Sri Lanka's weekly tea auction in Colombo drew broad demand but sold at irregular rates in early June, with high-grown Western teas the softest part of the market, as a volatile rupee kept Ceylon prices moving unevenly from grade to grade.

At the sale held June 2 and 3, about 5.4 million kilograms were on offer, the Tea Exporters Association of Sri Lanka reported. General demand held up, but prices did not move together. Teas from the Western high-grown slopes were irregular, and the Nuwara Eliya and Uva/Uda Pussellawa districts barely held their previous levels, the association said. Better low-grown and leafy grades kept selling; the weaker orthodox lots did not.

That split is the market Sri Lanka has been running all year, and the currency is the reason. When the rupee falls, an exporter filling a fixed dollar order can bid more rupees for the same tea, so the rupee price at Colombo can hold firm even as the dollar the tea earns abroad softens. It also works the other way when the rupee steadies, and the back-and-forth leaves the weekly average moving in steps rather than a trend.

For growers, the rupee is now doing more to their returns than the tea does. A garden that earns a firm rupee price is not necessarily selling a dearer tea in world terms; it may only be banking a weaker currency. Buyers reading the Colombo numbers have to strip the exchange rate out before the price tells them anything about quality or demand.

Sri Lanka is among the world's largest tea exporters, and unlike the CTC-heavy origins it sells mostly orthodox leaf graded by elevation, from the light high-growns of Nuwara Eliya and Uva to the fuller low-growns that carry much of the export tonnage. High-grown Western teas of the kind that eased in early June are the country's premium tier, so a soft, irregular market there is felt first by the estates least able to cut costs.

Sources: Tea Exporters Association of Sri Lanka, weekly market reports; EconomyNext, Sri Lanka high, mid and low grown tea prices ease at weekly auction.