CURRENT SITUATION AND
MEDIUM TERM OUTLOOK
20th Session FAO
Intergovernmental Group on
Tea – Colombo, Sri Lanka
30 Jan -1 Feb 2012
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HIGHLIGHTS
• World black tea prices remained firm in 2010 and 2011
as market fundamentals were strong.
• After long periods of sustained growth, black tea
production actually declined in 2009, and demand for
black tea exceeded supply.
• This trend continued in 2010 and 2011.
• As the FAO Tea Composite Price is an indicator price for
black tea, it followed that prices were firm throughout
2009 to 2011.
• Early forecast for 2012 indicates a continuation of this
trend as adverse weather has been experienced by
some major producers.
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WORLD TEA PRODUCTION
(Thousand tonnes)
4120
3600
3499
2004-06
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2006
and
2010
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PRODUCTION
• Growth in world output was due to major
recoveries in the two largest black tea exporting
countries: Kenya by 18 percent and Sri Lanka by
13 percent.
• Other notable increases occurred in Argentina
(23.5 percent) and Uganda (16.6 percent).
• China remained the largest producing country
with an output of 1.4 million tonnes, accounting
for 33 percent of the world total, while production
in India, the 2nd largest producer, continued to
decline and reached 0.97 million tonnes in 2010.
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WORLD TEA EXPORTS
(Thousand tonnes)
1677
1548
2004-06
Trade
1547
1615
2008
and
2009
Markets
2010
Division
WORLD TEA CONSUMPTION
(Thousand tonnes)
3364
3827
4043
3779
2004-06
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2008
and
2009
2010
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FAO TEA COMPOSITE PRICE
(USD/Kg)
3.30
3.10
2.90
2.70
2.50
2.30
2.10
1.90
1.70
1.50
Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec08
09
09
09
09
10
10
10
10
11
11
11
11
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Tea Production and
Trade to 2021
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PROJECTED BLACK TEA
PRODUCTION
(Thousand tonnes)
(growth rate 1.87% p.a.)
3286
2727
2011
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2021
and
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PROJECTED GREEN TEA PRODUCTION
(Thousand tonnes)
(growth rate 7.2% p.a.)
2604
1299
2011
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2021
and
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PROJECTED BLACK TEA
CONSUMPTION
(Thousand tonnes)
(Growth Rate 1.8 % p.a.)
3500
3000
2500
2000
3365
2792
1500
1000
500
0
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2011
and
2021
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PROJECTED BLACK TEA EXPORTS
(Thousand tonnes)
(Growth rate: 1.5 % p. a.)
1521
1295
2011
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2021
and
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PROJECTED GREEN TEA EXPORTS
(Thousand tonnes)
(Growth rate: 5.8 % p. a.)
516
295
2011
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2021
and
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CONCLUDING REMARKS
• The review of the world tea market indicates an improvement in
the fundamental oversupply situation which has persisted in
recent years underpinning current firm prices.
• The increase in tea prices resulted in an estimated 2.2 percent
increase in export earnings in 2011 at the global level,
significantly affecting rural incomes and household food security
in tea producing countries.
• In the context of food security, tea export earnings in 2009
account for about 36 percent of total agricultural export receipts
in Kenya and 62 percent of agricultural export revenue in Sri
Lanka. In addition, export earnings from tea paid for about 61
percent of Kenya’s food import bill, while in Sri Lanka tea
exports covered the country’s entire food import bill.
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CONCLUDING REMARKS
• The ratio was relatively small for other producing
countries, but remained significant. For example, even
though domestic consumption accounted for a larger
share of total production in Indonesia, export value in
2010 was USD178 million and in Tanzania tea exports
earned the country USD 48 million.
• In the medium term, the projections suggest that supply
and demand of black tea will be in equilibrium in 2021, at
a price of USD 2.75 per Kg, if there is no supply overreaction to the current firm prices.
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Baseline Tea Prices
(USD/Kg)
3.00
2.50
2.00
1.50
1.00
0.50
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
20
21
0.00
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Concluding Remarks
• However, if there is an over reaction to recent
high prices which, for example, would result in a
5 percent increase in production, the results can
be quite different. Here the clearing price would
be 17 percent less than the baseline price at
USD 2.54 per Kg.
• If the reaction to the current high prices is even
stronger, resulting in a say 10 percent increase
in production over the baseline increase, then
prices could be 38 percent lower.
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Scenario run: Large supply response
and impact on Tea prices
( 5 percent simulation)
(USD/Kg)
3.00
2.50
2.00
1.50
1.00
0.50
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21
20
19
20
17
20
15
20
13
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11
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09
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01
20
99
19
97
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95
19
93
19
91
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89
0.00
Division
Scenario run: Large supply response and
impact on Tea prices
( 10 percent simulation)
(USD/Kg)
3.00
2.50
2.00
1.50
1.00
0.50
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and
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21
20
19
20
17
20
15
20
13
20
11
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09
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07
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05
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03
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01
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99
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97
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95
19
93
19
91
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89
0.00
Division
Concluding Remarks
• Therefore, caution needs to be exercised.
Greater efforts should be directed at
expanding demand. For example, there is
scope for increasing per capita
consumption in producing countries as
they are low compared to traditional import
markets.
• The IGG on Tea has encouraged
diversification into other segments of the
market, such as organic tea.
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Concluding Remarks
• The health benefits of tea consumption
should be used more extensively in
promoting consumption in both producing and
importing countries.
• However, in targeting potential growth
markets, recognition of and compliance with
food safety and quality standards is essential.
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Thank you
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