Printer Friendly

Davies hails U.S. Tea Association committees; reviews international tea market scene.

Davies hails U.S. Tea Association committees; reviews international tea market scene

Much of the U.S. Tea Association's business is conducted through its committees. It is these committees, each with its own functional areas, which are responsible for much of the ongoing activities of your association.

The Transportation and Systems Committee under its chairman, Steve Wolfe, has been active in attempting to hold the line on ocean freight and import inspection fees.

For the past several years, ocean freight increases have not been a major problem. The breakup of the various shipping conferences, mergers and takeovers within the shipping industry and quicker turnaround time due to containerization led to a surplus of available shipping increased competition. It now appears that this era is behind us and the potential for increases in ocean freight will again become a more important element in our business. This year ocean freight costs have increased by approximately 13 percent from Argentina and Brazil. U.S. drug enforcement inspections have also increased the costs of importation and the committee has made suggestions to try and reduce the incidence of inspections.

The Packaging Committee, under its chairman, Ed Cullen, is investigating possible changes in specifications for kraft bags. In essence the new specification which is being co-ordinated with the U.K. Packaging Committee, centers around a "performance" specification rather than detailing bag construction and coating.

Two experimental shipments of single ply kraft sacks are planned, one from China and one from Tanzania. These single ply bags are thought to be strong enough to eliminate damage even when the sacks are shipped break bulk.

The Technical Committee under its chairman Dr. Philip Coggon has initiated periodic mailings of technical issues to keep the membership more fully informed. Current projects include: monitoring the "Proposition 65" situation, defining herbal tea (especially as it relates to decaffeinated products), describing tea cream or tea clouding and pursuing technical projects such as pesticide analysis and ISO tea standards.

In the autumn of 1988, a Long Range Planning Committee was established under the chairmanship of Joe Wertheim. This committee was charged with the responsibility for developing a long range plan to cover our activities during the 90's and into the 21st Century. This committee has reviewed our existing structure and has made appropriate recommendations for strengthening the organization. The several proposals emanating from this committee can be more intelligently reviewed at our next convention by which time they will be finalized and implemented.

Norman Langer, chairman of the Foreign Affairs Committee with Joe Wertheim and myself represented the association at the Food and Agricultural organization meeting in Rome on May 9-12. The agenda included the current, short, and longer term outlook for tea, the implementation of minimum export standards, and the generic promotion of tea.

In respect to the generic promotion of tea, the delegates at the meeting were greatly interested in the U.S. Tea Association's Health Benefits of Tea initiative. The FAO Secretariat commented that a $250 million common fund was coming into being in 1990. The monies from this fund would be available for approved programs for different commodities. The Secretariat noted that the Health Benefits of Tea initiative would be a likely candidate for monies from this common fund. In conjunction with the U.K. Tea Association, we plan to make a presentation and request for monies as soon as the common fund becomes operative in mid 1990.

The Health Benefits of Tea Committee was established in 1987 under chairman Marty Kushner, to investigate and identify the healthful benefits of tea, and through a carefully planned public relations campaign to responsibly promote these benefits to consumers and the professional health care community.

Since the committee's formation, the existing scientific literature on tea has been evaluated by an independent scientific advisory panel. The current evidence, in the panels opinion, was not conclusive enough to warrant specific health claims. However, they did ascertain that tea has certain potential as a healthful beverage, but more extensive and conclusive research is necessary to prove this. Most promising was tea consumption and its possible ability to lower blood cholesterol levels, and they strongly encouraged us to conduct studies in this area. The Panel reported their findings in a paper which has been submitted to the Journal of Clinical Nutrition for possible publication. They were impressed with tea's apparent absence of harm and suggested that the Tea Association publish a paper which would be sent to opinion leaders in the health media stressing the importance of maintaining proper fluid balance in the body and recommending tea as an excellent alternative fluid source to water. This paper entitled "The Importance of Fluid Balance For Good Health" was printed and distributed to the health media by Ketchum Public Relations who have been following up on inquiries resulting from this publication.

In the Spring of 1989, the National Academy of Sciences issued a report stating that, "tea drinking has not been associated with an increase risk of any chronic disease in humans" and..."there is no convincing evidence relating tea consumption to any type of cancer." This independent study substantiates the scientific advisory panel's conclusion that tea is a safe beverage.

Pursuing the recommendation of the scientific advisory panel that the industry continue research into the area of whether tea consumption lowers blood cholesterol levels, it was decided that an animal study be designed and conducted prior to a human study. If the results are positive, then we can begin trying to raise funds for a human study. Currently, a university and a contract laboratory are preparing designs for the animal study. After reviewing their proposals, one will be chosen to do this work for us.

Since the Committee's inception, much has been done. We have been able to determine the usefulness of existing scientific literature on tea and have established a direction to pursue so that credible and responsible health claims can be made for tea when proper scientific investigation is completed.

This can be frustatingly slow; but we are moving in the right direction to responsibly position tea as a healthful beverage to consumers who are, in growing numbers, demanding health-oriented products.

The health benefits of tea is probably the most promising avenue to increase tea consumption to come upon the scene in very many years.

In 1988, crops in the principal producing countries finished about 130 MM lbs ahead of the previous year - an overall increase of five percent. So for the fifth time in the last six years production exceeded that of the preceding year by over 100 MM lbs. Prices were depressed, the producing fraternity were gloomy, and the conventional wisdom agreed that a large weight of tea overhung the market as growth in global production continued to outstrip that of consumption.

