The tea market Essay

I. INTRODUCTION/ HISTORY

The tea market is dominated by five states. Kenya. Sri Lanka. China. India and Indonesia. which export about 80 % of the universe tea. Apart from China. the remainder chiefly produce black tea. In 2004. the world’s net import of tea was 1. 42 million metric tons. out of which 1. 17 million metric tons ( 82 % ) was black tea ( Anonymous. 2000-2003 ) . In contrary. the growing rate in universe black tea ingestion was reduced to 2. 2 % during 1993-2003 ( FAO. 2005 ) .

The instability state of affairs between the degree of demand and supply of tea is a large menace for the tea bring forthing states. due to worsen in monetary values. Similarly. the down monetary value state of affairs has been intensified in Kenyan tea industry due to high production cost ( Gesimba et al. . 2005 ) . The impact was besides tremendous on monetary value recovery of Indian tea traded through auction and was governing below the cost of production ( Anonymous. 1998 ) . Previous surveies revealed that diminution in tea monetary value had negative impact on tea industry in Sri Lanka chiefly due to dirty debasement and hapless productiveness ( Iqbal et al. . 2006 ) . In Indonesia. the market monetary value state of affairs affected the income degree of smallholders drastically. which constitutes the largest sector of tea industry ( Yuliando and Nakayasu. 2006 ) .

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All authorities of tea exporting states programs and policies recognize that tea is an of import export trade good and that it has high potencies to lend to national income. employment and environment protection. Teas. from the camelia genus. come in two chief classs: orthodox/green ( foliage ) tea and black tea/CTC tea. The former is produced in the hills for export and is available merely in limited measures. while the CTC tea produced in the urban countries is largely for domestic ingestion.

Having examined the ingestion and production links that set the demand and supply tendency of tea. United Nations Food and Agriculture Organization ( UNIFAO ) declared a deficit of tea in 2008. Demand for tea of 3. 85 million metric tons but with merely 3. 78 million metric tons of production suggests a deficit. Detecting the scenario from 2007 excess traveling to successive year’s deficit. it seems that this deficit could travel up until future old ages.

The analyses show that tea agriculture and fabrication is competitory and there are of import direct and indirect benefits from tea turning. Yet. the country devoted to tea production is still really little due to some structural restraints and policy anomalousnesss that need to be addressed for the growing of the sector. The supply-side restraints ( non holding adequate excesss or inability to spread out production ) for assorted grounds. natural. man-made and deficiency of fight in the international market ( cost and quality ) or due to structural and policy grounds and barriers to merchandise and in this instance. drouth – that hit hard the major bring forthing states of tea which are Kenya. Sri Lanka and India in 2007.

Furthermore. such instance has soared the monetary value of tea. mentioning the difference between 2007 and 2008 nose count of mean monetary value of tea. Kenya’s tea board reflects about a 3rd higher per kilogram footing of tea demoing US $ 2. 33/kg compared to 2007’s US $ 1. 76/kg. This has caused the more expensive black tea to leap to a record of US $ 2. 70 last August. 2008.

It is. hence necessary to take appropriate steps to better the current monetary value degree. A supply direction is considered as a key to act upon the market monetary value. Chiefly. it is an accommodation to suit the degree of supply and demand at certain monetary value end. The aim of this survey was to analyse a supply direction option for tea bring forthing states in order to better the monetary value degree.

II. STATEMENTS OF THE PROBLEM

I. How would the tea shapers respond when the demand for tea exceeded its supply?
two. How could the manufacturers of tea maximise its exports?
three. What can we replace and how does it impact when there is an increased monetary value of tea?

III. ALTERNATIVE COURSES OF ACTION

I. Tea industry are profoundly divided over programs to hike net incomes by importing cheaper foliages for intermixing and re-export. over fears the alterations could H2O down the pure trade name. Sri Lanka for illustration. who has been a taking exporter of the trade good. but now a subdivision of the tea industry wants to import foliages from states such as Kenya. Vietnam and Indonesia and intermix them with higher quality local green goods.

It has been argued that Sri Lanka could about duplicate its exports of 300 million kgs ( 660 million lbs ) yearly by taking a ‘realistic’ position of the universe market and intermixing its tea with cheaper imports. Sri Lanka does non presently let unrestricted tea imports for intermixing. They argue that the high quality and the correspondingly high monetary values have placed ‘pure Ceylon tea’ beyond the range of the moneymaking mass market. even if the industry enjoys an enviable trade name repute. Sri Lanka’s stance prompted Unilever to drop programs in the late ninetiess for a mill in Sri Lanka and it alternatively set up its Lipton tea sacking works in Dubai where they blend teas from East Africa and Asia — including Sri Lanka. The mill presently produces 1. 1 million bags of tea an hr and is set to be the world’s biggest works by 2015.

Sri Lanka’s export anteroom argues that the country’s refusal to import foliages is merely assisting to farther set up Dubai as a tea hub. As things stand. 1000000s of kgs of Sri Lanka tea are blended abroad and many argue that the island could hold better control over the merchandise if the blending were done at place.

two. Through liberalisation. the exports of value-added teas can be maximized. given the proviso of cheaper traditional teas used for blending. which enable exporters to cut down the FOB monetary value of their teas. The usage of foreign teas for intermixing will authorise manufacturers to command for fluctuations in agro-climatic conditions which affect the quality consistence of locally grown teas. This consistence in green goods will increase the trade name ability of the value-added exports. therefore increasing competitiveness amongst brand-conscious consumers who seem to do up the bulk of the planetary market.

