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Brexit fallout threatens to lift prices of Britons' beloved cuppa

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Will Brexit hit UK tea drinkers in the caddy?

Britons remain among the world's most enthusiastic tea drinkers, responsible for nearly half the 240,000 tonnes or so of leaf that the European Union consumes a year, on United Nations Food & Agriculture Organization (FAO) data.

But the cost tipple is in the UK facing upward pressure not just from a recovery in world prices, which have rebounded strongly from a multi-year low set in April 2016, according to FAO data, but from the drop in sterling after Britons last June voted to quit the European Union.

It is an issue which is taxing Camellia, the London-listed plantations group, which produces everything from soybeans to pineapples, but is better known as the world's second-largest tea producer in private hands.

The group reported production of 73.4m kilogrammes (73,400 tonnes) last year, a rise of 15.4% year on year, helped by benign weather across its tea plantations, which are situated in Bangladesh, India, Kenya and Malawi.

'Tea cost concerns'

Camellia, named after the genus which includes the tea plant, said that it was "concerned about the costs of [UK] imports, particularly tea, on demand", and the potential knock-on effects on prices paid to producers.

Indeed, the potential for downward UK pressure on tea values comes at a time when producers are being squeezed by rising labour costs too in many major growing countries.

Camellia said that in India, where it has more than 15,000 hectares down to tea bushes, "costs of labour continue to rise at a higher rate than prices", a disparity which was prompting the group to explore the potential for mechanisation in tea growing and processing.

"We are investing in the mechanisation of field operations and the automation of our factory processes to improve productivity and reduce costs.

"In 2016, all spraying activities were mechanised along with some pruning and plucking."

The group noted that in Kenya, the country's Labour Court had "awarded an increase of 32% in wage rates spread over 2014 and 2015", although this ruling remains subject to appeal and further talks with trade unions.

'Focus for future investment'

The comments came as the group unveiled underlying earnings for 2016 flat at £26.5m, on revenues up 5.4% at £257.9m.

These figures excluded the contribution from asset management group Duncan Lawrie, sold for £19.2m, in a move that will free up cash for investing further in Camellia's agriculture operations, which stretch from pistachio output in the US to rubber production in Bangladesh to macadamia nut growing in South Africa.

"Agriculture is the largest division, accounting for circa 80% of group turnover and is the area where we have the greatest critical mass and see the best opportunities for the group at the current time," said Tom Franks, the Camellia chief executive.

"It is therefore likely that this will be a focus for future investment."

By Mike Verdin

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