June 15/Sri Lanka/Daily News -- Over 72% of the global tea production comes from China, India, Kenya and Sri Lanka. Despite adversities and strong competition from substitutes, the world tea production increased from 3.4 million metric tons (MT) in 2006 to 3.6 million MT in 2007 and to about 3.8 million MT in both 2008 and 2009. About 45% of the global tea production is for retail markets.

It is estimated that the shortfall in global tea supplies will rise to nearly 140-150 million kilograms this year from about 120 million kg in 2009 - and that tea drinkers will have to pay more for their beloved brew or shift to substitutes.

The financial recession in many economies is changing the market dynamics. According to reports from Bloomberg, the global tea shortage which began in 2008 is said to increase by 10% in 2010. In view of the impending shortage, African tea prices rose to a record at auctions, while Indian prices have gained an average 25% for 2009.

The average global per capita consumption of tea in 2007 was 0.3kg and was driven by the growth in sales of black specialty tea bags, green tea and other types. The global tea market is expected to grow by almost 10% in value and over 13% in volume between 2005 and 2010, and current estimates indicate that the onset of the global recession is favorable for tea exporting nations due to increased global demand and per capita consumption.

According to a survey done by Org-Marg for the Tea Board of India, the per capita consumption of tea is put at 0.8kg for India, less than Pakistan (0.95kg) Bangladesh and Sri Lanka (1.2kg). Turkey is considered to be the highest tea consumer (2.7kg) followed by Ireland (2.7kg) and the U.K. (2.1kg). The U.K. had the highest per capita consumption of until the end of 2006 but changed dramatically thereafter with a shift in consumer focus.

The Russian market also has one of the highest per capita consumption rates of about 1.3kg compared to the average global per capita consumption. Despite the heavy domestic demand in China and India, they lag behind most countries in per capita consumption (0.8kg each) due to their higher population.

According to acclaimed global watchdogs including several tea boards of major tea producers and the FAO database, the world black tea exports in 2010 are projected at 1.14 million tons.

A greater part of the increase would take place in tea growing nations of Africa where currently the rate of growth of production is higher than its domestic consumption. Most major tea exporting countries in Asia are expected to experience slight declines in exports in line with expected growth in income and population that would foster domestic consumption. For example, exports from India and Indonesia are expected to decrease by 2.4% while exports from Sri Lanka are expected to increase at an annual average growth rate of 0.4%.

According to several forecasts for 2010, world net imports of black tea would amount to about 1.15 million MT, reflecting an average annual increase of 0.6%. Net imports in the CIS countries would increase to about 315,200 tons, an annual average growth rate of 3%. Pakistan would increase its net imports by 2.9% per year to about 150,000 tons.

The U.S. is expected to increase net imports by 1.4% per annum to 94,300 tons, while Japan would increase its net imports to 22,000 tons, an annual average growth rate of 1.8%. However, net imports by the U.K. are expected to decrease further by 0.6% annually to 125,500 tons.

Green tea exports are expected to exhibit a significant upward trend in keeping with production. Total exports are expected to increase by 2.8% annually, and China would continue to be the world's dominant green tea exporter.

Whilst Japan would consume most of its domestic production, Morocco, the world's leading green tea importer, is expected to increase imports at an annual average growth rate of 4.5%.

Russia continues to be the largest importer of tea followed by U.K., U.S., Pakistan and Japan. The Russian tea market has a growing demand for all tea varieties as well as for black tea, and Sri Lanka is placed as the major supplier for the Russian market.

In terms of retail value the Russian market was worth well over $3 billion with retail volumes (demand) in excess of 150 million kg. The year-on-year average growth rate of the Russian tea market is 12% in terms of retail value and 2% in terms of retail volume.

Even despite the financial turmoil that affected most parts of the world, the tea consumption and demand in Russia and other CIS countries have shown an inelastic demand. The average retail price for tea in Russia was about $18-20 per kg compared to the average global retail price of about $10-13 per kg.

From the June 21, 2010, Prepared Foods E-dition