MISIONES, Argentina
Argentina, one of the world’s top tea exporters and a primary supplier of black tea for U.S. consumption, is experiencing a troublesome harvest now well underway. In 2018, Argentina was the largest supplier of tea by volume to the United States.
During the first eleven months of the year imports to the U.S. from Sri Lanka grew 22% by volume and 12% in value; imports from India increased 10% in value and tea imported for consumption from Canada increased 32% in volume to 2.4 million kilograms. During these months black tea volume from Argentina declined by 11% to 41 million kilograms. Year-to-date the percentage of Argentine black tea decreased to 36.7% of all black tea imports, according to statistics compiled by the USDA Foreign Agricultural Service (FAS).
The value of tea imports from Argentina declined 12% to average $1.33 per kilogram, a trend dating to 2014 when the average value of imported Argentine teas was $1.71 per kilogram, according to USDA’s Foreign Agriculture Service data. The U.S. imported $54.7 million through November compared to $62.4 million through November 2018.
In 2018, Argentina was the largest supplier of tea by volume to the United States at 49 million kilograms, down from 55 million kilograms in 2015, 53 million kilograms in 2016 and 52 million kilograms in 2017.
Since the 1960s Argentine growers have produced CTC (cut, tear, curl) black tea grades used to make iced tea for the U.S. market. The U.S. consumes about 98% of Argentina’s production. Argentina’s tea industry retains significant capacity, but domestic consumption is low. As the average export price per kilogram has declined many growers have abandoned tea. Multinationals operating in Argentina, including James Finlays, are no better situated than cooperatives, some of which represent hundreds of smallholders. Finlays, which acquired Casa Fuentes SACIFI, Argentina’s largest tea estate in 2014, has since cut staff. The estate operates five processing plants with annual output of 27 million kilograms of which 90% is exported.
Like most of the world’s top producing countries, Argentina is experiencing a highly competitive export market awash in tea at prices at or below the cost of production. However, Argentina is at a greater disadvantage than China, India, Japan, Kenya or Sri Lanka. Since the Falklands War closed the UK to trade, virtually all the tea grown there is produced for North American consumers drinking iced tea blends in tea bags and ready-to-drink teas.
José Luis Garay, Argentina’s Minister ofAgriculture and Production, explained the current situation reducescompetitiveness of the nation’s “tealera” (supply chain) “making our tea moredifficult to place in certain markets.”
“In addition, we produce a lot of tea, but weconsume little in the country. While in Chile one kilogram of tea isconsumed per inhabitant per year, in Argentina only 160 grams (per inhabitantper year) are consumed,” said Garay. “That implies that only 2% of the crop isdestined to serve the domestic market,” he told Bichos de Campo.
A review of the FAS Global Agricultural Trade System (GATS) data shows five-year declines in both volume and value. During the first ten months of the year imports for consumption in the U.S. declined to $55 million, compared to the same period in 2018. In 2015 imports were valued at $85 million. Volume for U.S. consumption has since declined by more than 6 million kilograms annually.
Last year the U.S. purchased $71 million of the $90.5 million of Argentina’s tea exports ($69.7 of the $71 million was consumed domestically, and the remainder re-exported as blended tea). This represents a sharp decline of 20.5% since 2014.
Globally Argentina ranks No. 16 on the list of top tea exporting countries, accounting for 1.2% of global production in 2018. The nine tea producing countries on the South American continent, including the nations of the Caribbean, export 1.3% of the world’s tea.
Argentina’s tealera exports about the same amount of teas as Malawi (ranked No. 15 at $91.5 million) and is ahead of Uganda which exported $88.8 million worth of tea in 2018 according to The World’s Top Exports which draws its data from the U.S. Government, the United Nations and FAO and the International Trade Center.
Complex Crisis
Misiones and adjacent Corrientes are hilly landlocked provinces, located about 1,000 kilometers north of Buenos Aires. The Misiones plateau is bordered by Paraguay and Brazil to the north, east and south and is home to one million people, many of whom are indigenous.
Roberto Swier, manager of the Picada Libertad cooperative, inMisiones province, Argentina’s primary tea-growing region, explained thatweather conditions, while not ideal, are the least of the industry’s worries.
Inan email to World Tea News, Swier wrote, “The situation of tea inArgentina is very complicated, I think it is the worst crisis since I canremember.”
“Ourpeso devalued strongly against the dollar, but contrary to what was expecteddue to government-imposed export taxes,” he said.
“Thereis a lot of tea and few sales. Prices fell and the small and medium producersare disappearing. It is estimated that of the initial 8,000 producers only4,000 remain,” Swier explained. “Each year there are less and less. More than4,000 hectares of tea is abandoned by small producers or eradicated.”
“Asyou can see, everything is very bad and we have a hard time associating todevelop new ideas and look for new markets,” he wrote.
To compete, growers have enlarged their estates and certified much of their crop as sustainable. Half of the tea grown in Argentina is third-party certified by organizations that advocate conservation and the reduction of pesticides, herbicides and heavy use of commercial fertilizer.
HaltedExpansion
London-basedJames Finlays in 2014 purchased Argentina’s largest tea estate company. The estategrows tea on 2,000 hectares and operates five factories where they process,grade, blend, and pack 27 million kilograms of black tea, mainly to NorthAmerica where Finlays has offices and research facilities in Rhode Island.
