- Production capacity (acreage & yields) continues to increase
- Weather, COVID-19 effects mostly limited to high-end teas for domestic market
- Shifts in global export patterns could present opportunities
REVIEW OF 2019
In 2019, the total area of tea gardens in China reached 3.1 million hectares, and the area of exploitable tea gardens was 2.5 million hectares. Much of the remaining 19% of tea garden area includes newly planted tea fields that have not yet matured to yielded their first crop. The past 10 years have seen a 55% increase in tea acreage, so China is looking toward steady gains in production capacity.
Total finished tea output reached 2,793,400 metric tons, with a total output value of $33.8 billion USD. Outputs have grown 19% over the past 5 years, or 3.5% CAGR.
Total export volume was 366,500 metric tons (13% of production), and export value was $2.02 billion USD. Exports reached $5.51 USD/kg – a record high.
2020 NATIONWIDE SPRING PRODUCTION
Mid-February saw a cold snap that impacted special early tea varieties in Zhejiang, Hunan, Guizhou, and Sichuan provinces. However, many provinces, including large producing provinces, initiated their Spring harvests around the same time as in previous years. Fujian, Hubei, Shaanxi, and other provinces conducted their regular plucking in mid-March. Overall, weather conditions have had limited impact on the production of spring tea across the country. In fact, Mei Yu, Secretary General of the China Tea Association has remarked that the early spring cold brought overall benefits without significant impact to harvest.
The main impact of the coronavirus on tea production in various provinces has been the flow of personnel. The number of pluckers who were unavailable to harvest high-end specialty Spring teas has led to a drop in production. Subsequent production of Spring teas was able to return to normal, and the total output of Spring tea in the middle and late Spring harvests stages should not be lower compared to the same period last year.
It is important to note that the vast majority of the high-end specialty Spring teas affected are teas that remain in China’s domestic market and are not exported.
It is estimated that China’s total tea output may be reduced to 2.6 million tons for the year. This would represent a 7% drop in tea production over the previous year. Again – this is largely related to high-end specialty Spring teas for the China domestic market and to isolated regions where early spring production was hampered. As a result, prices of high-end famous teas have increased.
The impact on overall output of mid-range teas has been negligible, and prices have continued to decline. Demand for traditional green teas and white teas is still high.
According to statistics from China Customs, China’s Jan-Feb tea export volume saw a 26% drop over the previous year. US trade data shows a similar 20% decrease in tea imports from China during that same period from the previous year. In the case of the US, it is important to consider the role of the US-China trade war and tariffs that contributed to the decline. Presidents Xi and Trump signed a Phase One trade deal that reduced tariffs effective 14 February 2020.
Overall export volume is expected to decline, as some of China’s tea export partners experience various rates of economic recovery. This could present an opportunity for trade partners who are in a position to take advantage of access to a share of mid-range teas that are usually destined for other importing countries. One example of such (potential) opportunity arises from Morocco, where news reports and our China team members confirm that Morocco has seen record imports of Chinese green teas. Their early 2020 purchase volumes may slow as they draw from these reserves. Morocco has historically represented 20% of all Chinese tea exports.
The full text of the report can be found here (in Chinese): https://mp.weixin.qq.com/s/tDM6MKSCiM5YzeUGMyDDkQ