Tea Prices Explained
Tea prices continue to decline as the market experiences plenty of output from producing countries. India ( the 3rd-largest tea exporter ) faces a decrease in its auction prices. Additionally, Indian farmers suffer increasing production costs which diminish their profits.
The healthy production offsets the global tea demand. Furthermore, a growing number of small tea growers contributes to surplus inventory.
Why are tea prices fluctuating?
1. Weather Conditions
Most of the tea-producing countries are from the Asian continent which is a favorite hub of strong typhoons from the Pacific Ocean. Needless to say, weather condition greatly impacts tea quality, production, and prices.
2. Supply and Demand
The growing demand for tea due to health concerns and fad diets comes as a new price driver of tea. The U.S. market sees a 5% growth in demand for tea since 2022 and this will likely increase in the coming years.
3. Input Costs
Labor, transportation, packaging, and fertilizer are the farmers’ price determiners before trading them to their suppliers. Thus, these underlying factors first steer tea prices.
4. Tea Quality
Quality is the grading price of tea in the international market. A premium-quality tea marks high prices however, low-quality tea indicates low prices.
5. Renewing of International Trade
China’s announcement to fully mobilize its international trade at the start of the year 2023 means that full tea production is coming for this year and the next years.
The country tops as the number 1 tea producer with a yearly 40% average production of its global supply. The reopening of its economy increases market profitability. However, this may be cut short as the country currently experiences economic deflation.
Thus, consumer’s disposable spending largely affects tea prices.
Which variables impact the price of tea?
- Weather Conditions
- Supply and Demand
- Input Costs
- Tea Quality
- Renewing of International Trade
- Currency Exchange Rates
- Government Regulation and Taxes
Where does tea come from?
Tea originated in China over 5,000 years ago. The discovery of this refreshing delight is ”accidental and legendary” according to some Chinese scholars.
It is believed that the Chinese Emperor Shen Nong first discovered tea when tea leaves blew and settled into his boiling water while sitting under the tea tree.
The emperor tasted the brew and was happy with the result. This marked the integration of tea into Chinese culture.
Tea spread in Western soil and culture specifically in England through the establishment of the East India Company, a trading body that bought large quantities of Oriental products including tea to Europe in the 17th century.
Generally, tea plants are planted in the spring, after the last frost passed. The ideal temperature for planting tea is between 65 and 75 degrees Fahrenheit.
Normally, the required planting climate for tea is warm and humid conditions.
Tea leaves are harvested throughout the growing season. This typically lasts from March to November. Additionally, the number of harvests per year varies depending on the climate and the type of tea being grown.
For example, tea plants in tropical climates are harvested up to four times per year while tea plants in temperate climates are harvested two to three times per year.
The first harvest is the highest quality as the leaves are young and tender. The quality of the tea declines with each subsequent harvest as the leaves become older and tougher.
After harvesting, they are processed into tea. There are several different tea processing methods:
1. Withering – The tea leaves are dried, to reduce their moisture content.
2. Rolling – This involves rolling the leaves to break down the cell walls and release the tea’s flavor.
3. Oxidation – The tea leaves are fermented to develop their flavor.
4. Firing – The tea leaves are fired to stop the oxidation process and preserve the tea’s flavor.
Additionally, these are the top favored tea varieties around the globe:
1. Ceylon Black Tea in Sri Lanka
2. Darjeeling Tea in India
3. Black Tea in China
4. Green Tea in China
5. Pu Erh in China
6. Matcha in Japan
7. Oolong Tea in China
8. White Tea in China
9. English Breakfast Tea in England
10. Sencha in Japan
Today, the majority of this relaxing drink comes from China, India, Kenya, Sri Lanka, and Turkey.
What is the future price of tea?
The Asian inflation, particularly in Japan and India, and tea surplus inventories largely affect the commodity’s marketability. Additionally, China’s slide into deflation put pressure on tea’s Asian market loss.
Furthermore, the declining demand from Russia, the United Arab Emirates, and Iran contributed to its southward trend. Thus, this highly affected tea prices on a global scale.
Overall, the global tea market is expected to reach $148.16 billion by 2030, growing at a CAGR of 6.4% from 2023 to 2030 due to the increasing demand for healthy beverages, growing awareness of the health benefits of tea, and rising disposable incomes.
Therefore, based on these factors, here are the tea price estimates in 2030 per kilogram:
- Black tea: $5-$8
- Green tea: $8-$12
- Oolong tea: $12-$15
- White tea: $15-$20