Tea prices to maintain upward trend in 2008
Output in Viet Nam increases 28 percent, another record crop in China
14 February 2008, Rome – In 2008, world tea prices are expected to maintain their upward trend as a result of a tight supply on the world market exacerbated by a projected 10 percent decrease in Kenyan production due to civil unrest, according to an FAO report on current and future trends in the tea market prepared for the Global Dubai Tea Forum 2008 (February 19-20).
This follows a review of the world tea market for 2006 which indicated an improvement in the fundamental oversupply situation that had persisted for many years. Indeed, the FAO Composite Price, as a world indicator price for tea, increased by 11.6 percent to reach US$1.83 per kg in 2006. The market fundamentals for 2007 suggest that this trend is likely to continue as the FAO Index has increased a further 6.5 percent to US$1.95 per kg in 2007.
World tea production grew by more than 3 percent to reach an estimated 3.6 million tonnes in 2006, according to latest available figures cited by the report. The expansion was due to another record crop in China with 1.05 million tonnes – an increase of 9.5 percent over the record established in 2005 – and a record 28 percent increase in output in Viet Nam which pulled its production up to 133 000 tonnes.
A rehabilitation and expansion programme implemented by Viet Nam explains the impressive growth in output as tea bushes reached optimum yields. In China, government policies to increase rural household incomes and major rationalization of the farming systems including the replacement of low yielding bushes also boosted production.
An increase was also recorded in India, the second larger producer, where harvests were 3 percent higher, totalling 945 000 tonnes for 2006. The increases in China, India and Viet Nam should offset declines in major producing countries, according to the report.
Consumption and projections
World tea consumption grew by 1 percent in 2006, reaching 3.64 million tonnes. For the first time, China’s consumption surpassed that in India, recording a dramatic increase of 13.6 percent in total consumption. For India, although the annual tea consumption growth was not as spectacular as that of China – at 2.51 percent – this level was considerably higher than the annual trend of 1.6 percent on average over the previous decade.
World trade in tea remained relatively unchanged at 1.55 million tonnes in 2006, as increased shipments from Sri Lanka, India and Viet Nam offset major declines in Kenya and Indonesia, according to the report.
In the medium term, FAO projections for the next 10 years to 2017 indicate that world black tea production will grow at 1.9 percent annually to reach 3.1 million tonnes while world green tea production is expected to grow at a considerably faster rate of 4.5 percent annually to reach 1.57 million tonnes.
In terms of consumption, black tea is projected to reach 2.8 million tonnes, indicating an oversupply of about 300 000 tonnes as the stronger consumption growth in producing countries is unlikely to offset declines in traditional net import markets.
“The projections suggest that although supply will outstrip demand, the gap will be closer than it has never been. However for black tea there is a danger of supply overreacting to the current price hikes,” FAO tea expert Kaison Chang said.
Strategies to improve demand
“Strategies must be launched to continue the improvement in demand. Opportunities for an expansion in consumption and improvement in prices exist in producing countries themselves as per capita consumption levels are relatively low,” Chang added.
“The imposition of quality standards to segment the world tea markets should also be exploited further. Even the impact of imposing a minimum quality standard as a means of improving the quality of tea traded internationally, would by default, reduce the quantity of tea in the world market and improve prices, at least in the short to medium terms,” Chang also said.
The Global Dubai Tea Forum is a biennial event which includes an exhibition space. It attracts a broad range of representatives from across the global tea industry. The focus is on sharing industry-specific knowledge and best practices for improving tea production and marketing worldwide.
Media Relations, FAO
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