CCP: TE 99/3

Table of Contents

I. INTRODUCTION

II. PRODUCTION

III. CONSUMPTION

IV. IMPORTS

V. EXPORTS

VI. CONCLUDING REMARKS

ANNEX

I. INTRODUCTION

1. At its Twelfth Session, the Intergovernmental Group on Tea stressed the importance of analyzing longer-term market prospects in order to determine appropriate strategies to maintain remunerative tea prices, taking into full account the impact of such factors as the macro-economic situation, structural changes in some markets and the impact of international trade agreements.

2. This document contains projections which were based on the most recent data available on black tea production, consumption, trade, and growth in population and income. The projections on production were based on a linear trend analysis for each country for the period 1983-85 to 1993-95 and extrapolations to the year 2005. They were adjusted to reflect policy developments, new and replacement planting and improvements in infrastructure. Consumption was projected from past trends, estimates of population and income growth and the assumption of constant real prices. Where possible, projections for black tea were categorised by orthodox and CTC teas. Stock changes were not considered.

3. The Group is invited to study the projections and identify fundamental issues and challenges that may be faced by the world tea economy as it enters into the next century, particularly those constraining the income of tea producers.

II. PRODUCTION

4. World tea production is projected to increase from the 1993-95 average of 1.97 million tonnes to 2.7 million tonnes in 2005, an annual average growth rate of 2.8 percent. Production in India is estimated at 1.02 million tonnes in 2005, an average annual growth of 2.8 percent from the 1993-95 base. Most of the envisaged production expansion in Sri Lanka should result from recent economic reforms and the national plan for tea production expansion. Production by 2005 is projected to reach 285 000 tonnes, compared to 240 000 tonnes during 1993-95, an annual growth rate of 1.6 percent. Significant growth in production is also projected for other major tea-producing countries. China and Indonesia would increase black tea production from 180 000 tonnes and 105 100 tonnes to 220 000 tonnes and 160 000 tonnes, respectively. Output of tea in Bangladesh would grow only moderately from 49 000 tonnes in 1993-95 to 55 000 tonnes in 2005. Increases in both yields and planted area are likely to continue to support the strong growth in tea production in African countries. Output in Kenya is expected to increase at an average annual rate of 2.8 percent to 300 000 tonnes in 2005. Malawi, Tanzania and Zimbabwe are also expected to increase production significantly. Production and yield of tea produced by small growers in Africa are likely to continue to increase rapidly.

5. Production expansion programmes initiated by major exporting countries have contributed to previous increases in output of black tea in recent years, and the impact of these programmes, particularly as bushes reach optimum production age, may continue. The area harvested of all tea has increased by almost one million hectares since 1961, from 1.4 million hectares to 2.3 million hectares in 1996. The average yield per hectare has increased by over 50 percent during the same period. However, the pressure for the cultivation of food crops continues to increase and it is questionable whether any large scale increases will ensue from now on.

III. CONSUMPTION

6. World black tea consumption is projected to increase from 1.97 million tonnes in 1993-95 to 2.67 million tonnes by 2005, an annual growth rate of 2.8 percent. Developing countries would account for the largest part of the prospective increase, with consumption rising from the 1993-95 average of 1.41 million tonnes to 1.95 million tonnes by 2005, an annual growth rate of 3.0 percent. Black tea consumption in India is projected to continue to rise rapidly, reaching 832 000 tonnes by 2005, an annual growth of 3.2 percent from the base period. In other major markets for black tea such as Pakistan, the Islamic Republic of Iran and Egypt, consumption is projected at 160 000 tonnes, 122 000 tonnes and 90 000 tonnes by 2005, respectively. The reduction of import tariffs and declining prices could have a more pronounced effect on consumption in these countries. The projections also suggest significant increases in black tea consumption in other developing countries, such as Turkey where consumption would grow at an annual average rate of 3.2 percent to 150 000 tonnes.

7. In developed countries, including countries in transition, black tea consumption would increase more moderately by 2.2 percent annually, to 719 000 tonnes in 2005. Consumption in the European Community is projected to increase only slightly in the next decade since higher purchases by France, Germany, Italy and the Netherlands would be largely counterbalanced by a continuing decline in the United Kingdom. Consumption in the United States is projected to increase, though at a relatively slow rate of less than one percent. Since many developed countries impose no, or only slight, restrictions on bulk and packaged black tea imports, the effect of trade liberalisation on their consumption would be negligible. Black tea consumption in the countries of the former USSR is projected to increase from 154 000 tonnes in 1993-95 to 250 000 tonnes in 2005, equivalent to an annual growth rate of 4.5 percent over the period.

IV. IMPORTS

8. Import requirements in 2005 are projected at 1.27 million tonnes, an average annual increase of 2.3 percent from average annual imports in the 1993-95 base period. Import requirements by developing countries would increase more rapidly, by about 3.1 percent annually to reach 626 000 tonnes while import demand in developed countries is projected to increase by about 1.6 percent annually to 642 000 tonnes. In volume terms, the major importers would be the countries of the former USSR (mainly the Russian Federation), Pakistan, the United Kingdom, Egypt and the United States which would account for 51 percent of total import requirements. The average annual growth rate of imports by the former USSR is projected at 2.4 percent though this may have to be revised downward if the current economic crisis continues.

