The Coronavirus Impact on China's Tea Harvest

Tea workers in factories and fields don masks and pledge to follow rules of hygiene. In Yunnan, residents must scan an anti-epidemic QR code on entering public buildings. (Photo credit: Hunan Daily via Xuanet)
Tea workers in factories and fields don masks and pledge to follow rules of hygiene. In Yunnan, residents must scan an anti-epidemic QR code on entering public buildings. (Photo credit: Hunan Daily via Xuanet)

The coronavirus (Covid-19) outbreak, which originated in the city of Wuhan, China and is rapidly spreading, is causing logistical havoc in advance of the world’s most valuable tea harvest.

“China is reeling from the outbreak of novel coronavirus-caused pneumonia,” according to Cai Jun, secretary general of tea with the China Chamber of Commerce of Import and Export of Foodstuffs, Native Produce and Animal By-Products (CFNA). CFNA is an influential trade association that operates under the supervision of China’s Ministry of Commerce.

Hubei Province, an important producing region, remains under lockdown with 2,563 deaths, and 64,789 confirmed cases of the coronavirus. Globally the disease has killed 2,705 with 80,350 cases confirmed and 27,878 who recovered.

Enshi tea producers are the closest hot spot, about 500 kilometers west of Wuhan. Plucking generally commences March 15 on Wufeng Mountain. Enshi is a green tea region, one of the few that specializes in steamed green teas. Train and bus service was suspended in January, all 70,000 cinemas in the province were closed, and public gatherings were forbidden. Only grocery stores, gas stations, drug stores, and hospitals are operating.

Setbacks are not due to illness or deaths of tea gardenworkers; it is the result of a national effort to limit travel, closefactories, ban public gatherings and shutdown bus, train, air, and subways toprevent the virus from spreading.

CFNA was forced to postpone three teaconferences scheduled for March, and several tea fairs, including the springedition of the Global Tea Fair, are being rescheduled.

“As far as I know, Chinese tea people are allsafe and sound, which indicates that drinking tea helps to strengthenimmunity,” wrote Cai.

China's tea industry saw this coming, accordingto tea retailer Austin Hodge, founder of Seven Cups Fine Chinese Tea in Tucson,Ariz. Hodge, who imports tea directly from China, recalled the SARS epidemic in2003. The Chinese learned valuable lessons from that outbreak, which killed 774globally. “No tea is going to waste. They are not plucking if they cannotprocess,” explained Hodge, who praised the Chinese for "making all thenecessary adjustments."

“In rural tea country, the real issue isn't the virus; it's the lockdown and logistics. Everybody is local. They don't have to travel anywhere," he said. Hodge expects his first tea of the year to arrive on schedule in one to two weeks.

Tea worker in Guangxi Sanjiang County (Photo credit: Xincha)

Procedures at China’slargest tea company factory in Erhai are typical. The plant resumed operationsFeb. 13 as 700 workers were screened for fever, completed and signed a personalhealth commitment promising to wear masks, disinfect their hands and periodicallyvisit one of six health test points. Upon entering the factory, they scannedthe “YunnanEpidemic Prevention” QR code withtheir cell phones, activating a cell phone (WeChat mini app) that tracks theirmovement and warns employers if they have encountered someone who has come downwith the virus.

EffectiveFeb. 11, all Yunnan residents must scan a QR code to enter and exitpublic places, including residential complexes, markets, malls, hospitals, andpublic transit hubs. "No name, ID or other content is stored," andYunnan promises to destroy the tracking data once the virus is contained.

A factory manager estimated the increasedsecurity reduced productivity by 10%.

In the southern-most tea gardens where the harvest is just beginning, those who prune and pluck tea are required to wear masks andare not permitted to form groups. They must keep a minimum distance of 10 feet apartwhile working.

The China Tea Circulation Association reports specialtyharvests began Feb. 10 in Gaoxian in Sichuan and on Feb. 20 in southernZhejiang (Wenzhou and Lishui).

"Under the epidemic situation, while doing a goodjob of prevention and control, multiple tea-producing areas and companiesacross the country have also organized tea farmers to start the first batch of2020 spring tea picking," according to the association.

"We're not in picking season yet, so thevirus hasn't had much effect on the tea production and international trade.Although it does affect the sales, it's overall manageable," said Cai.

Retail Impact

“When most tea markets are not open, companies areencouraged to sell online and micro-businesses,” advises the Agriculture andRural Bureau of Yuzhou District as reported on the Sichuan News Network. Production of Chuancha in Yuzhou is projectedat 1,800 metric tons valued at more than $42.5 million (RMB300 million).

More than 500 million Chinese drinkapproximately 1.9 million metric tons of tea annually, according to the ChinaTea Marketing Association. The domestic tea market is valued at $18 billion.

During the crisis, overall retail sales arebeing stripped of $144 billion per week, according to China's Evergrande ThinkTank (as reported by Forbes).

The impact thus far is most significant incongested urban areas. Every province, including Tibet, has reported cases ofCovid-19, but tea regions were spared the initial brunt of the epidemic.

Here is a sample of the impact in China’s tea producing regions as of February 25: Henan, 1,271 cases, 19 deaths; Guangdong 1,347 cases, 7 deaths; Hainan 168 cases, 5 deaths; Anhui 989 cases and 6 deaths; Zhejiang reported 1,205 cases with 1 death; Jiangxi 934 cases, 1 death, Fujian reported 294 cases with 1 death, Guangxi has 252 cases with 2 deaths, Yunnan reported 174 cases with 2 deaths. (Image credit: Johns Hopkins University)

JohnsHopkins is tracking cases globally.

