The Indonesia Tea Board (DTI) forecasts a potential decline in Indonesia’s share of the global tea market this year given flat output due to declining prices and the increasing conversion rate of tea plantations.
“We rank sixth in the world for tea exports today, but it’s very possible that we’re going to be the seventh by the end of 2009,” DTI production department head Insyaf Malik said during a press conference on the upcoming tea and coffee exhibition on Friday.
“Our market share has been declining since 2003. Back then we had around 5 percent of market share while today we can only secure around 3.9 percent,” said Malik.
Indonesia markets around 60 percent of its tea production capacity to the international market with around 51 percent of exports destined to Europe and Russia.
Malik argued the decline in the share was primarily attributable to stagnant output.
“While global tea production is constantly increasing, our production has remained at around 150,000 tons per year during the last five years,” he said.
DTI data shows the flat output is caused by a combination of factors, including fluctuations in tea prices, which discourage farmers to plant the crop, and increasing conversion of tea plantations for industrial and property use.
This is evident as the plantation area has shrunk to 133,000 hectares last year from 136.000 hectares in 2006, according to the DTI.
“The industry players seem reluctant to invest in area expansion because, frankly, the tea business has not been very profitable in the last five years,” Malik said.
However, Malik is upbeat that the industry could increase the value of exports despite flat output.
“We believe that because of potential increases in the prices for the commodity, export value is likely to reach US$140 million this year from $135 million last year,” he said.
Output is forecast to reach as much as 153,000 tons this year. But if there is a drought then output will only reach 145,000 tons, according to Malik.
However, DTI marketing and promotion head Tridjoko Subandrio said the country’s tea industry would face other stiff challenges with the planned signing of a free trade agreement between the Association of South East Asian Nations (ASEAN) with India during the upcoming ASEAN Summit in Thailand on Feb. 27.
“From our point of view, the deal is more like a challenge rather than an opportunity,” Subandrio said.
As the second largest tea exporter after China, India is one of the main competitors in the global tea market for Indonesia.
Subandrio said that DTI would encourage tea producers to focus more on increasing production for domestic consumption.
“Our research shows that an Indonesian only consumes 300 grams of tea per year. We should find ways to promote tea as a lifestyle product and hopefully we can increase local consumption to up to 600 grams per head per year,” he said.
Source : www.thejakartapost.com