For local tea producers, 1997 a bad year

For local tea producers, 1997 a bad year

By Sylvia Gratia M. Nirang

JAKARTA (JP): This year has been considered a bad year for
Indonesian tea, as the output is estimated to drop and the
business is facing a land shortage.

Executive secretary of the Indonesian Tea Association Moeljono
Partosoedarso told The Jakarta Post that Indonesia's tea
production was expected to fall sharply by over 20 percent due to
this year's severe drought caused by the El Nino weather
phenomenon.

"We estimate output to be slightly over 110,000 tons or down
about 20 percent from last year's output of 144,000 tons,"
Moeljono said.

He said East Java, one of the biggest tea-producing areas in
Indonesia, was the most affected province. Its tea production
dropped by about 40 percent this year, also due to the drought
caused by El Nino.

El Nino, named after the Christ child by Peruvian fishermen,
is a phenomenon which causes unusually warm Pacific Ocean
temperatures off the coast of South America and occurs every two
to seven years.

It normally peaks around December and can affect weather
conditions worldwide.

But this year, the phenomenon arrived early and nearly matched
the century's worst El Nino in 1982/1983, which blighted crops in
Indonesia, Australia, the Philippines and southern Africa after a
blistering drought.

Indonesia is currently the world's fifth biggest tea producer,
producing about 144,000 tons last year.

Indonesia's main tea-producing areas are West and East Java
and North Sumatra.

Indonesian tea producers are also facing difficult times due
to high pressure placed on them by property developers and other
agricultural commodities.

"Some private and small estates have been converted into
residential areas and horticultural areas," he said.

But he declined to give further details about the total
acreage that had been converted.

According to the association's data, tea plantations in
Indonesia currently cover about 160,529 hectares. About 61,464
hectares are owned by small plantations, 54,795 hectares by
state-owned plantations and the remaining 44,270 hectares by
private estates.

The productivity rate of state-owned tea estates has been an
average 2.3 tons a hectare per year since 1992, against the small
holders' productivity rate of less than 0.5 tons per hectare.

"Some tea companies and exporters no longer consider the tea
business profitable, so they change their businesses into more
profitable ones, such as ones dealing with horticulture or palm
oil," he said.

"A lot of private tea estates have been neglected by their
owners because the owners do not want to spend money to maintain
them," he said.

"It will threaten tea development in Indonesia in the coming
years," he said.

Moeljono estimated next year's tea output would remain under a
cloud due to the severe drought and the shrinking tea plantation
areas.

"I estimate Indonesia's tea production will continue to drop
at least 10 percent due to the prolonged dry season and high
pressure on tea business," he said.

The London-based International Tea Committee's data puts 1996
world tea output at 2.61 million tons, compared to 2.58 million
tons in 1995.

India ranked first last year with an output of 780,034 tons,
followed by China with 593,386 tons, Sri Lanka with 258,969 tons,
Kenya with 257,162 tons, Indonesia with 144,000 tons and Turkey
with 114,540 tons.

Export

Although Indonesia faced a decline in tea production this
year, its tea exports were estimated to remain stable at about
100,000 tons, Moeljono said.

He explained that Indonesia's tea exports were estimated to
remain stable because the country's per capita tea consumption
was still very low, at about 200 grams per year.

"A habit of Indonesian families is to use the same tea bag
several times over to make drinks," he said.

The country's export of tea from January to May this year
totaled US$52.92 million.

Last year, Indonesia exported 101,532 tons of tea, worth
$112.34 million. Some 97,200 tons of which was black tea and the
remaining 4,325 tons green tea.

About 23,500 tons of tea was exported to Pakistan, 11,000 tons
to the U.S., 10,400 tons to the United Kingdom, and 10,000 tons
to Russia. The rest was sent to other European countries and the
Middle East.

Moeljono said major tea producers, like India, Sri Lanka,
China and Kenya, did not consider Indonesia a threat because it
only accounted for 5 percent of the world's total output and 7
percent of the world's total exports.

Although Sri Lanka is the world's third biggest producer after
India and China, the country is the biggest tea-exporting country
in the world.

He said some of Indonesia's well-known brands of tea also
included some imported Chinese tea mixed into them.

"Some tea producers want their products to be exclusive, so
they mix them with Chinese tea for a different taste compared to
other brands. It's common in high-class tea products," he said.

Prices

Moeljono said tea prices in the world market were increasing
due to a decline in output of some major tea-producing countries
like Kenya, India and China.

The drought had also damaged tea plantations in Kenya and
India and some floods had done some damage earlier this year in
China, he said.

He said average tea prices had increased 50 percent in two
years, over $2 a kilogram this year from $1 in 1995, at the
Jakarta tea auction.

"High quality tea sold for $2.50 a kilogram this month," he
said.

Tea demand in the international market has significantly
increased in the last few years and the surge in demand has
pushed up commodity prices.

He said tea prices in the local market were also being kept
high by the sharp decline of the rupiah's value against the U.S
dollar.

The monetary crisis, triggered by the devaluation of the Thai
baht in early July, has caused the value of the rupiah to drop by
more than 50 percent against the dollar.

He said medium quality tea was about Rp 20,000 per kilogram
while low quality was Rp 10,000 per kg in Jakarta this month.

He said some high quality tea had been sold in the local
market this year, as some local tea industries produced high
quality tea.

"It's a good development, because in the past few years, high
quality tea has always been exported," he said.

But he predicted a fall in tea prices next year due to the
increase in production in some countries which were unaffected by
El Nio, like Sri Lanka and Egypt, and the decline in demand in
some European countries and developing countries, like Pakistan,
Iran and Saudi Arabia.

Policy

Moeljono said Indonesian tea businesses would continue to face
a difficult period next year.

He said the government has stopped its efforts to encourage
tea output and export due to the currency crisis.

"During the current monetary crisis, the government is
focusing its efforts on boosting the export of commodities which
have very high potential and value," he said.

He said the government had stopped supporting tea production,
a decision which had made tea businesses suffer.

The secretary-general of the Ministry of Agriculture,
Sjarifuddin Karama, said earlier this year that the government
would continue its policy of restricting the expansion of tea
plantations despite an increase in world demand.

"The restriction will remain in effect for an indefinite
period of time," he said.

The government has prohibited state-owned and private estates
from opening and expanding or opening new plantations since 1992
in a bid to maintain tea prices, which at that time had a
downward trend.

Table: Indonesia's production and export of tea, 1991-1997

Year Production Export

(tons) Volume (tons) Value (US$1,000)

1991 133,421 110,218 143,130

1992 145,685 121,243 140,823

1993 136,588 123,926 155,696

1994 135,807 84,915 96,091

1995 145,422 79,297 87,709

1996 144,000 101,532 107,380

1997* 110,000 100,000 120,000

* Projected