V. EXPORTS

9. Net export availabilities are projected to reach 1.292 million tonnes in 2005, an average annual increase of 2.5 percent from the actual exports of 985 000 tonnes during the base period. China, India, Indonesia, Sri Lanka and Kenya are expected to account for 78 percent of the total projected export availabilities. Bangladesh, Malawi, Tanzania, Turkey and Zimbabwe are also expected to increase export availabilities significantly during the projection period.

10. Most of the increase in the volume of export availabilities would originate in Asia. Exports from India, the world's largest tea producer and consumer are expected to recover from the recent disappointing performance while satisfying growing domestic demand. Projected export availabilities for Sri Lanka, currently the largest exporting country, would grow by 1.6 percent annually to 263 000 tonnes in 2005. China, Indonesia and Bangladesh are also projected to increase export availabilities. China would continue the rapid growth of tea sales from the eighties and early nineties reaching 192 000 tonnes in 2005, while Indonesia and Bangladesh would attain export availabilities of 140 000 tonnes and 32 000 tonnes, respectively.

11. Substantial growth in export availabilities is also projected for African tea exporting countries. The region's total export availabilities are projected to amount to 401 000 tonnes in 2005, an annual increase of 2.8 percent from an average of 295 000 tonnes during 1993-95. Kenya, which currently accounts for 70 percent of African tea exports, would increase its availability from 203 000 tonnes (1993-95 average) to 276 000 tonnes in 2005, an average annual growth rate of 2.8 percent. Malawi, with average shipments of 36 000 tonnes in 1993-95, is expected to increase its exports to 44 000 tonnes in 2005. For the other African countries export availabilities would amount to 30 000 tonnes in 2005.

VI. CONCLUDING REMARKS

12. The projections indicate that by 2005, world black tea production and consumption could almost be in balance at 2.7 million tonnes, representing a growth rate of 2.8 percent for each. Production gains would largely result from higher yields, whereas the rise in consumption would largely be due to population and income growth. Developing countries would account for most of the growth and their share in world consumption would rise by 2 percent over the projections period. However, much will depend on economic development of these countries.

13. More importantly, the projections suggest an imbalance in the international market. The projected surplus of export availabilities over import requirements would be about 24 000 tonnes by 2005 from an almost balanced market in 1993-95. This possible imbalance implies that world market prices would be under downward pressure if there were no additional increases in demand and/or downward adjustments in production.

14. There are several ways of narrowing the trade deficit and improving prices, which the Group is aware of and has attempted to address. The most obvious way is by attempting to expand consumption through promotion. Over the last few years, the major efforts of the Group have been to create awareness of the health benefits of tea drinking and to work out a generic promotion programme that would stimulate consumption of tea. The project on tea and health that has been executed for the Group by the United Kingdom Tea Council comes to an end in December 1999, and the Group will have to decide at this Session on the most effective method of keeping up the momentum.

15. The projected gap between exports and imports could also be further reduced through trade liberalisation, particularly of "retail-packed" teas. The direct impact of the Uruguay Round Agreement on bulk tea imports is small since tariffs imposed by major importing countries are already very low or at zero. However, most of the potential growth markets have high import tariffs on "retail-packed" black tea which have restricted exports to those countries. Any reductions of these tariffs would make it possible to expand the value-added trade, and would offer new opportunities for tea exporting countries.

16. Another obvious means of reducing the gap between export availability and import demand and thereby improving prices is through the rationalisation of production in major exporting countries to relieve the supply pressure on the world tea market.

17. Therefore, given the prospect of downward pressure on prices, the commodity policy for tea for the next decade should largely concentrate on the exploration of possible new and market-orientated approaches.

ANNEX

TABLE 1 -Black Tea : Actual and Projected Production
	P R O D U C T I O N
Countries / Regions	Actual		Projected	GROWTH RATES
	1984*	1994*	2005	1984* / 1994*	1994* / 2005
	Thousand Metric Tons			Percent per year
WORLD	1858	1970	2681	0.6	2.8
DEVELOPING	1728	1941	2581	1.2	2.6
Africa	244	335	457	3.2	2.9
Kenya	128	222	300	5.7	2.8
Malawi	36	36	45	0.0	2.0
Rwanda	9	7	15	-2.5	7.2
Tanzania	16	24	32	4.1	2.6
Zimbabwe	13	14	20	0.7	3.3
Other	42	33	45	-2.4	2.9
Latin America	52	65	78	2.3	1.7
Argentina	36	51	54	3.5	0.5
Other	16	14	24	-1.3	5.0
Near East	161	175	255	0.8	3.5
Iran	44	53	85	1.9	4.4
Turkey	117	122	170	0.4	3.1
Far East	1264	1360	1777	0.7	2.5
Bangladesh	41	49	55	1.8	1.1
China	199	180	220	-1.0	1.8
India	618	749	1015	1.9	2.8
Indonesia	92	105	160	1.3	3.9
Sri Lanka	200	240	285	1.8	1.6
Viet Nam	8	10	20	2.3	6.5
Other	106	27	22	-12.8	-1.8
Other developing	7	5	14	-3.3
Developed	130	28	100	-14.2	12.3
Former USSR	120	16	80	-18.2	15.8
Other	10	12	20	1.8	4.8
* = Averages for 1983-85 and 1993-95

