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India Tea Prices Firming Up, Prospects Encouraging

According to a report published on India News, India's recession in the tea industry is showing signs of resurgence with prices firming up during weekly auctions, although rains have led to a slump in production in the first five months of the year as compared to 2006. “We are achieving average prices in the weekly auctions with a kilogram of tea being sold at Rs.60 which is about Rs.2.5 higher then what we got last year,” stated Dhiraj Kakaty, secretary of the Assam chapter of the Indian Tea Association.

India’s $1.5 billion tea industry has been in a slump since 1998 with prices and exports plummeting because of weak domestic demand and increased international competition coupled with poor quality teas being produced in the country. However, last year India produced a record 955 million kg, 27 million kg more than 2005. Exports went up by about 8 million kg to 200 million kg in 2006. “The reason for hitting good prices at the auctions is mainly due to very good quality tea being produced by India. Maximum stress and care is being taken to produce premium grade teas,” Kakaty told IANS. The northeastern state of Assam is considered the heart of India's tea industry with the state accounting for about 55 percent of the country's total annual tea production.

India, the world's largest tea grower from plantations in southern, eastern, and northeast highlands, aims to boost the overall exports with the industry body already setting up marketing bureaus in Cairo and Tehran. “We are getting queries from many countries and hope to do some good business this year,” Kakaty said. The union commerce ministry will organize an international tea festival in November. “We are expecting delegates from Pakistan, Iran, Egypt, the United Arab Emirates and the U.K. for the festival that is expected to help improve exports of tea,” the official said.

The central government will also implement a Rs.50 billion ($1.1 billion) package to help the industry replant tea bushes and boost quality.

National Coffee Association Announces Anti-Terrorism Initiative

United States - The National Coffee Association of U.S.A., Inc. (NCA) has announced that it is moving into the pilot phase of an initiative in support of the U.S. coffee industry's participation in the Customs Trade Partnership Against Terrorism (CTPAT) program of the U.S. Customs & Border Protection (CBP) department.

Participants in the Pilot Phase include NCA Members Starbucks Coffee Co., Volcafe USA, Atlantic (USA), American Coffee Corp., and Rothfos Corp. “The threat of terrorism has changed the stakes and the rules for American commerce,” said Robert F. Nelson, NCA president and C.E.O. He added, “NCA is taking the lead to protect the food supply as the industry adapts to new business realities. The NCA C-TPAT program will help the industry partner with government to enhance homeland security while easing potential burdens on commerce. NCA encourages all members of the supply chain to become part of this important initiative.”

The primary objective is to test out a proprietary Internet-based portal that will function as a registry of foreign suppliers and their C-TPAT related security practices. The Portal and registry are being developed in partnership with Intertek, a global leader in international trade management and assurance services. Importers seeking C-TPAT membership will utilize the NCA C-TPAT portal for efficient and cost-effective means of collecting and maintaining necessary documentation.

In addition to the supplier registry, the portal is designed to provide valuable information and tools to users to facilitate application to the C-TPAT program. The Internet platform combines NCA's extensive membership reach and knowledge of industry needs with Intertek's expertise in security inspection services and online security data collection in support of C-TPAT applications.

In February, NCA made a formal commitment to play a major role in strengthening and improving supply chain security across the U.S. coffee and global trade industry with this innovative initiative. In addition, the supplier registry in particular is estimated to result in overall cost savings to the industry by offering consolidated information on security practices of coffee supply chain companies.

NCA is developing its services in direct consultation with U.S. Customs & Border Protection. CBP has commented that a service like the one NCA is initiating will be a benefit to their efforts to promote participation in the C-TPAT program as well as contribute to border protection in general.

Local Tea Processors Weeping Over Yellow Tea

Vietnam - Farmers are rushing to pick tea leaves to sell to Chinese businessmen, which will be used to process yellow tea, while local tea processors are crying about the material shortage for domestic processing.

Tran Van Gia, deputy chairman of the Vietnam Tea Association, has voiced his concern about the material tea shortage. At the moment, Chinese businessmen are trying to collect as much tea as possible in Vietnam to process yellow tea, which will be used during the 2008 Olympics in China.

In the last two months, material tea markets in the north, especially in border and midland provinces, saw many Chinese businessmen collecting materials for processing yellow tea, which is favored in the market with more than one billion consumers. The Chinese businessmen collect not only dried tea but fresh tender tea leaves and rudimentary processing tools as well. This massive collection has led to abnormal price increases. In the Lao Cai province, for example, one kilogram of tea is selling at VND25,000 instead of VND15,000. At the end of April, the yellow tea processed by Shan Tuyet Suoi Giang tea was sold at VND90,000/kg at the Muong Khuong border gate, while Shan Tuyet Bac Ha tea was sold for VND75,000/kg at the Phong Tho border gate in Lai Chau province.

