Iran Tea Imports Plunge by 62%

One of the world’s top tea-drinking countries saw tea imports plunge 62% in value during the first ten months of the Iranian calendar year, which begins in March.

The Tasnium New Agency reported only $185.75 million worth of tea was imported from eight origins, according to the Islamic Republic of Iran Customs Administration. Volume declined to 33,683 metric tons as shipments from India dwindled.

Shortages have been reported, but the steep decline suggests that traditional suppliers are shipping more tea to surrounding countries where the non-tariff barriers to trade are lower.

Iran typically consumes about 21% of India’s annual tea exports. Indian traders report exports to Iran declined by 15.7 million kilos from January to October 2023. Tea exported from India is down overall, but shipments to Iran showed the most significant drop.

Indian producers say restrictions on Iran’s inability to trade in US dollars result from sanctions first imposed in 1979 and additional European sanctions imposed in 2010, are preventing timely payments. The higher transport cost in war-ravaged regions, including the Black and Red Sea, further complicated trade.

In November 2023, Iran halted tea imports at the request of Iran’s federal Inspection Organization. Investigators accused the CEO of Debsh Tea, the nation’s largest tea company and sole tea importer, of embezzling $3.4 billion in subsidies (about three trillion in local currency). Around $300 million is budgeted annually to purchase orthodox grades and tea for blending. Investigators became suspicious when that sum had tripled in recent years and eventually uncovered evidence of currency manipulation and fraud involving customs officials, members of the country’s central bank board, top executives in the food safety department, and office holders. The four-year scheme is the largest embezzlement in Iran’s history.

BIZ INSIGHT – Iranian tea exports also steeply declined by 12,828 metric tons. Value fell by 58% compared to the 2022 fiscal year ending March 2023. In the past, Iranian growers produced as much as 70,000 metric tons of tea to meet domestic demand. Iran still ships locally grown tea to 25 countries but at far smaller volumes than in the early 2000s. Tea exports peaked at 21,000 metric tons in 2000 before bottoming out at 4,500 metric tons in 2003 following the imposition of sanctions tied to nuclear development that continue to interfere with timely payments.

Stable Price Outlook for Soft Commodities in 2024

Tea is classified as a soft commodity, one of several grown in the tropics and delivered globally along supply chains similar to coffee, cocoa, sugar, and spices.

The sector has experienced three years of extreme volatility attributed to escalating geopolitical tensions, soaring pandemic-induced shipping costs, and adverse weather conditions.

Last week, the Economist Intelligence Unit (EIU) predicted risks would ease and prices would stabilize in 2024. In its “Commodities Outlook 2024,” EIU writes, “El Niño and the Russia-Ukraine war still loom large for soft commodities. Prices for food, feedstuffs, and beverages (FFB) will rise throughout 2024, driven primarily by beverages, as El Niño will hit production, and therefore, prices for coffee and cocoa will increase.”

In the section subtitled “Resilient Prices Amid Global Headwinds,” EIU writes there is “Some relief in sight, with the US National Oceanic and Atmospheric Administration (NOAA) giving a 72% chance that El Niño will end by mid-year. But the damage to this season’s harvests will already be done by then, with coffee and cocoa production forecast to fall by 9% and 13%, respectively, in the 2023/24 crop season. 

At least the threat of a “historically strong” El Niño is waning significantly, according to NOAA. NASDAQ reports that (Intercontinental Commodity Exchange) Arabica coffee futures

• ICE Arabica coffee futures rose to the highest price since 2011 in 2022 but closed in 2023 at $1.90 per pound, a 12.5% gain from the previous year. 
• ICE cocoa futures exploded 61.4% higher in 2023, closing the year at $4,196 per ton.  

Energy prices, excluding crude oil, will trend downwards in 2024. Prices of hydrocarbons will largely trend in the opposite direction than those of most industrial raw materials and soft commodities, writes NASDAQ.

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FEATURE

Observations on Tea Oversupply

By Dan Bolton

“The IGG is a fabulous opportunity for all interested parties on a governmental level to talk about the tea industry,” says UN FAO IGG TEA Delegate Peter Goggi, president of the Tea Association of the USA. “It’s essential to express their views. They all have issues that they’re facing. The problems facing countries of origin differ significantly from those facing consuming countries. But ultimately, solutions that satisfy both need to be met,” he says, adding, “The overriding concern of all parties in this business is the lack of profit throughout the supply chain.” Read more…

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Episode 154 | The UN FAO IGG Confederation of Tea Smallholders Will Relocate its Headquarters from China to India for the Next Four Years | Iran Tea Imports Plunge by 62% | Economists Forecast Higher but Stable Prices for Beverage Soft Commodities in 2024 | PLUS UN FAO IGG Delegate Peter Goggi Discusses The Economics of Oversupply | 9 Feb 2024

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According to the forecast, “One of the major trends noted in recent years is the mixing of tourism and (CNY) New Year celebrations, where families choose to get together in a new destination rather than in their hometown. Some of the most popular domestic destinations for this type of travel include Yunnan, Guangdong, Fujian, Beijing, and Harbin for winter getaways. For international travel, Southeast Asia remains the most popular destination. Search data from Baidu.com shows that families and children account for as much as 42% of the holiday tourism cohort.

