Iran’s Domestic Tea Production Climbs 60%

Domestic tea production is reinvigorated in Iran, the world’s fourth-largest tea market by volume and one of the top tea importers in the Middle East.

During the long difficult period under sanctions, the nation’s tea factories fell into disrepair. Land use permits to grow tea on at least 7,000 hectares of  land  in Gilan were changed to grow more essential crops. [SG1]Tea imported at competitive rates far exceeded domestic production and smuggling, which has been prolific over the past 20 years, remains a serious issue. In January, the government lowered import tariffs for eight basic commodities, including tea, by as much as 55%.

Now that they have access to foreign equipment, local growers are modernizing and repairing as many of the nation’s 105 tea factories as practical. Last week, the Financial Tribune reported 31,200 metric tons of dried leaves were produced during the Iranian calendar year (March to February).

Mohammad Vali Rouzbehan, head of the Iran Tea Organization (ILNA), announced that production increased by 60% in 2016–17 compared to the previous year. He estimated the crop was large enough to meet 28–29% of domestic demand.

Rouzbehan said that 140,000 metric tons of fresh leaf was purchased from local farmers by the government. This amounts to about 28,000 metric tons of processed tea as fresh leaf converts to processed tea at an average ratio of 5:1. The government guarantees the purchase of many crops, including tea, to build its strategic reserves and control prices.

The good news in Iran has a ripple effect in Kenya and India, both countries [SG2]where growers rely on Iran as a buyer. Tea is normally traded in dollars. In defiance of sanctions, India established a market for tea export based on rupees as bankers were not allowed to accept dollars. Now that Iran has switched payment systems back to dollars, India is at a currency disadvantage. As a result, tea shipments to Iran have been suspended.

Iranian importers said rupee trade is likely to come to a halt on March 31, according to Binod Bansal, a leading Indian tea exporter to Iran. Bansal told the The Economic Times the central banks of the two countries need to find a solution “otherwise Sri Lankan tea would make major inroads into Iran.”

The newspaper reported India will send a delegation to Iran in April to sort out the issue.

India’s tea exports fell last year overall but exports to Iran were up from 15,610 metric tons to 17,000 metric tons cumulative (January 2015 through January 2016), according to the International Tea Committee (ITC). Kenya sent 4,727 metric tons to Iran during this period. Sri Lanka exported 2,275 metric tons of orthodox tea to Iran in 2016, according to ITC.

Sources: ITC, The Economic Times, Financial Tribune