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Market Reseaech
World Tea- The Current Situation
Production

World tea production in the last decade has grown at an yearly rate of 1.81 percent until 1999 and consumption has kept pace at a slightly higher growth rate of 2.05 percent per annum. However global consumption has consistently been significantly less than production.

World tea production has been dominated by India where output peaked at over 870000 tonnes in 1998. The second largest producer is China with its highest output also recorded in 1998 when its production reached 665000 tonnes. Kenya follows at a distant third at 294200 tonnes, and Sri Lanka at 280100 tonnes. Indonesia, Argentina and Bangladesh follows as fifth, sixth and seventh respectively.

Preliminary estimates available to FAO indicate that world tea production in 1999 declined down from a record 1998 output of nearly 3 mn tonnes to 3.7 mn tonnes. Smaller crops were harvested in all major producing countries, except China and Sri Lanka, as unfavorable weather affected yields in Bangladesh, Indonesia and Kenya.

Draught from January to May 1999   in Bangladesh followed by heavy rains and flooding from June to August' 1999, resulted in an 18% decline in production. In India, a severe draught in the North Eastern state of Assam, main tea growing region, accounted for a 7% decline in output and in Indonesia, adverse weather coupled with political uncertainties early in the year contributed to 8% reduction. In kenya, after a record expansion in output of more than 33% in 1998. Cold weather in tea growing areas reduced harvests in 1999 by more than 15%. Production in Malawi and Tanzania declined by 5% each, while output in China, Argentina and Japan remained at similar levels in 1998. Unfavorable weather and lower grower prices in Sri Lanka contributed to a reduction in harvests in that country in the first eight months of 1999. However, higher prices lead to a production boost in the final quarter of the year. Pruning carried out during the period of lower prices by small holders enhanced yields and output increased by just over one percent.

Exports

World tea exports have grown by almost two percent over the last decade. Sri Lanka is the largest exporter followed by Kenya, China and India as second, third and fourth respectively. World export data available  to FAO covers trade to the end of 1998. In that year global exports expanded by more than 7%, compared to 1997, to reach 1.27 mn tonnes. The increase mainly reflected a 32% price in shipments from kenys, where exports reached a record level for that conuntry of 263000 tonnes. Sri Lanka shipped a record 265000 tonnes in 1998, 3% more thn inn 1997, exports in Chine recoverd in thesde markets in 1998. Exports from India in 1998 sustaines a significant export volumes previously in 1997.

Imports

World imports grew yearly at 1.2% over the lasdt decade. United kingdom was the largest Importer until 1997 and the CIS surpassed its imports. Pakistan is the third largest importing country followed by the United States, Egypt and Japan.

In 1998, world tea impose rose by 2.4 percent compared to volumes in 1997, with most of the growth occurring in developing countries, mainly Pakistan where the demand expanded by 28%. Significant growth was also experienced in the United States, as imports expanded by 19%in1998, potential attributable to the impact of consumer promotion of the health benefits of tea consumption in that country. However the expansion was not sufficient to offset declines in other developed countries, such as the 4% decline in the EC and 5% percent in the Russian Federation. A marked trend in recent years has been the shift in demand towards the import of quality teas, not only in mature markets such as the Unite Kingdom and the Russian Federation, but also in the rst of the Europe and North America.

Prices

The price of bulk tea generally declined in al; auction markets in the first half of 1999. due to forecast larger crops in major producing countries and weaker demand in the Russian Federation. However, prices recovered as revised production estimates indicated lower harvests. The FAO composite price trend for tea ( a weighted average price of tea traded in major auction markets of Kenya, India, Sri Lanka) indicated a sustained price decline in the first half of 1999, from an average of US 166 cents to US 161 cents per kg. However, in the third quarter prices recovered by 11 percent to US 178 cents per kg. Prices further improved in the fourth quarter and averages US 183 cents per kg up 3% from previous quarter.

Medium Term Developments

Previous efforts at improving prices were production oriented, and focused mainly on reducing the cost of production and in creasing yields. But the more attention was needed at a market place where demand had remained sluggish or had shown declining trend in some  traditional markets. This led shifted the focus on increasing demand through Research on Health benefits of Black Tea Consumption.

One of the most tangible and immediate benefits of this approach has been the creation of the "Tea Mark".

Production

The release of some of the positive findings have begun to stimulte consumption in several market, notably in North America. These developments have also been taken into account when revising its projection which are as follows.

World black tea production is prepared to reach 3.1 mn tonnes by 2005, an annual average growth rate of 3 percent from the 1993-95 base period. Production in India is estimated at 1.15 mn tonnees in 2005. Nost of the envisaged increase in Sri Lanka should result from recent economic reforms and the national plan for tea production expansion. Production by 2005 is projected to reach 300000 tonnes. China and Indonesia would increase black tea production180000 tonnes and 105100 tonnes  to 280000 tonnes and 180000 tonns respectively. Output of tea in Bangladesh would grow to about 60000 tonnes in 2005. And in Africxan countries, increase in plantation area as well as productivity are likely to support the growth in production.]

Consumption

World black tea consumption is projected to increase by 3% pr annum to 3.0 million tonnes by 2005, with developing countries accounting for the largest part of the perspective increase. Consumption in these countries would reach 2.15 mn tonnes by 2005, an annual growth rate of more than 3 percent.

Black tea consumption in India is expected to reach 820000 tonnes by 2005. In other major markets for black tea such as Pakistan, Iran and Egypt, consumption is expected to reach 170000 tonnes, 130000 tonnes, and 100000 tonnes respectively by 2005. The reduction in import tariffs and declining prices could have a more pronounced effect on the consumption in these countries.

In developed countries including countries in transition, black tea consumption would increase more moderately to 850000 tonnes in 2005.Consumption in European Community is projected to increase only slightly in th next decade since higher purchases by France, Italy, Germany and the Netherlands would be counterbalanced by a continuing decline in the United Kingdom. Silmilarly consumption in the United State of America is projected to increase at a relatively low rate of less than one percent., while in the CIS a stronger growth consumption rate of nearly 5 percent is projected to increase consumption to 250000 tonnes in 2005.

Imports

Import requirements at 2005 are projected at 1.55 mn tonnes, an average annual increase of 3.6 percent from the base period average. Import requirements by developed countries is projected to increase to 700000 tonnes. Major importers would be the CIS, Pakistan, the United Kingdom, the United States and Egypt which would account for 51 percent of total import requirements.

Exports

Export availabilities are projected to reach 1.6 million tonnes in 2005, an average annual increase of 3.8 percent from the actual exports during the base period. China, India, Indonesia, Sri Lanka and Kenya are expected to account for 78% of the total projected export availabilities. The balance would largely be sourced from Bangladesh, Malawi, Tanzania, Turkey and Zimbabwe, where export availabilities are expected to increase significantly over the medium term.


Excerpts of the statement by Mr. Kaisan Chang, Secretary of the FAO Intergovernmental Group on Tea at India International Millennium Tea Convention held in New Delhi (22-24 March, 2000)

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