Casa Fuentestea is all Rainforest Alliance certified, pesticide-free, and particularly wellsuited to the production of tea extracts for the ready-to-drink sector in the U.S.according to a company press release issued at the time of the acquisition.Finlay’s group managing director Ron Mathison said “Finlays is already a marketleader in the delivery of tea and coffee extract solutions to the food andbeverage business sector in the U.S. This acquisition will not only provideassurance of supply of suitable raw material, it will provide Finlays with aplatform for research and development, new product development, and innovationin delivering custom specific tea blends.”
“WhenFinlays bought Casa Fuentes, the largest tea producing and processing companyin Argentina, we thought things would balance out among the four largestmultinationals. However, they closed a plant, many people were fired, andprices fell to unacceptable levels,” wrote Swier.
Finlays operates tea estates in Kenya, Sri Lanka as well, earning $545 million through December 2018, an increase of 7.8%. During a recent earnings session officials said restructuring was carried out in Argentina to reduce costs. “The resultant cost savings are expected to return Argentina to profit in 2019,” the directors said.
Transition to quality
Independent growers and small cooperatives like Picada Libertad are now focusing on growing better quality tea.
Cultivars suited to iced tea produce bright colors and do not cloud when chilled. These teas are ideal for mixing with fruit flavors like foodservice favorites raspberry and peach. Hot tea producers prefer highly aromatic cultivars and tea processing that maximizes taste. Argentina is a terroir in which many different cultivars thrive.
Asia Sherman, writing in Food Navigator, describes a partnership between the Solidaridad Network and S&D coffee and tea, a U.S. based supplier of foodservice beverages. More than 100 smallholder Argentine tea farmers supplying S&D are Rainforest Alliance certified, writes Sherman.
“One of the focus points for Solidaridad and its partners is to create awareness among farmers and provide support to preserve forested areas within farms as 84% of the native forest is on privately owned land. The Misiones project includes the preservation of 1,175 acres (475 hectares) of it,” according to Solidaridad.
Arnoldo Holzmeister, one of the tea farmers who produces sustainable teafor S&D, told Solidaridad that farmers using traditional methods ofcultivation tilled annually, emphasized monoculture plantings and reliedheavily on fertilizers and pesticides.
Growers now sow grass between plots to prevent erosion and retain soiladditives.
“At the beginning of the certification process five years ago, Arnoldo averaged about eight tons per hectare per season,” said Solidaridad. “Producers who adopt good fertilization and land management plans can double those yields in five years.”
Picado Libertad employs the same best practices but Swier observes compliance is costly. High yields are not as critical as higher prices at the farm gate.
“Weare required to maintain Rainforest Alliance certifications and we do it withgreat effort, but nobody pays the increase in costs that it means,” wrote Swier.
Heapplauds Solidaridad’s efforts to encourage sustainable practices.“The people of the Tea 2030 program were also around, and the conclusions arevery interesting, but certification is obviously for another world. Theproducers of tea in this part of the world are having a bad time and thedifference in profit is being left in a few large ones and especially in themarketing sector,” he wrote.
Swierexplains small exporters are trying to associate to achieve volumes andconsistent quality essential for export, “but the international market is verycomplicated, even more so because they are all selling to the United States,which is the best known and theoretically the easiest.”
“Germanyis very demanding and concerned with the presence of alkaloids,” wrote Swier.Planting ground cover to hold soil can encourage undergrowth that isaccidentally incorporated in the harvest. Germany then rejects the loads ifthey rise above acceptable minimums. The result is increased labor costs fromthe start,” he said.
In recent yearscomprehensive analyses of tea sampled in the Berlin retailmarket revealed unexpected high amounts of pyrrolizidine alkaloids in herbaland teasand brewed camellia sinensis. Studies later included spices andhoney. Alkaloids are produced by a wide range of organisms including bacteria,fungi and plants. Alkaloids uniformly evoke a bitter taste, a few are toxic.
CleanSustainable Tea
Argentina producessome of the cleanest tea in the world.
“Misiones has 52% of thecountry's biodiversity at 30,000 square kilometers, with protected areas inalmost two thirds of the provincial territory, and in that rest of the third wedo productive activities developing afforestation, yerba mate and the tea, allactivities that link production with our people in small plots,” said Garay.
The Ministry ofAgro and Mission Production guarantees a price of $3.15 per kilogram at thedryer (processing factory) with an additional 0.30 cents from lots certifiedunder the Good Agricultural Practices (BPA).
Prices are tied tothe currency value of U.S. dollars so that variations of 5% automatically raisethe price guarantee. “Ifthe dollar undergoes a modification greater than 5%, during the period Jan. 1to Feb 28, the base price will be updated as of March 1 and this price is inforce until the end of the harvest, which is May 31,” according to Garay.
In 2016 Argentinaannounced amajor project to implement food quality management for tea making at the fivecooperatives and eight Argentine SMEs (small and medium enterprises) that makeup a tea cluster that harvests about 90% of the tea grown in South America. Last December Misiones promoted “Argentine Tea Week” both in Puerto Iguazúand in Buenos Aires.
According toGaray, the objective is to revalue the properties of tea and to promote itsconsumption. "People must know the benefits of missionary tea andconsume it more," he emphasized.
Garay highlighted the quality and positioning of Argentine teain the world and added that “the great challenge we have as a government andwith an important group of industrialists is to see how we operate with ourproduct in the international market.”
Sources: Food Navigator, Solidaridad Network, STiR coffee and tea,
Bichos de Campo. James Finlays