Rooibos prices expected to rise
Business Day - Nov 23rd 2011, 09:29
Insufficient crop production due to below-average rainfall is expected to push up prices of rooibos tea during the festive season
Although good harvests between 2006 and last year resulted in a glut of the popular beverage, a combination of growing domestic demand, lower rainfall and declining production volumes have led to production volatility and resultant price fluctuations in the industry.
Willem Engelbrecht, the South African Rooibos Council’s director for cultivation research and producer affairs, said prices last year dropped until production costs exceeded farm-gate prices. However, declining production volumes this season were likely to lead to upward pressure on rooibos prices.
This is good news for farming communities as the industry is a significant employer in the rooibos growing region of Cederberg and surrounding Western Cape areas .
Ernst Janovsky, head of Absa Business Bank, said the higher price of rooibos would mean job retention rather than new jobs.
The higher rand exchange rate would also benefit the rooibos sector immensely in terms of exports, but he said that higher volumes were critical to sustain exports.
Mr Engelbrecht said unpredictable production patterns and security of supply were some of the issues that the industry body was seeking to address through a series of local and international studies.
"Both domestic buyers and importers want continuity of supply and relative price stability. While there are some factors such as the weather which we can’t control, improved production data and forecasting should go some way towards reducing volatility."
The council claimed yesterday Rooibos was the only growing segment of the local tea market and it represented about 22% by volume and 24% by sales.
Over the past decade average annual production was 10500 tons, but it is cyclical and influenced by weather. The best crop yet was in 2009 at 20000 tons. This year’s crop is expected to be about 9000 tons, the body said.
About half of tonnage produced is expected to be consumed locally and the remainder exported; mostly to Germany, where most of Europe’s tea merchants are based. Total market demand was expected to be about 12000 to 13000 tons.
Mr Engelbrecht said the Dutch government had provided the Rooibos Council with funding for research to enable better production, supply capacity and market price forecasts.
According to the council, there are about 450 rooibos farmers on about 50000 ha. The industry provides about 4500 jobs, with most of the work done by hand, mainly by unskilled or semiskilled workers.
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