According to Gia, Hong Kong previously imported 1,500-1,700 tons of Vietnam’s Shan Tuyet tea every year to make yellow tea. However, Vietnamese dealers, who did not have extensive knowledge about yellow tea, bought the tea grown in midland provinces and put it out to dry in the sun to make it similar to yellow tea. Meanwhile, farmers, who could sell tea for good prices to Vietnamese dealers, picked tea leaves earlier which caused the yield to go down by 30%.

Gia said that the “yellow tea fever” had led to the overexploitation of the tea plant, which makes the quality of tea leaves worse due to the bad picking techniques.

He said that now Chinese businessmen refused to buy counterfeit yellow tea; therefore, 5-7,000 tons of tea have been left unsold.

Meanwhile, tea processing plants are seriously lacking materials to run. Many tea processors have been incurring debts as they have breaking contracts due to the material shortage, making many workers jobless.

The prestige of Vietnam-made tea has been seriously affected as foreign enterprises have turned their backs on Vietnam’s tea. A foreign company has sued the Song Lo and Nghe An Tea Companies for breach of contract. VTA has warned that if the situation cannot be improved and the ‘yellow tea bleeding’ continues, more plants will have to shut down.

Coffee Farmers Propose Plan to Self-Insure

Jamaica - Jamaica’s nearly 5,900 coffee farmers are mostly without insurance coverage, more than two years after Dyoll's collapse. The farmers have been attempting to woo a new provider, but since there is a risk associated with mountainside cultivation, so far, there are no takers.

Under Dyoll, some 500,000 boxes of coffee produced at the Mavis Bank, Wallenford, Moy Hall and other approved traders, were insured for US$1.25 per box under a scheme monitored by the trustees. “This is a high-risk area and given the many disasters over the past three years, insurance companies are reluctant to do crop insurance and the premiums being looked at are heavy almost not affordable,” said St. Clair Shirley, director general of the Coffee Insurance Trust.

In the meantime, the coffee farmers themselves are trying to sell to government a plan to self-insure, according to representative Derrick Simon, who said the proposal would require $60 million of public support to establish a fund. “Presently, with the start of the hurricane season, if some form of insurance policy is not put in place, then farmers would be left to their own devices,” said Simon.

Minister of Agriculture and Lands Roger Clarke is yet to reply to the proposal, but is considering it, said the coffee farmers' spokesman. It is expected that the farmers would pay premiums to build the fund.

Shirley said the trustees and the state-owned Coffee Industry Broad (CIB) have approached several reinsurers and are awaiting their response.

Dyoll was taken over by regulators in early 2005 after it became clear the company could not cover the damage claims from policyholders in Jamaica and Cayman. Two receivers, in the two jurisdictions - John Lee in Jamaica and Ken Krys in Cayman - were appointed by the court to wind up the insurance business. Just this week, after months of negotiations and legal challenges, coffee farmers began receiving compensation.

With the settlement of that issue, farmers are again worrying about their exposure to the next big storm, with no new insurance scheme in place to take up the slack left by Dyoll.

The lack of coverage was raised as a concern at the Jamaica Agricultural Society's 112th annual general meeting last Thursday, given the heavy storms expected this hurricane season.

Without insurance, the sector's shelter would have to come from the public purse, but on Tuesday Agriculture Minister Roger Clarke, said assistance was not a given.

Last year, government gave $40 million of support to the coffee producers, but the level of assistance is not standard, but dependent on available resources. “The ministry doesn't have the resources to act as a buffer for farmers in the event of a disaster,” said Clarke, speaking with Wednesday Business at his Hope Gardens offices in Kingston.

Meantime, the CIB is in the field collecting and collating all the information relating to production, since Hurricane Ivan's 2004 decimation of crops, in preparation for an insurance tender placement. “There is a level of difficulty in getting crop insurance though, a general reluctance right throughout the region to deal with this issue due to the vulnerability with hurricanes,” said Clarke.

JAS president Senator Norman Grant, last week urged the CIB and trustees to publicly advertise for an insurance provider. The new coverage, should be of a compulsory nature where all farmers are insured and must contribute to the scheme.

Tea & Coffee - July, 2007

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