STiR coffee and tea magazine

40 STiR coffee and tea | 2024 Issue 3 (June / July) By Dan Bolton Unusually persistent oversupply poses a grave long-term threat as stagnant wholesale prices discourage investment and increase financial risk along the tea supply chain. Soft Commodities Are Notoriously Volatile eather patterns highly influence short-term availability, which has recently been aggravated by uncertainties arising from climate change. Periods of oversupply are traditionally short-lived partly because of natural disasters, from unprecedented deluges that cause flooding and landslides to heatwaves and droughts that lower yield. Tea rebounds quickly in times of scarcity—too quickly, it appears, as rising stocks of black tea have created a price-paralyzing surplus in Kenya and other bulk black tea- growing countries. This report focuses on black tea exporters but points to some troubling trends. The quantity of black tea exported to the US is in decline. The US is the world's most important tea importer by value, but growth in the specialty beverage category is in coffee and herbal infusions in the US and UK. No one can do much about the weather, but they can influence demand. Global tea consumption has risen steadily for decades, and according to the United Nations Food and Agriculture Organization (FAO), it is expected to continue at a projected 2% growth rate through 2030. Tea's compound annual growth rate (CAGR) is currently 2.74%, driven mainly by increasing affluence, expanding population, and rising health awareness, illustrated by the double-digit spike in sales during the Covid-19 pandemic when relieving stress and fear led to health and wellness beverage preferences that favored tea. Coffee consumption globally has a CAGR of 1.47% over the past 60 years. The United States and Europe are the primary consumers, drinking an estimated 10 million metric tons annually. Emerging Asian markets, including China, India, South Korea, and Japan, are accelerating demand. Market expansion is comparable, but there is a big gap in price growth between coffee and tea. The price of coffee has increased by an average of 2.4% per year over the past 60 years. Cocoa prices rose 2.83% during that same period. Tea prices have been static for 15 years. The wholesale price paid for tea has roughly doubled from $1- $2 per kilo in the 1960s to $2.75 per kilo in the 2020s. Tea is the lagging outlier among soft commodities. Restoring price growth will mean adding value, cutting production, increasing demand, or combining all three. Too Much Tea Why is economic disequilibrium in global black tea markets the rule, not the exception? W

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