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Tea

Introduction

The production and trade projections presented in this sectionare derived from a dynamic times series model of the world tea market. Thismodel quantifies key market relationships on the basis of observations on thepast behaviour of volumes produced and traded, prices, and population and incomegrowth. This projection methodology is a development of a former one used toprovide projections for the FAO Intergovernmental Group meetings. By exploitingadditional information concerning the economics of market behaviour, the revisedmethodology should provide a sounder basis for projections, and allow a widerrange of alternative scenarios to be explored.

The projections presented here also include a first attempt atproviding separate results for black and green tea. While the differences indemand and price trends make this a useful distinction, data limitations meanthat the analysis of green tea markets is less detailed.

Black tea production

World black tea production is projected to increase to 2.4million tonnes in 2010, an annual average growth rate of 1.2 percent from 2.15million tonnes in 2000. This growth would result largely from the improvement inyields.

Most African producers are likely to see significantproduction growth as tea bushes reach optimum production age, and productionskills of small growers improve. For example, production in Kenya would grow by2.3 percent a year from 236 300 tonnes in 2000 to 304 000 tonnes in 2010, whilegrowth rates in Tanzania and Uganda are expected to be 1.7 percent and 2.7percent, respectively.^[15]

Most producers in Asia would experience a steady growth inproduction. Indonesia is expected to achieve an annual growth of1.1percent, from 130 600 tonnes in 2000 to 147 000 tonnes in 2010. Over the sameperiod, production in India, the world’s largest black tea producingcountry, is projected to grow by 2.5 percent to 1.07 million tonnes, accountingfor nearly 44 percent of global production, compared to 38 percent in 2000. Teaproduction in Sri Lanka is projected to reach 329 000 tonnes by 2010, an annualaverage growth rate of 0.7 percent. Black tea production in China is expected tocontinue to decline to 54 000 tonnes as the balance of production shifts toother teas with stronger market prospects.

The three largest black tea producing countries, India, Kenyaand Sri Lanka, are expected to account for 70 percent of the world teaproduction in 2010, compared to 63 percent in 2000.

Black tea exports

World black tea exports in 2010 are projected at 1.14 milliontonnes, reflecting an average annual increase of 1.1 percent from 1 milliontonnes in 2000.

Most of this increase would take place in Africa, whereproduction is likely to continue to grow while domestic consumption remainssmall. Exports from Kenya would increase by 2.6 percent annually from 208 200tonnes in 2000 to 275 000 tonnes in 2010, giving Kenya 32 percent of globalexports. Over the same period, export availability in Malawi would remainunchanged at 38 000 tonnes.

Most major tea exporting countries in Asia are expected toexperience slight declines in exports in line with expected growth in income andpopulation that would foster domestic consumption. For example, exports fromIndia and Indonesia would decrease by 2.4 percent to 150 890 tonnes and by 1.1percent to 87 000 tonnes, respectively. Conversely, exports from Sri Lanka wouldincrease from 281 000 tonnes to 293 400 tonnes, an annual average growth rate of0.4 percent.

Black tea consumption

In 2010 world net imports of black tea, a proxy forconsumption, would amount to 1.15 million tonnes, reflecting an average annualincrease of 0.6 percent from 1.08 million tonnes in 2000. Net imports in thecountries of the former Soviet Union would increase from 223 600 tonnes to 315200 tonnes, an annual average growth rate of 3 percent. Pakistan would increaseits net imports by 2.9 percent per year from 109 400 tonnes to 150 000 tonnes.The United States is expected to increase net imports by 1.4 percent a year to94 300 tonnes, while Japan would increase its net imports from 18 000 to 22 000tonnes, an annual average growth rate of 1.8 percent. On the contrary, netimports by the United Kingdom are expected to decrease by 0.6 percent annuallyto 125 500 tonnes. These major importers together would account for about 60percent of global net imports.

The model does not take into account stock levels. Hence, thedifference between production and exports is treated as a proxy for domesticconsumption in producing countries. In 2010, the quantity of black teaproduction that would be consumed in these countries is expected to reach 1.27million tonnes, or 52 percent of global black tea production, compared to 1.14million tonnes in 2000. Domestic consumption of black tea in India is expectedto increase by an average annual rate of 3.7 percent to 919 300 tonnes by 2010,or 86 percent of the black tea produced in the country. During the same period,Indonesia is expected to increase its domestic consumption at an average annualrate of 4.0 percent from 33 100 tonnes to 51 000 tonnes. Domestic consumption inBangladesh and Sri Lanka would grow by 2.0 percent and 3.8 percent to reach 45000 tonnes and 36 000 tonnes, respectively.

Green tea market trends

Projections for green tea are provided only for production andexports due to data limitations. World green tea production is forecast toincrease from 680 700 tonnes in 2000 to 900 000 tonnes in 2010, reflecting anannual average growth rate of 2.6 percent. During this period, production inChina would grow by 2.7 percent per annum from 500 000 tonnes to 671 000 tonnes,accounting for 75 percent of global green tea production in 2010, compared to73.5 percent in 2000. Production in Japan would grow by an average rate of 0.1percent to 90 800 tonnes, while production in Viet Nam is expected to increaseby an average rate of 2.5 percent to 50 000 tonnes. Output in Indonesia wouldgrow by 2.3 percent annually to reach 49 000 tonnes.

Green tea exports are expected to exhibit a significant upwardtrend in keeping with production. Total exports would increase by 2.8 percentannually from 186 800 tonnes in 2000 to 254 000 tonnes in 2010. China wouldcontinue to be the world’s dominant green tea exporter, with shipmentsreaching 210 000 tonnes by 2010, reflecting an annual average growth rate of 2.7percent. During the same period, exports from Indonesia are expected to increaseby 3.8 percent per annum to 12 000 tonnes, while exports from Viet Nam wouldincrease by 2.5 percent a year to 25 000 tonnes. Japan would consume most of itsdomestic production.

Morocco, the world’s leading green tea importer, isexpected to increase imports from 35 200 tonnes in 2000 to 57 100 tonnes in2010, an annual average growth rate of 4.5 percent.

Issues and uncertainties

The projections indicate that over the next decade exports ofblack tea would increase at an annual growth rate of a little over one percent,mirroring a similar growth in production. However, the world market is expectedto remain broadly in balance. In consequence, price levels should bemaintained.

In contrast, with consumption outstripping the production ofgreen tea, an upward trend would persist in the medium-term.

Several actions can be taken to enhance returns from black teaproduction. On the supply side, by reducing unit costs through productivitygains, building capacity of small growers, streamlining marketing channels andimproving infrastructure, improved returns to growers may result.

On the demand side, consumption can be raised througheffective marketing. Variations in demand among countries suggest that marketingactivities need to be tailored to individual markets. Successful market-specificactivities require in-depth knowledge and understanding of the target market,including consumers’ preference and market structures. In addition,worldwide marketing efforts, such as the generic promotion of tea using the TeaMark, could have a significant impact, if planned and implementedappropriately.

It is important that any action taken is done holistically toimprove longer-term price prospects. Forming such a strategy requires betterunderstanding of markets. Exchanging information and views between producers andconsumers, as well as public and private sectors, could promote greater markettransparency.

Table 2.32. Black tea: actual and projected production

Table 2.33. Black tea: actual and projected exports

Table 2.34. Black tea: actual and projected consumption

^1/ Net imports plus domesticconsumption
^2/ Production minus exports

Table 2.35. Green tea: actual and projected production and exports