Episode 130
India Audit Cites Regulatory Shortfalls of Tea Board: More than a third of tea smallholders were not registered by March 2021
| China Tea Exports Decline | China Travel Restrictions Ease
| Kenya Tea Production is Up, Exports are Down
Tea News for the week ending Aug 18
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UKTA Director Jennifer Wood and Jo Selman-Smith, a project manager with the UK Tea Academy who, in 2022, oversaw the launch of The Leafies, join Tea Biz this week to discuss the academy’s international judging of tea in 12 categories with correspondent Dananjaya Silva. This year’s competition is open not only to farmers and suppliers but also to tea retailers worldwide. The deadline for entries to arrive in Scotland is Sept 18.
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Auditors Find Lapse in Factory Inspections, Unregistered Smallholders, Lack of Well-Defined Strategy
By Dan Bolton
A government audit of India’s Tea Board during the five years ending 2021 found numerous flaws in its regulatory mandate and a failure to address concerns raised a decade ago. Glaring omissions include the lack of a strategy to identify and register smallholders — a first step in supporting the tea industry’s financial well-being, development, productivity, and promotion in domestic and overseas markets. Small tea growers supply more than half of the tea grown in India.
“Thirty-eight percent of small tea growers were not registered as of March 2021 and were out of the ambit of Tea Board’s regulatory activities and development assistance,” according to the report. Auditors also found that 119 of 1,573 large growers were not registered. The Tea Act mandates regular inspection of processing facilities to maintain quality.
“However, factories were not adequately inspected in the five financial years,” according to auditors, who noted, “The shortfall of inspection ranged between 79 and 92 percent, which showed poor monitoring on the part of the tea board.”
Samples for laboratory testing were not submitted every six months. In addition, all tea factories discard waste tea. A rate of 2% is evidence of culling inferior leaves, but between 72% and 78% of factories reported less than the 2% minimum, and several factories reported no waste. Mandates on district-wide records documenting the age of plants, yield, labor productivity, and replanting were not maintained in a database, and committees required to monitor the monthly green tea price were never met.
The Comptroller and Auditor General (CAG) audit, titled “The Role of Tea Board India in the Development of Tea in India,” recommends a “well-defined strategy” to identify and register smallholders, step up the pace of inspections and enforce existing mandates such as the requirement that 50% of India’s tea be sold at e-auctions.
The 176-page report was submitted to Parliament on Aug. 8. The audit revealed identity cards, mandated in 2018, had been issued to only 137,800 of the 222,746 known small growers (about 62%). Auditors found that no IDs were issued in Mizoram, Arunachal Pradesh, or Manipur. As of April 2021, only 42-44% of tea was sold at auctions. Buyers were registered, but 61% to 68% did not purchase tea at auction.
BIZ INSIGHT – The previous audit, conducted for the fiscal period ending 2016, documented the practice of mixing Nepal tea with GI-protected Darjeeling leaves, which continued through the subsequent audit period. Auditors estimated that 96% of Nepal tea exports were to India, “The main purposes of importing Nepal tea are re-exporting upon value addition and for blending” not for sale in the domestic market. According to auditors, blending imported tea with Darjeeling, Kangra, and orthodox Nilgiri or Assam teas was not properly monitored, with 90 of 127 importers operating without a license.
Kenya Tea Production Up, Tea Exports Down
By Dan Bolton
Kenyan tea exports declined by volume and value through June as fair weather boosted yields and benefitted growers. The Tea Board of Kenya (TBK) reported a 29% decline in value, and export volumes fell to 191,000 metric tons during the first half of 2023 compared to 243,000 metric tons during the same period last year. Kenya exported $432 million worth of tea (Sh 62.1 billion) through June. Value is impacted by the Kenyan shilling’s downward spiral against the US dollar, which benefits exporters.
A shortage of foreign exchange reserves and the conflict in Sudan and Yemen reduced sales, and economic troubles limit what Pakistan and Egypt can spend. Pakistan remains Kenya’s top tea destination, importing 65,728 metric tons this year, followed by Egypt at 28,600 metric tons and the United Kingdom at 20,546 metric tons.
Auction prices were higher last year, averaging $2.56 during the first half of 2022 compared to $2.29 in 2023.“Auction prices have been declining since the second quarter of 2022 owing to lesser demand due to recession in the global market,” according to KTB.
May was a strong month for tea producers, who harvested 7.63 million kilos more tea than during 2022, totaling 58 million kilos for the month, adding to an April harvest of 49.5 million kilos.
May marks the cessation of the long rains over most parts of the country; rainfall recorded across the country was moderate and well distributed,” said KTB.
Tea production increased to 273,640 metric tons in the six months, an increase compared to the 271,300 tons harvested by July 2022.
China Tea Exports Decline | Travel Restrictions Ease
By Dan Bolton
China Customs data for tea exports to all destinations through June amounted to 175,000 metric tons, a 3% decline in tea volume compared to last year. According to the China Tea Marketing Association, export value for the period was $847 million, a year-on-year decrease of 14%.
Tea exports amounting to $2 billion annually are a small fraction of China’s overall shipments but follow a trend of slowing export growth. During the past year, the country’s exports dropped 14.5%. Exports to the US accounted for only 13.3% of US imports during the first half of the year, the lowest share in 20 years. Exports to the European Union also sagged.
Decoupling is evident, according to Bloomberg News. The US imported about $203 billion in goods from China in the first six months of the year, 25% less than in the same period in 2022, based on the latest unadjusted data from the Commerce Department. The figures are not adjusted for inflation.
The Asian country is now the third-largest merchandise provider to the US, behind Mexico and Canada. Goods imports from Mexico were up 5.4% in the first half from a year ago. Germany and Japan round out the top five.
On a seasonally adjusted basis, US imports from China fell to $33.5 billion in June, the lowest since the immediate onset of the pandemic.
On an annual basis, China had ranked as the top supplier of goods to the US for more than a decade, with the trade ties between the two countries reaching a peak last year. Bilateral trade is being challenged by the widening split between Washington and Beijing over human rights issues, fair trade, and competition for technology and markets, writes Bloomberg.
CTMA reports that the average export price from January to June was $4.84 a kg, a year-on-year decrease of 11.47%.“China’s green tea export volume was 146,300 tons, accounting for 83.6% of the total export volume, a decrease of 6,251 tons, or 4.1%; black tea export volume was 13,400 tons, accounting for 7.7% of the total export volume, a 4.5% decrease that amounted to 636 tons,” according to CTMA.
Exports of Pu’er, white tea, jasmine tea, scented tea, and dark tea all declined.
Shipments of oolong tea were up 13.8% to 11,000 metric tons, the only category that increased.
BIZ INSIGHT – Last week, in a rare sign of cooperation between the world’s largest two economies, the U.S. Transportation Department (USDOT) agreed to increase the number of Chinese passenger flights allowed to fly to the U.S. to 18 weekly roundtrips on Sept 1 and increase that to 24 per week starting Oct 29, up from the current 12, according to Reuters. The Chinese government agreed to the same increase for American carriers, lifting pandemic-era restrictions on group tours for the U.S., Japan, South Korea, and Australia.
FEATURES
UK Tea Academy Tea Competition Deadline Nears
By Dananjaya Silva | PMD Tea
Entry is now open for the Leafies International Tea Awards, organized by the United Kingdom Tea Academy and in partnership with Fortnum and Mason. The awards are open for entries across the globe. This is Dananjaya Silva, and I sat down with UKTA Director Jennifer Wood and Jo Selman-Smith of the UK Tea Academy to talk about this year’s awards, what’s new, and how to enter.
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