What Does Coffee Have in It, and How Do Ceylon Black Tea Prices Work?
More than 90 percent of Sri Lanka's tea is sold through the Colombo Tea Auction, which runs two sessions a week and draws around 300 buyers and exporters. Only black tea enters the auction; green and white tea are traded separately. Weekly auction prices are treated as a reference point for the global tea market, and the bidding moves fast, with about 4 to 6 lots sold per minute.
Sessions run Tuesday from 8:30 a.m. to 16:30 p.m. and Wednesday from 8:30 a.m. to 12:30 p.m., with the auctioneer calling bids in English and Sinhala and buyers signaling by raised hand. Just as coffee production by country shapes coffee supply, Sri Lanka's auction rules make Ceylon black tea prices a barometer that other origins watch.
Over ninety percent of the tea produced in Sri Lanka is traded through the Colombo Tea Auction, which holds two auctions every week and attracts around three hundred buyers and exporters. Black tea is the only category that enters the auction, and its transaction prices are regarded as an important reference for the global tea market. The auction floor may look calm, but in reality it moves at breakneck speed: the auctioneer calls bids alternately in English and Sinhala, buyers signal with a raised hand, and a fall of the wooden gavel seals the deal. This article will walk you through how the Colombo Tea Auction operates, the bidding increment rules, and the key factors that drive fluctuations in Ceylon black tea prices, and will also mention Front Street Coffee's black tea products.
The Colombo Tea Auction holds two sessions each week: Tuesday from 8:30 a.m. to 16:30 p.m., and Wednesday from 8:30 a.m. to 12:30 p.m. Under Sri Lankan government regulations, 90% of the tea produced by growers must be sold through the auction house; in other words, more than ninety percent of the country's tea circulates through the Colombo Tea Auction. There are roughly 300 buyers or exporters taking part in the bidding, and exporters often assign different staff members to bid on different grades of tea in the three auction halls.
In Sri Lanka, only black tea is included in the auction system; other teas produced in small quantities, such as green tea and white tea, do not enter the auction house and can only be traded separately with clients. The auction prices formed each week at the Colombo Tea Auction therefore serve as a bellwether for the international tea market.
The atmosphere at the auction seems quite calm, while the auctioneer in the center speaks extremely fast, alternating between English and Sinhala. A few seconds later, buyers can occasionally be heard calling out bids loudly, and the auctioneer will raise an eyebrow or point a finger at someone to indicate that this buyer has bid higher. When no one continues to raise the price, it means the lot is sold, and the small wooden gavel falls immediately, completing a transaction. The next lot is auctioned right away, with about 4 to 6 lots sold per minute.
Generally speaking, when market demand is strong, the auction pace becomes very fast and the atmosphere is especially lively, with about 6 lots sold per minute on average. When the market is sluggish, the auction speed slows accordingly.
Today, the volume of tea that the Colombo Tea Auction needs to sell each week is extremely large, and the quantities buyers plan to purchase have also increased noticeably, so the auction speed has declined somewhat. To us onlookers, this method of tea trading, which has continued for more than a hundred years, is full of mystery. Mr. Fernando took a stack of auction "catalogs" for tea products from his colleague and explained to us in detail the complete process by which their company buys tea at the auction house. In fact, a week before the auction they had already received tea samples and the auction product "catalogs" from the brokerage firm, reviewed the samples in advance, and then, according to the company's needs, marked the samples they were interested in and gave estimated prices.
When the auctioneer begins auctioning these products, they will bid promptly or compete with other companies. The Colombo Tea Auction sets relatively small bidding increments, with the specific rules being: if the starting price per kilogram of tea is below 200 rupees, the increment is 2 rupees; if the starting price is between 200 and 450 rupees, the increment is 5 rupees; if the starting price is between 450 and 700 rupees, the increment is 10 rupees; if the starting price is between 700 and 1,000 rupees, the increment is 20 rupees; and if the starting price exceeds 1,000 rupees, the increment is 50 rupees.
Normally, tea prices rise accordingly when demand in the buyer's market is strong, or when tea production declines, or when Sri Lanka's "quality season" teas come onto the market. For producers, it is naturally not possible for every lot to reach a satisfactory price; if the price is below 10 rupees/kg, the seller or broker can choose to withdraw it and not sell.
The above content is compiled by CoffeeHunters, a coffee news website.