"Generally speaking, the spread of Covid-19 in tea growing areas is slow, and infections in neighborhoods and local outbreaks are comparatively rare. Covid-19 cases in other places such as Enshi and Shennongjia are still attributed to imported cases, and the risk of spread is relatively low,” according to Epidemiologist Dr. Liang Wannian, Beijing’s health chief. His responses to questions from reporters were posted by the State Council of Information Office in Beijing.

How Bad Could It Get?

In addition to tea and coffee, Yunnan is one of the most important growing regions for cut flowers. Fresh-cut flowers from Yunnan are exported to 46 countries and accounts for 70% of the market in China’s major cities. Like tea, harvesting flowers is time-sensitive, and Valentine's Day represented a significant but fleeting business opportunity.

The timing of this year's coronavirus lockdown could not have been worse, resulting in big losses due to a critical break in the supply chain as trucks, trains, and flights were suspended.

The magnitude of the problem became evident in early February at the Dounan Flower Market in Kunming, the largest fresh-cut flower market in Asia. During the period Jan 27 to Feb 5, trade volume in the market slumped 95% to $61,355 (RMB431,500). Sales were 4.78% percent compared to the same period in 2019. Dounan sold 6.53 billion cut flowers valued at RMB5.4 billion last year.

This wascompounded by the fact that 50 million consumers were confined to their homesin the Wuhan region and that offices nationwide were closed for as long as twoweeks beyond the traditional spring festival travel holiday. The auction wasshut down for several days and re-opened Feb. 10.

Growers earn $64,000 (RMB450,000) per hectare on average selling flowers for $0.20 (RMB1.43) per bloom. One-third of Yunnan's annual cut-flower revenue is earned in February, according to Wang Jihua, deputy director of the Yunnan Provincial Academy of Agricultural Sciences. Mr. Wang estimates the loss of Yunnan's flower industry, including supporting industries such as logistics, during the special period will reach RMB3 to RMB5 billion ($425,000 to $715,000).”

Transport options were cut by 90% during theheight of the lockdown and are only now being restored. Roadblocks preventedentire villages from access to larger cities and towns. Tea faces a lesscritical timeline―processing must begin within fourhours once leaves are plucked―but the logistics of transportationare the same.

Phil Orlando, Chief Equity Market Strategist and Head of Client Portfolio Management at Federated Investors told Bloomberg Newsweek the world's stock markets had not indicated the true impact on trade. "In my humble opinion, it will be bigger than people think," he said. It is "ugly" right now, hitting first-quarter corporate earnings, but based on the economic impact of the SARS epidemic in 2003, investors share the view there will be “a snapback” at mid-year, he said.

Orlando's prediction proved accurate as stock prices declined sharply this week in Europe, Asia, and the U.S. lowering expectations of a second-quarter economic recovery.

Looking Ahead

The last three weeks of February were the first in which the number of patients cured of the disease outnumbered those who contracted Covid-19. It is too soon to declare an end to the crisis, but progress is evident in China.

"The epidemic is under effective control due to the Chinese government's prevention and control measures," said Cai. During the lockdown, "Most people worked from home except those who work in the sectors responsible for the supply of necessities. We have full confidence and capability to win this fight against the epidemic,” he said.

Cai said China’s major tea companies “haveshown a dedication to fighting this virus by donating money and necessarysupplies to those affected areas.”

Sources: Bloomberg Newsweek, China State Council of Information Office, Xinhua, Tea Weekly

China’s Four Tea Growing Regions

It takes 80 million rural laborers in China to annually produce 2.56 million metric tonnes of mainly green tea on 3 million hectares of land. Their effort results in half of the world’s annual tea production of 5.2 million metric tons.

Domestic sales by volume are mainly of green tea, but many localities, including Quimen, Fuzhou, Wuyi, and Fuding (in Fujian province) and Pu’er in Yunnan Province, specialize in the production of high-value oolong, white, jasmine, black, and post-fermented teas.

The China Tea Marketing Association estimates 63.1% of domestic sales are from green tea; Pu’er teas represent 14% of sales; oolong represents 11.1%; black tea accounts for 9.9% of sales and white tea for 1.5% with yellow tea estimated at 0.4% in 2018. The Chinese will drink 670,000 metric tonnes of tea in 2020, for which they will spend $18 billion.

Tea plantation acreage has grown substantially since 2006 with most new plantings south of the Yangtze River valley in Guizhou, Yunnan, Sichuan, and Hubei provinces—the four best-known tea growing regions.

Jiangnan

Tea grown south of the Yangtze river spans several provinces.  It is called Jiangnan and includes Zhejiang, Jiangxi, portions of Anhui, and Hunan provinces. It is the largest tea producing region by volume. Hubei province is split with Wuhan north of the Yangtze and Enshi, south of the river near the Wufeng Mountains. Wuhan is 850 kilometers inland from Shanghai, which is at the mouth of the Yangtze.

Jiangbei

Tea grown north of the Yangtze (Jiangbei) spans Henan, Shandong and northern Anhui. Jiangbei is China's smallest tea growing region.

Huanan

South China is known as the Huanan growing region. This superior tea growing region spans coastal Fujian, Guangxi, and Hainan island. Fujian is the most important tea producing province by value.

Xinan

Tea in Southwestern China within the Xinan region is grown in Guizhou, Yunnan, and Sichuan provinces. The earliest teas are plucked in late February in the semi-tropical portions of this zone bordering Vietnam, Laos, and Myanmar.