black&white #30: Sri Lanka, a tea-producing country in crisis

3 min steep

Sri Lanka is the fourth biggest tea producing nation in the world, after China, India and Kenya. This is remarkable for a country of its size. While China and India’s inhabitants both sit at over a billion and Kenya around 53 million, Sri Lanka’s population is around the 22 million mark. Unsurprisingly, tea is the island nation’s biggest export commodity, bringing in a whopping $1.3 billion in 2021. The country produces mostly commodity-grade black teas such as Ceylon (Sri Lanka was formerly known as Ceylon under British colonial rule), which are commonly used in blends, for pre-made tea drinks or for decaffeination (our lovely Canton Decaf is made using a high grade Ceylon from the Uva region).

But this week the Prime Minister resigned following weeks of violent protests, and official figures showed that Sri Lanka’s tea exports have dropped to their lowest levels in 23 years, fuelled by a perfect storm of socio-economic and geo-political factors that are, predictably, completely outside the control of the country's 2 million smallholder tea farmers. So what exactly is driving this crisis? Firstly, the country’s in a severe economic downturn, caused mainly by high levels of foreign debt and some questionable economic policies, such as tax cuts, by the Sri Lankan government. All this was exacerbated by the COVID-19 pandemic, which decimated the country’s tourism industry and put further pressure on its flailing economy. Secondly, there was the bungled attempt to become the world’s first completely organic farming nation, leading to a total ban on agro-chemical imports last May. While a laudable and radical ambition, the policy lacked mechanisms to support farmers to make the transition. There was, for example, no programme in place to actually promote organic agriculture among producers – though the majority supported the move. While agri-business with vested interests tend to play up the impact of the ban on chemical fertilisers on the economic situation, the hasty implementation and lack of planning caused a drop in yield – leading to a spectacular u-turn by the government just months later. And thirdly, the Russian war in Ukraine is having multiple and unforeseen effects on Sri Lanka’s tea industry. The spike in energy prices after the invasion of Ukraine caused fertiliser costs to rocket; Russia is not only the world’s largest exporter of fertiliser, but many fertiliser manufacturers in other countries heavily rely on a cheap and plentiful supply of gas. While lots of farmers around the world had already ordered their fertiliser for the year, Sri Lanka had only permitted fertiliser imports for a few months – and most Sri Lankan farmers were left unable to afford fertiliser that had already risen fourfold since 2020. On top of this, Russia accounts for about one-third of Sri Lankan tea exports – but the devalued ruble will make trade more difficult for Russian tea importers and will, of course, impact the amount that Russian people are willing to spend on high grade teas. It’s a grim reminder of the ways in which war can impact the livelihoods of ordinary people thousands of miles away, as well as the untold horrors for those actually living in the warzones.

The drop in Sri Lankan tea imports will also drive demand for South Indian teas with similar characteristics, putting pressure on smallholder farmers in the region and pushing up prices in the industry. While the big tea companies can usually absorb these costs, independent tea businesses around the world are likely to feel the pinch. How will it affect Canton directly? We only use Ceylon in our Decaf Breakfast tea, so we’re not overly reliant on Sri Lankan tea and we have a good relationship with our suppliers, which should mean we have enough stock to last us through the year. If Sri Lankan tea imports continue to suffer, we may have to switch the origin of our Decaf to another high grade option.