Besides. liberalisation of imports would take to increasing the export of value-added teas which will ensue in a figure of extra benefits to the society. These include greater employment. increased foreign exchange and the potency of beef uping industrial bunchs in the economic system via forward and backward integrating.

From the corporate sector’s point of position. plantations may be able to put more into their CSR plans. increasing the overall public assistance of hapless plantation workers. while cut downing the demand for authorities intercession in rewards. Higher net income borders will besides let the corporate sector to put
in heightening their production and efficiency.

three. When the turning demand and short supply of teas continues. monetary value will be unsettled. However. due to a good crop twelvemonth. monetary values of alternate goods were able to diminish. Tea lovers would likely switch to those merchandises. One of the replacement trade goods that can be switched from tea is java which is found to be of the same rate to tea.

Tea and Coffee workss are members of the evergreen household. If allowed to turn of course. both would develop into reasonably big trees. But both workss are kept trimmed to the tallness of a bush. so they can be manageably harvested. Both workss produce a drink whose spirit is subtly affected by the turning conditions. such as dirt status. wet. environing flora. etc. Both Coffee and Tea have been of course imparted with a chemical that provides stimulation and caffeine. Besides. both drinks come from dried versions of a portion of the works. Finally. both use really similar methods of readying.

In consequence of this. people will exchange from teas to java ( due to a cheaper monetary value ) . and therefore. increasing the measure supplied and demanded of java while diminishing the measure supplied and demanded of tea.

IV. ANALYSIS/ CONCLUSION

We. hence conclude that the increased monetary value of tea is due to the higher demand than the supply. Harmonizing to the Economic Help net site. tea is considered an inelastic consumable good – wherein the demand is non entirely dictated by economic downswings and even as monetary values for tea ascent. consumers continue to buy it because they perceived the tea as a necessity. Additionally. because tea is non viewed as a luxury point. many consumers will really purchase more tea in stead of luxury drinks such as sodium carbonate and java. With the demand for tea already on the rise. this form is coercing demand to mount even higher. And because tea does non follow the normal form of other luxuries. the manufacturers and makers do non follow the same tendencies that other luxury manufacturers follow – such as take downing monetary values or offering nest eggs in an effort to go on pulling consumers to their merchandise. In fact. recent studies suggest that the monetary values for tea will go on to lift over the following three to four old ages.

Supply for tea is besides falling as the countries that produce tea autumn under conditions extremes and drouths – destructing the tea harvests. Tea production is non easy increased to run into demands in a short sum of clip. This means that the drouths that continue to hit India. Sri Lanka and Kenya can and hold done much more harm to tea production in the long tally because there is truly no manner to work around these hurdlings and maintain production degrees the same.

And while conditions forms are get downing to return to normal for those major tea manufacturers. monetary values are non expected to drop. This is due to how long it will take for tea production to return to normal degrees. Even with conditions forms are favourable and manufacturers have good harvests. tea manufacturers claim that they will still non be able to run into the turning demand for tea. In such instance. consumer’s purchasing penchants may alter. They may look for much cheaper alternate goods that can be switched from tea. which is java.

V. RECOMMENDATION

Tea monetary value is so a trade good of great demand over the old ages of exposure in the market. The sensitiveness of the consumers to their personal wellness and wellbeing creates an tremendous hiking in the call for the handiness of such in the constituted trading topographic points. In stead to this. the job on the market monetary value of tea taken by its unresponsive supply to the turning demand of the market aroused.

Major tea bring forthing states are holding a difficult clip to continue the supply of the tea because of changing grounds like drouths and other environmental causes. In deciding the job. the demand to believe of more feasible ways to market the limitedly supplied tea in the market becomes a precedence. The demand to develop alternate agencies of cropping tea foliages should surely be considered every bit good for the long tally facet of the industry’s sustainability.

The supply is decidedly of no confidence for tea manufacturers because of several factors. In this instance. the selling attempts of the distributers should be aimed at doing the consumers buy despite the high pricing for tea. It may be positioned as a herbal detoxifier or any other wellness auxiliary merchandise whereas paying of rather much is ne’er an issue.

On the other manus. the culturing of tea bushs that could defy the environmental tests should be of precedency to ease and turn to the deficit in the market. Through the inflow of biotechnology. the terminals focused on the improved planting of tea bush is non excessively far from realisation.

Coffee as an option is viably a resort for unsated consumers. In this note. the permutation consequence could attest and do a declined ingestion of tea. It is an chance for the tea agriculturists to see the option of capitalising to coffee. if a better planting opportunity is possible. to retrieve their market portion lost.

Tea pricing policies should be similarly monitored non to let farther instability in the market place to thrive due to irrational fluctuations in the monetary value. The monetary value must be attained at the lowest possible degree. as the considerations would let and non inflicting losingss to the concerns and agriculturists. to keep the trueness of the devouring populace.

VI. BIBLIOGRAPHY

hypertext transfer protocol: //www. diffen. com/difference/Coffee_vs_Tea

hypertext transfer protocol: //www. oup. com/uk/orc/bin/9780199565184/9780199565184_ch05. pdf

hypertext transfer protocol: //www. worthpublishers. com/Catalog/uploadedFiles/Content/Worth/Product/About/Look_Inside/Krugman. _Micro_in_Mods_2e/KrugMicro2eMods_Mod07. pdf

hypertext transfer protocol: //www. dailymirror. lk/business/features/21673-uncertainty-in-sri-lankan-tea-business-continues. hypertext markup language

hypertext transfer protocol: //scialert. net/fulltext/ ? doi=jas. 2006. 3170. 3173 & A ; org=11

hypertext transfer protocol: //www. He. com/items/1957504-why-tea-prices-may-be-rising

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