Whereas short-haul travel became popular during the pandemic, longer-distance travel is now back in vogue. Data from online travel agency Trip.com indicates that travel within the same province or to peripheral provinces will account for just 25% of overall travel during the 2024 holiday, while inter-provincial long-distance travel will account for as much as 75%.

Tea vendors welcome the holiday as it draws large crowds to tea-producing regions and encourages gifting of tea and an increase in out-of-home consumption at restaurants.

Pakistan’s Legal and Smuggled Tea Imports Rise

Pakistan has emerged from deep financial difficulties, thirsty for tea.

According to the Pakistan Bureau of Statistics, tea imports surged 5.5% to $336 million during the first six months of the current fiscal year (July- December 2023). The increase is due in part to the reversal of trade deficits that crippled the country’s economy in 2022 and 2023.
Import volume grew by 9.1% to 138,750 metric tons in the current fiscal year, compared to 128,000 metric tons during the same period in fiscal 2022.

Exports are up 5% to $15 billion overall, but imports decreased by 16% to $26 billion, down from $31 billion during the same period last year.
The nation’s deficit from July to December (2023-24) declined to $11 billion, down by 34% during the fiscal year’s first half.

Scarcity and a spike in prices led to a high incidence of tea smuggling with the Afghan Transit Trade (ATT), estimated to have increased by 159% during fiscal years 2022-23. According to The Nation, Kenyan tea exports to Afghanistan totaled $75 million last year, up from $29 million in FY2021-22.

The newspaper reported, “Afghan authorities expressed shock over the 159% increase in the import of black tea. Afghans prefer green tea, according to an unnamed source who claimed Pakistani importers prefer to trade with Afghan traders instead of buying directly from Kenya. “The duty-free black tea is then smuggled back into Pakistan, which has caused loss to the national exchequer, the source argued.”

Nepal Recovers from Foreign Currency Crisis

Nepal achieved a record high of $13.3 billion in foreign currency reserves in December, reversing a two-year crisis.

According to Nepal Rastra Bank’s (NRB) report on the ‘Current Macroeconomic and Financial Situation of Nepal,’ reserves QUOTE “soared 13.6% in the past five months of the current fiscal year.” Remittance inflows were cited for adding $1.6 billion through December.

In 2022, Nepal was forced to limit imports of nonessential goods as its foreign currency reserves dipped. The cause was declining tourism and unusually low remittances from migrants who send home part of their earnings, one of the largest sources of foreign income for many developing countries.

Globally, remittances to low- and middle-income countries grew 5% in 2022 to $626 billion out of $767 billion worldwide. Nepal received $9.29 billion in remittances in 2022.

According to the NRB records, remittance inflows increased 28% to 613 billion rupees during the review period compared to a 23% increase in the previous year.

In US dollars, inflows increased 25% to $4.6 billion in the review period compared to 13% in the review period last year.

The tea industry, the largest foreign exchange earner after cardamom, is facing a crisis at a time when the National Tea and Coffee Development Board (NTCDB) has set a target of doubling foreign currency in the current fiscal year.

The newspaper My Republica writes that the Central Vice President of the All Nepal Trade Union, Bhupal Sapkota, blames the NTCDB for not effectively solving the problems of tea industrialists, businessmen, farmers, and workers. These include labor concerns, lack of irrigation systems, poor road infrastructure, and erratic distribution of electrical power and water supply.

Tea Board Executive Director Bishnu Prasad Bhattarai pledged to play an effective role in solving the existing problems in the tea sector and adequately address all the problems raised by the stakeholders.
Nepal earned NLRs 3.80 billion rupees, about $28.6 million in US foreign exchange dollars from tea exports last fiscal year. India, China, Sri Lanka, Russia, and the Netherlands are the main export markets.

There are 20,237 hectares of tea plantations in Nepal, mainly in Koshi province, with 38 CTC processing facilities. There are, in addition, 30 orthodox tea factories. Total employment is 70,000.

Nepal has set an ambitious target to transition from a World Bank-designated lower-income country to a status as a middle-income country by 2030.

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FEATURE

Enthusiastic Young Crowd Sets Record Attendance at Toronto Festival

By Dan Bolton

Tao Wu and his sister Mingzhou Gao (an accountant) co-founded Tao Tea Leaf 14 years ago, opening their first three tea shops on Yonge Street in downtown Toronto. Tao and “Lisa” were raised in the Wuyi Mountain in China’s northwestern Fujian province, where their parents run a tea garden, and their brother has a tea shop and exports tea. In 2013, Tao was one of the original organizers of the Toronto Tea Festival. In this interview, he shares his observations and insights on the recently concluded 10th edition.

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Episode 153 | Lunar New Year Will Boost Consumption and Tea Travel | Nepal Recovers from Foreign Currency Crisis | Pakistan’s Legal and Smuggled Tea Imports Spike | PLUS  The Toronto Tea Festival that concluded January 28 marks a turning point in 2024 as the crowd surged from a low of 2,600 in February 2020 to 4,000 attendees – a 25% increase from previous highs.

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