Tea Totals Rise as Exports Slide

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By Dan Bolton

There was much less tea sailing the high seas last year than could be found in local market stalls.

Production continued its steady growth in 2016 with a continuous upward climb dating back to 1996, based on statistics compiled by the International Tea Committee (ITC).  In 1996 ITC tallied global production at 2,654 million metric tons (2.6 billion kilos). Production has since more than doubled to 5,463 M.kgs.

China, India, and Kenya contribute the largest share. China harvested 2,350 M.kgs. last year, accounting for 43% of all global tea. India contributed 23% of the global total and Kenya grew 9% of the world’s tea. Combined they produced 75% of the global total, according to ITC.

Collectively Asian countries are the greatest source of tea, producing 85%, with Africa next at 12%. South America, mainly Argentina, contributed about 2% with both Oceania and Russia bringing 9 million kilos to market in 2016 (less than 1% combined).

Exports flat

The amount of tea exported last year was down slightly from the previous year to 1,774 m.kg. compared to the 1,796 m.kgshipped in 2015. What is significant is that tea exports since the Great Recession have plateaued. Export totals were 1,786 m.kg in 2010 and have remained essentially unchanged since.

“Tea exported as a percentage of what is produced, continues to decrease and in 2016 is estimated to be 32% of total production, down from 41%, 10 years back,” explains Manuja Peiris, chief executive and statistician with the International Tea Committee in London. ITC was founded in 1933 to regulate tea production, shipments, and pricing but now functions as a credible statistical body.  “This means that 68% of global supply is retained at origin,” said Peiris. “Inversely, consumption has been declining in countries within the developed world, where both population growth and disposable incomes are not improving,” he said.

Shipments to Russia, the world’s largest importer of tea, marginally declined as consumption fell to 154 m.kg. Russians (and the nearby CIS countries) consume 4.5% of the world’s tea.

“The overall global demand in non-producing countries remains stagnant, with the exception of a very few countries, which means that the overall export quantities are not shifting upwards,” said Peiris.

“During the last 10 to 15 years, export growth has come primarily from Kenya and Vietnam,” he said. China has also planted a lot of tea in recent years but that is mainly to meet domestic demand, he said. The need for more tea there is very much evident ― all destined for internal consumption,” he said.

New interest is driving demand with consumption increasing by 15% per year, according to estimates published by The Economist Intelligence Unit. Black tea is the fastest growing segment with an average rate of 40% per year since 2002. Green tea has risen more gradually. Only 35% of people in China drink tea daily. Consumption is just over 1 kilo per year per capita, which ranks 14th globally.

Export data reveal that new markets for tea are emerging, with the number of countries buying tea at the major auction houses in Asia and Africa on the rise, according to The Economist. Demand from these faster-growing emerging countries, is set to increase. Together these countries account for about 20% of global consumption.

Increasing disposable income in most developing nations is contributing to a wider intake of tea consumption, writes Peiris.

“When one looks at markets where further volume growth is bound to take place, they are China, India, the Middle East, Pakistan & Afghanistan, Bangladesh, Taiwan, Morocco, Sudan, Kazakhstan, Ukraine, the US, and Malaysia,” he said.

Consumption

“As much as we take interest in individual countries, it is global availability that kicks the market forces into action,” observes Peiris.

Whether China produces more for internal use, or Kenya wishes to produce more for export, “this increasing availability keeps the global prices at modest levels since the price in Kenya tends to be the yardstick for both cut, tear, and curl (CTC) and orthodox (loose leaf) though they could very well be higher or lower,” he said.

“Prices, worldwide tend to be higher in Sri Lanka, where they are driven by labor costs, and lower in Vietnam in line with quality,” he said.

“If Kenya continues at the pace they have, there will be lots of tea, which will accelerate the shift to CTC from orthodox in most markets, probably at lower prices, making other suppliers simply niche players,” he said.

Forecast

Forecasts should be taken with a grain of salt, observes Peiris. Weather, political instability, economic doldrums all contribute to uncertainty. Last spring, the weather in China was unusually cold, the coldest recorded in several decades. This year the harvest was delayed by the late onset of warmer weather.

The Economist projects an unusual downturn: “We expect global tea production to contract in 2017, by 2.7% year on year, for the first time since our data series began in 2000.”

The estimate is based on gloomy weather in countries where 35% of tea is grown, along with reduced profits for farmers due to increase costs for inputs such as fertilizer leading to less investment. The latter can be blamed on the fact that so many of the world’s currencies are expected to remain weak against the U.S. dollar.