STiR coffee and tea magazine

34 STiR coffee and tea | 2023 Issue 5 (October / November) Subsidies Agricultural price minimums have tended to fail. Direct sup- port shows results, but it's costly. Programs that lead to im- proved quality and greater value are few. Programs focused on increasing supply invite disaster. Since 1977, Sri Lanka's Tea Small Holdings Develop- ment Authority has supported the sustainable development of 450,000 independent tea growers. Ramesh Pathirana, minister of plantation industries, said small tea growers now contribute around 77% of Sri Lanka's total production. The government is providing subsidies to the STGs. In 2021 growers were granted up to LKR 500,000 each for new plantings. The total area newly planted was 678 hectares. Replanting was also supported by grants of up to LKR 630,000 (about $2,000, based on LKR 100 per plant), which supported the renewal of 849 hectares. In 2020 Sri Lanka spent almost $500 million on fertilizer imports and subsidies, supplying tea growers with inputs criti- cal to the high yields essential to production at scale. In May 2021, however, the government suddenly halted synthetic fertil- izer imports and halted subsidies, which led to economic losses of $425 million in the tea sector. The import ban was reversed in November 2021, but tea production has not fully recovered. Focus on quality, not price ITC chair Ian Gibbs said consumers are paying much less than they should. Growers are producing far more tea than they should. Jem McDowall, vice president at Universal Commodi- ties in New York, said, "The pricing conundrum is indicative of over-production." "We have had a three-decade pursuit of eliminating excess costs from the supply chain, which has overshot and greatly reduced much of the value of tea — seasonality, variety, indi- viduality, etc. We have an increasingly homogeneous and com- moditized industry at both ends of the supply chain, with very little return for investment in tech, people, research, and devel- opment, new products, etc.," McDowall said. "The side effect of lower quality and yield-based strategies — producers, government, NGOs, and others all bear some responsibility — is that we also have massive oversupply. Some- where between 5% and 10% of internationally traded black tea," McDowall said. "And now that Pakistan and Egypt have eco- nomic difficulties, allied to declining Russian and U.K. usage, that excess quantity is potentially fatal for producers. Which, sadly, is maybe what the industry requires. Given the absence of government welfare and employment opportunities in some producing countries, that could be ex- tremely painful and traumatic." McDowall said, "To reverse the trend towards commoditi- zation will take a combined effort on all fronts: improved har- vesting and manufacturing standards by farmers and producers, with a much greater focus on quality and variety over quantity. This needs to be backed up by brands and retailers in marketing and selling tea as more than 'the cheapest beverage after water.' That outdated platform has been pivotal in achieving the cur- rent status quo. It needs to change." Compare the unit price of Lipton Yellow Label tea bags to Starbucks Pike Place coffee pods, two single-serve beverages of comparable status and quality that are widely sold around the planet. The world's best-selling tea retails for $0.07 a cup, just a fraction of the price of $1.16 for the cup of coffee. "Increasing the retail price of a teabag from, say, 7 to 14 cents doesn't even register to the average Western consumer, but it could feed, house, and educate a lot of people back up the chain," McDowall concluded. TEA BAG MACHINERY FOR IMMEDIATE SALE ACMA T-2 ACMA T-4 ACMA T-10 IMA C-2000 IMA C-23 All in running condition & presently in Production lines Contact PCL Solutions (Pvt) Ltd. Tel: +94 772 342741 & +94 777 761704 thushantha.karunanayake@pclsolutions.lk chappel.fernando@pclsolutions.lk Production has been rising fast in Bangladesh and Africa. Exports have not grown as much as production, reflecting growth in consumption in producer countries.

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