Tea Markets: Tea Is a Mass Commodity Essay Example

Japan. The undermentioned graph shows the import statistics for the universe 's biggest tea importers.

The influence of single agriculturist 's on the monetary value of tea

The international monetary value of tea is extremely volatile and is determined by the relationship between the supply and demand factors of the universe markets, the tea agriculturist is a price-taker, as the little volume of local end product is deficient to act upon monetary values. Another cardinal issue which will impact tea monetary values of single agriculturists of tea is how the tea market is separated into 3 types of agriculturist. There are the agriculturists of perfect competition who are the smaller agriculturists, the oligopoly which are the transnational agriculturists every bit good as the monopoly agriculturist, which without a uncertainty is China. Because of this the single monetary value of tea will change, the perfect competition sector will non acquire every bit much for their tea, where as the oligopolistic and monopolistic sectors will derive a higher monetary value per kilogram for their tea.

The function of the multinational corporations in the tea market

A multinational, or transnational, corporation has its central office in one state and operates entirely or partly owned subordinates in one or more other states. The subordinates study to the cardinal central office. The growing in the figure and size of multinational corporations since the 1950s has generated contention because of their economic and political power and the mobility and complexness of their operations. Some critics argue that multinational corporations exhibit no trueness to the states in which they are incorporated but act entirely in their ain best involvements. Even though the monetary value of tea

is affected by supply and demand, multinational corporations have a major impact within the international tea market, in the 90 's about 90 % of the western tea market was dominated by multinational corporations and about 85 % of universe production was sold by these multinationals ( Transfair study on Fairtrade, 2005 ) .

Multinational companies holding a monolithic power for buying tea and can therefore influence non merely the supply but besides the monetary value of tea. Leading on from this they play a major portion in non merely the merchandising of tea but besides the production as they own and control companies from growing to picking to selling every bit good. However it can be easy to state that the transnational 's May besides be tempted to pull strings the other larger companies and the monetary value of their tea.

By far one of the largest of these is Tata Tea Limited, besides known as Tata-Tetley, is the universe 's 2nd largest maker and distributer of tea. Owned by India 's Tata Group, the Tata Tea Limited markets tea under the major trade names Tata Tea, Tetley, Good Earth Teas and JEMCA. While Tata Tea is the largest tea trade name in India, Tetley is the largest tea company in the United Kingdom and Canada and the 2nd largest in the United States by volume.

Supply and demand factors

The planetary supply of tea has invariably overwhelmed the demand for it and has hence had an impact in the monetary value of tea to reflect the overpowering difference for the supply and demand of tea.

As you can see above the universe has a higher supply of tea

compared to demand, as to preliterate my point above, the monetary value will be affected in order to get by with the high supply and low demand of tea.

Supply and demand for tea in India from the old ages 2005-2008 exceeded its demand for tea, fiting up with the fact that the planetary market for tea besides exceeded its demand for tea, is the ground for the current low monetary values of tea gross revenues in the Indian economic system.

Beginning: ( Indian Tea Statistics, ” Tea Board of India. Available online at: hypertext transfer protocol: //www.teaboard.gov.in/inner2.asp? param_link_id= )

The above tabular array relates to the thought that India is over providing the demand for tea making a back log, and in order to unclutter the back log of supply, a lower tea monetary value is needed in order to increase demand.

In India tea has high market laterality and a batch of the market growing in tea has chiefly been achieved from tea discrepancies such as flavoured and herbal teas, nevertheless this thought has non caught on as it is tradition in India to add milk to tea. The developments in the discrepancies have developed from the recent determination that they are wellness and wellbeing niche of the market, which is possibly the new craze of other market growing of thing such as organic nutrient.

In India the retail monetary value is really low, particularly compared to that of Russia, in 2007 tea averaged a monetary value of $ 3.9kg where as Russia was $ 20.2kg ( Ibid ) .

Tea is chiefly sold by auction ; the industry is dominated by a few vertically incorporate companies. Climate alteration

is holding major deductions for tea production, as higher temperatures could endanger shrubs, and with drouth in the cardinal tea-producing states in 2008 affected production, doing ingestion to run in front of production. Although the auction system would look to come close a 'fair market ' in which monetary values are determined entirely by the interplay of supply and demand, the system does non ever work good for small-scale manufacturers. Auction monetary values vary well with both the quality and measure of tea on offer, and the demand for tea at any given clip. A little figure of companies dominate gross revenues at each auction Centre.

A little figure of companies dominate the tea industry. They have a presence at about all phases of the journey of tea from tea shrub to tea bag or package. The companies either grow tea on estates, or purchase tea at an early phase of production, and normally carry out the high-value-added blending and packaging which account for 80 % of the retail monetary value ( I BID ) at installations in the EU and other Western states. Globally, most tea is grown on plantations. In the African, Caribbean and Pacific Group of States ( ACP ) small-scale agriculturists are besides outstanding ; in Kenya, they account for approximately 60 % of the state 's tea production. ( I BID ) Smallholders frequently grow tea shrubs aboard staple harvests for their ain ingestion. Net incomes from tea may supply their lone hard currency income. Low monetary values for tea tend to be passed on to the poorest sections of a state in the signifier of low rewards on plantations. Given

that it is easier to cut costs ( by cut downing labour costs ) than rise monetary values ( it is impossible for a manufacturer state to try this one-sidedly ) , bring forthing states have to stay competitory by take downing rewards which partly accounts for the rut in which plantation rewards are caught. ( I BID )

Another cardinal issue to research in this is Elasticity and demand, if the monetary value increases the demand is elastic and hence means a lessening in entire gross. Therefore the alteration in snap will counter impact the alterations in the worker 's wage and monetary value, nevertheless this is merely if the demand is more monetary value inelastic, this is because the monetary values change more in the short tally and the consumer are more willing to alter their disbursement wonts whereas is demand was elastic and monetary values alteration in the short tally, the consumer will be less willing to alter their disbursement wonts. Therefore intending that because of the recent snap of demand for tea, the consumer will non be willing to pay every bit much as the monetary value additions, hence holding a negative consequence on the tea economic system intending that non merely the manufacturer will endure from high supply to demand, the worker will adjectively hold to endure wage cuts and perchance redundancy.

Even though it is thought that a rise in tea monetary values in the stores indicates a beef uping economic system, it has an inauspicious affect on a easy retrieving market, after the recent ruin, the market economic system needs to retrieve with a steady market monetary value for all

merchandises, in context a rise in monetary values will non intend a rise in rewards as the monetary value for the tea will hold dipped in order to vie in the “perfect competition” between the tea pudding stones, intending lower rewards instead than higher rewards in order to seek and maintain company turnover with small discrepancy from the old years.