STiR coffee and tea magazine

30 STiR coffee and tea | 2023 Issue 5 (October / November) T By Dan Bolton he world's black tea supply chain is out of balance. Suppliers are earning flat or falling prices even when production declines. Yet their costs are rising. Meager prices threaten the industry's long-term sustainability. Ensuring fair farmgate prices for raw leaf would remedy many of the problems. With this in mind, governments, growers, and processors are working to combat low prices in three ways: price minimums, price sharing, and quality improvement. But prospects are uncertain. Price volatility One problem is the unusual volatility that has been affecting black tea prices in recent years. Tea prices generally rise during production shortfalls, as was evident in 2022. Auction prices at the Kolkata, Colom- bo, and Mombasa auctions averaged $3 per kilogram despite a sharp decline in Kenya prices, according to the Economist Intelligence Unit (EIU). Average tea prices at Kenya's Mombasa auction were $1.97 per kg in 2021 and $1.93 in 2020, which are levels below the cost of production. In Sri Lanka, the average price at auction fell to $3.24 per kg in June 2023, far below the high of $4.49 per kg last September. Export prices for orthodox processed teas averaged $5.10 per kg in 2022, an all- time high, according to the Tea Exporters Association of Sri Lanka (TEA). India's average auction prices year-to-date are also down as much as Rs 100 ($1.21) per kg for orthodox tea and Rs 18 ($0.22) per kg for CTC (cut, tear, curl) from Assam. Prices during the first half of 2023 aver- aged Rs 242 ($2.95 per kg) compared to Rs 257 ($3.13 per kg) during the same period in 2022, according to the Tea Board of India. The supply-demand equilibrium is out of balance, unsteadied by a combination of oversupply, tepid demand, adverse weather, and unusual circumstances along tea's value chain. Black Tea Prices: Red Ink Drowns Growers Oversupply in the black tea value chain, especially in India and Kenya, is suppressing prices even as production costs rise. "This is the first time that the crop is down, and prices are also down, especially in the Darjeeling and the Dooars regions." — Atul Asthana Managing Director & CEO Goodricke Group When adjusted for inflation, tea prices have risen little if any since 2001. Growth in production has overshot consumption growth, creating oversupply. Source: International Tea Committee

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