Sri Lanka smallholder tea factory capacity outgstrips leaf

August 31, 2007 (LBO) – Sri Lanka's tea industry in the southern part of the region where low grown teas are cultivated mainly by smallholders have too many factories chasing the available leaf supply, a top industry official said. Smallholders, who now produce more than half the island's tea crop, have grown rapidly in the past two decades, driven by good prices for the low grown teas which are much in demand in the oil-rich Middle East and Russia.

But the number of modern factories too has grown to meet the demand for processing the leaf bought from smallholders.

"This has resulted in the processing capacity volume being larger than leaf availability," said Sarath Samaraweera, Head of Operations, Tea Small Holder Factories and Assistant Vice President, John Keells Holdings.

The development has meant that tea grower in the region has become a key player who decides where to supply green leaf, he told the Colombo International Tea Convention organized by the Colombo Tea Traders' Association and the Sri Lanka Tea Board to mark the 140th anniversary of the Ceylon tea industry.

Most smallholders own less than half a hectare and they supply the tea leaves as raw material to private factories which process the leaf i