The downside of rooibos' long shelf life - knocking prices and hurting farmers
The Western Cape's rooibos farmers are bracing for the impact of an expected surplus of supply this year - the third year in a row.
Martin Bergh, MD of Rooibos Ltd, explains the cyclical challenges the industry faces.
The company is the largest processor of rooibos in South Africa.
How do you get an oversupply of rooibos exactly? Bruce Whitfield asks on The Money Show.
That's simple - anything that has a price that's too high for a while will induce an oversupply of the commodity.Martin Bergh, MD - Rooibos Ltd
Rooibos is grown in one small spot in the world... it's a dry-land plant... so it's production is going to be cyclical by nature.Martin Bergh, MD - Rooibos Ltd
If you go through a dry spell your production goes down and prices go up. Rising prices induce more planting... Then you get some rain... production is stimulated and you end up with over-production and prices come down!Martin Bergh, MD - Rooibos Ltd
Does the industry then not need to grow its markets?
You can only do this if you have supply, Bergh points out.
The stats are 70 years old. In the 70 years the demand or consumption of rooibos has grown... Production has gone up and down in that time but in the last few years consumption has actually stagnated.Martin Bergh, MD - Rooibos Ltd
A lack of supply together with high prices stagnated consumption. Now prices come down; there will be oversupply again and the consumption of rooibos will slowly go up again.Martin Bergh, MD - Rooibos Ltd
When it comes to agricultural products, surpluses normally solve themselves as the product decays, he says.
Think of fresh produce like tomatoes, which will eventually start to rot.
But rooibos is different.
Even black tea and coffee don't last - they go off. Rooibos has an indefinite shelf life if it's stored well.Martin Bergh, MD - Rooibos Ltd
You should look at the average rooibos price through a full cycle. Whether it's the farmer or the processors or the branders, if you buy or store when prices are low you can keep that tea until prices are high.Martin Bergh, MD - Rooibos Ltd
Listen to Bergh's explanation in the audio below:
This article first appeared on CapeTalk : The downside of rooibos' long shelf life - knocking prices and hurting farmers
Source : https://previews.123rf.com/images/pixelsaway/pixelsaway2010/pixelsaway201000056/156945047-rooibos-red-tea-a-glass-cup-of-a-hot-drink-and-loose-leaves-tea-made-from-the-south-african-red-bush.jpg
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