STiR coffee and tea magazine

STiR coffee and tea 15 Source: International Tea Committee, courtesy Ian Gibbs. Source: International Tea Committee, courtesy Ian Gibbs. Colombo auction climbed from $3.51 per kilogram in January to a record $4.49 per kilo in September. Sri Lanka's supply gap and higher prices drove many buyers to source from India, pushing prices higher there. Elsewhere the trend is downward. Kenyan prices Prices at Kenya's Mombasa auction, the world's largest by volume, have steadily declined since 2018. In September 2021, Mombasa prices averaged $1.98 per kilogram, well below the cost of production. In 2022 so far, prices have declined by 8% despite a 14% fall in output by the Kenya Tea Development Agency (KTDA), which markets tea on behalf of the smallholders who produce 60% of Kenya's tea. Kenya exports 92% of its crop, amounting to 28% of the world's tea and earning $1.36 billion in sales in 2021. Peris Mudida, director of the Kenya Tea Board, said that tea production is growing by an average of 5.3% annually and that the country's 620,000 acres (250,000 hectares) under cultivation of tea are expanding by 4% per year. The steady increase in supply is one reason why Kenyan CTC sold for an average of $2.10 per kilogram at auction in 2021. The downward trend is also visible in the direct sale of tea. "China has really gone for production growth, but they are not exporting it," said Gibbs. Prices are one reason, as China's domestic consumers are willing to pay more for tea than consum- ers in export markets. In China in 2021, green tea prices averaged RMB152 (about $21 per kilogram). According to the China Tea Marketing Association, the price of green tea exported to the United States in August was down 9% to an average of $5.76 per kilogram. The Economist Intelligence Unit predicts that the average price of auctioned tea will decline by 4.5% to $2.90 in 2023 and remain low in 2024 due to economic downturns globally. Oversupply Production has more than doubled in the past 20 years to 6 billion kilograms, said Gibbs. Demand is closely tied to population growth, but the two billion people born since 2000 are only now beginning to purchase tea. In an expanding middle class, their parents account for the huge increase in apparent consumption per capita of 50 grams to an average of 800 grams per person. There is more land under cultivation of tea, and average yields have increased to 1,200–2,000 kilograms per hectare in leading tea-producing countries. Yet export volumes are flat. Gibbs explained that consumers in producing countries drink a lot more tea, making it less available for export. China and India consume 61% of the world's tea. Global tea exports totaled $7.3 billion in 2021, down by 9.4% since 2017, when they were at $8.1 billion. Market growth has slowed from 4–5% per year before the pandemic to around 2.5% today. Gibbs said that figures for tea consumption exceed figures for production in 2022, translating to a gap of approximately 350,000 metric tons. But that's on paper. In reality, there is a production surplus. "There's a lot of [excess] stock being held in producing countries," said Gibbs. "These teas are not being exported, which suggests there is a gap between consumption and production, and as the gap widens, the price of tea comes under huge pressure and goes dark," he said, citing lows of $0.98 per kilogram in Malawi and Bangladesh. "The more tea available in the market, the more difficult it is for producers to get the prices they want," Gibbs said. —Dan Bolton Tea Report

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