amounts to a 24.4% Year-on-Year (YoY) reduction, and a drastic 40.3% reduction between Jan-June 2023.

National Tea Price Averages

Rubber prices too experienced significant volatility throughout 2022, moving from Rs. 461 per kg of Grade 1 Ribbed Smoked Sheets (RSS1) up to an annual high of Rs. 800 in June 2023, before collapsing back to Rs. 472.7 per kg in January 2023. While rubber prices have appreciated marginally to Rs. 536.3 per kg in June 2023, average prices of rubber for 1H23 were 21.4% less than the corresponding period of 2022.

“Sri Lanka’s plantation industry is in urgent need of a realignment. The price dynamics over the past 6 months show strong signs of a continuing downturn across both tea and rubber. Tea prices have been impacted by increasing production in competitor nations, while rubber prices affected by continuing supply-demand mismatches in the wake of the COVID pandemic. Demand for finished rubber products while showing marginal improvemnts, has been relatively stagnant compared to the past 3 years. Sri Lanka’s low productivity is also eroding our ability to compete with larger regional producers,

“While we maintain that there must always be a place for Sri Lankan tea and rubber, we have to acknowledge that securing the future of our nation’s plantation industry requires extensive crop diversification. We can no longer limit ourselves to just two main crops. Already significant investments are being channeled across the RPC sector into an array of crops – from a wide range of fruit cultivation to coffee and even several varieties of berries. However, we note with disappointment that there has still been little to no progress on expanding of sustainable oil palm cultivation,” PA Chairman Senaka Alawattegama noted.