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Argentina: tea and coffee report.

Farming is one of the mainstays of the Argentine economy and the various activities developed around it constitute more than 35% of the gross domestic product. Over the last two decades, an average of 75% of Argentina's exports has come from this agro-industrial sector, one of which is tea.

Exports of Argentine tea began in 1958 with 176,571 kilos; by 1990, this amounted to a record 45,965 metric tons at an FOB price of US$35,673,252 according to figures released by the Argentine Tea Association. Export figures for the first seven months of 1991 show 23,499 tons at US$18,329,333. Industry analysts are quick to point out that these figures reflect exports of the previous season's stock; the recent 45% drop in production will be noticeable in future export figures.

The U.S. imported 16,828 tons of the total 1990 tea exports followed by Chile with 8,047 tons and the Low Countries with 4,715 tons. Germany imported 6,278 tons The same trend continued into 1991 with the U.S. importing 10,585 tons in the first seven months of 1991, followed by Chile with 5,287 tons; Argentina is regarded as a cheap source of off-grade tea.

Tea is grown in the northeastern corner of Argentina, where until recently it constituted an important part of the regional economy. A 1937 census showed only 13 hectares of tea but from 1943 the expansion in the area under cultivation began. In 1949/50 a real "tea fever" began and by 1964, 32,000 hectares were under cultivation which, by 1984, had climbed to 40,000 hectares of which 85% were worked. Total yields, until recently, averaged up to 41,000tons annually.

Over the last two years however, tea production in Argentina, the U.S.' largest supplier, has declined dramatically. It has dropped to its lowest level in the last 10 years and second lowest since 1973. "If the 1990/91 season was terrible with a drop of 45% to 27,000 tons, the 1991/92 season is disastrous with an anticipated 25,000 tons if we're lucky," commented Antonio Fernandez, president of Casa Fuentes, Argentina's largest tea producer and exporter. "The fundamental problem is the high cost of production against low sales price."

Although the economy stabilized and inflation dropped dramatically in 1991 with the introduction of policies of convertibility, deregulation and privatization, production costs have soared in relation to producer prices. Tea producers and exporters, whose costs are measured in dollars terms, have been hard hit by an overvalued peso. The peso, a new currency replacing the austral, went into circulation on January 1st, 1992. The peso has four less zeros than the austral and a one-to-one parity with the U.S. dollar. Many exporters feel the peso is being artificially maintained at 25% to 30% above its real value.

The average price being paid for green leaf is 5 cents per kilo. Producer prices are linked to export prices which average 85 cents a kilo for main grades.

Yields are around 6,000 kg a hectare. One hectare grosses $300 per hectare annually on production units averaging 5-6 hectares. As a result of such low returns, many producers are not even bothering to harvest their tea this season and are looking for alternate crops.

Machine harvesting began in October and those producers who can still afford to harvest are only doing so once a month. Tea is not artificially irrigate and flushing was affected by a 40 day dry spell during December and January leading to 50% less tea being produced in February than in January. Tea processing plants are consequently functioning at half their normal capacity and several processors are talking of closing temporarily.

Along with Abel Actis, president of the Argentine Tea Association and director of Establecimiento Las Marias, exporters agree that Argentine tea will always have a market but, unless better prices are paid, tea production in the country will continue to decrease.

Tea consumption in Argentina is estimated at around 6-7,000 tons annually and coffee at 33,000 tons. Tea and coffee face strong competition from yerba mate, a tea-like beverage, of which 140,000 tons are consumed annually. As in many other parts of the world soft drinks, fruit juices and alcoholic beverages also compete more and more with tea and coffee consumption.

Argentines do not have very sophisticated tea and coffee drink habits. "They prefer tea in tea-bags giving more importance to color than to aroma and taste and have traditionally drunk coffee roasted with sugar and other sweeteners known as "cafe torrado," says Ruben Pellegrini, manager of the Argentine Tea and Coffee Association. Colombia coffee exporters to Argentina have recently launched several new all Colombian brands on the market in the hope that Argentines will refine their tastes.

For the first time, in 1990 exports of Colombian coffee to Argentina exceeded Brazilian exports. Since 1971, Colombian exports have grown from 10-33% of the market in 1990, although the first seven months of 1991 show a drop to 21% with Brazil taking the lion's share with 68%. of the market. Other suppliers to Argentina are Paraguay with a 1990 total of 19%, Peru with 3% followed by Bolivia, Mexico and Ecuador, each with less than 1%.

According to Ruben Pellegrini, there are three main internal markets for Argentine coffee: 60% of the market in ground coffee geared towards massive retail outlets such as supermarkets etc.; 10% to soluble coffee; and the remaining 30% to the restaurant and cafe industry. The last category buys in small quantities at regular intervals, and each has special requirements as regards the amount of sugar or sweetener in the delivered product.

Going out for coffee in Argentina is a way of life. Like Parisian cafes, Argentine cafes are not just places that serve food and drink, but are places to meet friends, talk, work, make deals, read the paper and watch life passing by. The first cafe in Buenos Aires dates back to 1779. Today the oldest in the Cafe Tortoni founded in 1859 and which, like so many others, has age-old links with important characters of Argentine political and cultural life.

Even if tea and coffee consumption continue to decline the tradition of "having a coffee" as a social encounter is fixed in Argentina, and the nicest aspect is that the waiter never hurries the customer.
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Author:Misdorp, Sheila
Publication:Tea & Coffee Trade Journal
Date:Jun 1, 1992
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