TABLE 2 - Black Tea : Actual and Projected Consumption
		C O N S U M P T I O N
Countries / Regions	Actual		Projected	GROWTH RATES
	1984*	1994*	2005	1984* / 1994*	1994* / 2005
	Thousand Metric Tons			Percent per year
WORLD	1876	1970	2669	0.5	2.8
DEVELOPING	1235	1405	1950	1.3	3.0
Africa	75	82	101	0.9	1.9
Latin America	18	27	41	4.1	3.9
Near East	282	417	584	4.0	3.1
Egypt	70	62	90	-1.2	3.4
Iran	43	85	122	7.1	3.3
Iraq	41	1	54	-31.0	43.7
Far East	858	877	1194	0.2	2.8
China	79	77	76	-0.3	-0.1
India	413	590	832	3.6	3.2
Pakistan	87	113	160	2.6	3.2
Other developing	2	2	30	0.0	27.9
DEVELOPED	641	566	719	-1.2	2.2
North America	98	96	105	-0.2	0.8
Canada	19	13	13	-3.7	0.0
U.S.A.	79	83	92	0.5	0.9
Europe	265	257	279	-0.3	0.7
EC	222	215	229	-0.3	0.6
UK	165	148	135	-1.1	-0.8
Other Europe	43	42	50	-0.2	1.6
Former USSR	218	154	250	-3.4	4.5
Oceania	28	21	28	-2.8	2.6
Other Developed	32	38	57	1.7	3.8
* = Averages for 1983-85 and 1993-95

TABLE 3 - Tea : International Trade , Actual and Projected
			E X P O R T S					I M P O R T S
Countries / Regions		Actual		Projected	GROWTH RATES		Actual		Projected	GROWTH RATES
		1984*	1994*	2005	1984* / 1994*	1994* / 2005	1984*	1994*	2005	1984* / 1994*	1994* / 2005
		Thousand Metric Tons					Thousand Metric Tons			Percent per year
WORLD		929	985	1292	0.6	2.5	911	985	1268	0.8	2.3
DEVELOPING		929	985	1292	0.6	2.5	420	447	626	0.6	3.1
Africa		197	295	401	4.1	2.8	55	42	50	-2.7	1.6
Kenya		106	203	276	6.7	2.8
Malawi		37	36	44	-0.3	1.8
Rwanda		9	5	9	-5.7	5.5
Tanzania		13	20	29	4.4	3.4
Zimbabwe		9	9	13	0.0	3.4
Other		32	23	30	-3.2	2.4
Latin America		53	53	55	0.0	0.3	14	15	25	0.7	4.8
Argentina		44	43	42	-0.2	-0.2
Other		9	10	13	1.1	2.4		15	25		4.8
Near East		2	17	25	23.9	3.6	238	258	366	0.8	3.2
Egypt							71	62	100	-1.3	4.4
Iran		1	2	0	7.2	0.0	30	34	37	1.3	0.8
Iraq							41	1	54	-31.0	43.7
Turkey		1	16	25	32.0	4.1
Other								162	175		0.7
Far East		671	613	811	-0.9	2.6	111	131	162	1.7	1.9
Bangladesh		28	27	32	-0.4	1.6
China		91	103	192	1.2	5.8
India		213	159	165	-2.9	0.3
Indonesia		78	89	140	1.3	4.2
Sri Lanka		187	222	263	1.7	1.6
Pakistan							87	113	140	2.6	2.0
Viet Nam		11	9	17	-2.0	6.0
Other		74	4	2	-25.3	-6.1		18	22		1.8
DEVELOPED							491	538	642	0.9	1.6
North America							98	96	105	-0.2	0.8
Canada							19	13	13	-3.7	0.0
U.S.A.							79	83	92	0.5	0.9
Europe							265	257	284	-0.3	0.9
EC							222	215	234	-0.3	0.8
France							9	9	12	0.0	2.6
Germany							16	17	32	0.6	5.9
Italy							3	5	7	5.2	3.1
Netherlands							10	15	16	4.1	0.6
UK							165	148	135	-1.1	-0.8
Other Europe							43	42	50	-0.2	1.6
Former USSR							69	139	180	7.3	2.4
Oceania							27	20	28	-3.0	3.1
Other Developed							32	27	45	-1.7	4.8
* = Averages for 1983-85 and 1993-95