At the May Food and Agricultural Organization meeting in Rome no less an authority than the FAO Secretariat repeated its earlier assertions that "...tea production will continue to be in excess of world absorption levels into the medium-term, i.e. 1995."

There was one question, however, that the conventional wisdom found disturbing. Exactly where, physically was this buildup of stocks? We knew there were no untoward stock levels in Europe or North America. We knew that only transit stocks existed in Calcutta, Colombo, Djakarta, and Mombasa. Where was this tea? Did it in fact exist at all?

As the early months of 1989 unfolded, crops began to reflect lesser volumes than the comparative periods in 1988. Throughout the spring and early summer several factors became clearer and began to indicate possible market changes.

* Consistently lower monthly crop figures pointed toward an approximate 120 MM lb annual shortfall compared to 1988 - about four percent.

* The dimension of the damage to the Russian tea crop caused by the Chernobyl disaster seemed to become a little clearer. Historically Russia consumed 450 MM lbs - 300 MM lbs produced in Russian Georgia and 150 MM lbs imported. It began to appear that the crop in Georgia as a result of Chernobyl may be reduced to about 175 MM lbs leaving an additional 125 MM lbs each year that Russia needs to import. Certainly over the past year we have seen Russia buying on a large scale and in areas where previously they never operated.

Statistically then, it began to appear that in 1989 we might see a negative swing in availability comprised of the following.
 MM Lbs
Shortfall in crops 120
Extra Russian buying 125
Traditional inc. in global consumption 80
For a total of 325 MM Lbs


Retrospectively it began to appear that the surplus from previous years did not in fact, exist at all. Quiet and efficient Russian buying over the previous three years and perhaps an increase in the traditional rate of global consumption had apparently absorbed it.

As this general pattern evolved, so the prospects of a stronger market began to emerge. Currency fluctuations and differences between individual auction centres make for a less than uniform picture. Certainly different types of tea have advanced at different rates. Suffice to say that in the last three months blend replacement costs for U.S. packers have increased generally speaking, by about 35 percent.

Where is this market heading and what are we likely to see in the year ahead? There are several different scenarios from the most conservative to the most extreme. I would like to outline the principal points of only three which, between them, cover the spectrum.

* The first scenario embraces the view that Russian buying cannot continue at the high levels we have seen. Further, the Indian government's various measures to ensure an adequate supply of reasonably priced tea for the internal market at the expense of export markets will ease once the elections in India are held although their present official policy states otherwise. Improved weather will bring about better growing conditions and a return to larger and larger crops. These factors will most likely lead to the market peaking before years end (1989), followed by a modest retreat, and a stabilization at a somewhat higher level than that which existed prior to the rise which began in August.

* The second scenario looks to history. All of the strong sustained upward price movements which we have seen since the end of the war began in October-November and peaked in May or thereabouts. This was true in 1983-84, it was true in 1976-77, and (for those in this room who were around at the time) it was true in 1954-55. There is a logic to this timing. Any major shortfall in global crops results of July-October is known. A major draw down in inventories during the January-April period when global consumption is more than double that of production compounded by a production shortfall results in a substantial swing in availability of tea. It is this combination of factors which historically fueled major price rises. Again, historically, prices began to decline in May-June as a larger weight of tea came on to the market. The new factors of Russian buying and increased demand within India itself have only served to move the genesis of the price rise forward from November to August. Thus, in keeping with the past, this scenario evisions a continuing stronger market until prices finally peak in May. At this point prices can be expected to decline although at a considerably slower rate than their rise.

* The final scenario is more extreme and while it may not be likely, it is worth some consideration. The thrust of this scenario is that despite several years of increased crops, the surplus envisiones by conventional wisdom does not exist. Increased Russian buying is here to stay. The effects of Chernobyl will continue to adversely effect Russia's own crop and the emphasis on increased consumer must lead to a continuing greater demand for tea. Consumption in the rest of the world, particularly in eastern Europe, India, and China is increasing. In the past producers reacted to greated demand and higher prices by course plucking, pushing a greater volume of lower quality tea through the factory in order to maximize their returns. However this time honored response is no longer an option as most producers now routinely practice courser plucking. Anxious to control production costs, and reluctant to commit the capital to build additional factories, most producers now routinely push ever greater volumes of green leaf throughput factories already burdened beyond their design capacity. In short, the potential for increasing throughput to take advantage of a higher market no longer exists. Thus, an increased in the growth of global consumption plus a large, new, and ongoing requirement from Russia set against the relative inability of producers to materially increase their production brings us all into uncharted waters characterized by a continuing shortage to tea and buoyant prices beyond next May.

By the time we meet next year the situation will certainly be a lot clearer. Of one thing we can be certain, as one gentleman present in the tea industry has been heard to say - "the market makes fools of us all."
COPYRIGHT 1990 Lockwood Trade Journal Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Alan Davies
Publication:Tea & Coffee Trade Journal
Date:Jan 1, 1990
Words:2178
Previous Article:Education and promotional programs continue to brighten coffee's future.
Next Article:Social progress and coffee.
Topics:


Related Articles
UK tea trade holds first-ever convention.
Researchers discuss health benefits of tea at first international Tea Symposium.
Tea in 1993.
U.S. Tea Convention review.
Why won't the U.S. (among others) cut, tear, & curl?
Vienna 1997: an overview of the International Coffee and Tea Exhibition & Symposium.
Review of Canadian tea conference.
India tea convention to be held. (Trade News).
Calendar.
Tea certification ... from the experts.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters