Economic Factors Affecting Tea Production
Tea is a major cash crop produced in several countries such as Kenya, Sri-Lanka, Vietnam, China, and Indonesia. Many people across the world cannot think of a life without consuming tea. However, there are several economic factors affecting tea production in the contemporary world. These factors are affecting both farmers and even major tea companies in the world.
One of the major economic factors that affect tea production is monopoly by the large tea companies. For instance, Unilever owns Lipton, Twinings, Brook Bond and PG Tips, Tata Global Beverages and Finlays have come up with competitive strategies for protecting their long-term futures in the tea business. These strategies ensure that the companies can always access tea at affordable prices without allowing other companies to venture into the market.
Unless this monopoly is managed properly, the future of tea production will remain unpromising. The tea industry needs to be managed properly to ensure that other players can venture into the tea market successfully. This way, farmers will be able to sell their tea at high prices which will motivate them to produce more tea.
Competition in the tea industry can have both positive and negative effects. For instance, increased competition in
the markets can boost the price of tea at the auctions because more buyers want to purchase tea of a country. This implies that farmers will get more returns from the tea that they produce and offer for sale in the market. Going by this perspective, competition in the tea industry should be encouraged.
On the other hand, competition in the global market can negatively affect tea production. This is because when more countries produce tea there will be an oversupply in the market. This will affect prices of tea negatively and farmers will not be motivated to produce more tea. Thus, competition for tea in the market is good because it causes an increase in price while competition in tea production affects prices negatively.
Other economic factors affecting tea production include delayed payments and funds mismanagement. Farmers are unable to plan for their earnings and re-invest them in the tea industry to boost production when payments are delayed. Mismanagement of funds by farmers and factories via which they market their tea also affect tea productions.
For instance, if money set aside for the development of feeder roads is mismanaged, these roads will not be developed. This implies that green leaves of tea will not be collected on time which can cause damage or reduction of quality because tea is a perishable commodity that must be delivered to a processing factory quickly.
Fluctuation of tea prices in the market also affects tea production in most countries. This is because when the prices fluctuate, farmers may get low payments than they expected and this in turn affects their morale to produce more tea.
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