Like the well-known tune, prices will rise inevitably, for the following reasons:
West Bengal tribes are in foment. Last year, and early this year, they demanded a change in the Darjeeling brand logo, and the implementation of a tax on buyers.
While the government and planters rejected the call for an excise tax, it's clear that the Gorkhaland (Sikkim hill tribes) are wanting autonomous control over local government policy and funding, calling themselves the '29th Indian State'. They have twice attempted crippling strikes of services and tea plantation harvest within the last year. I don't think this political problem is going to quietly go away.
Meanwhile, India and the UK/Europe have begun negotiations to develop and ratify quality 'definitions' on Darjeeling teaa. For every pound sold, three more pounds are labeled as 'Darjeeling', even though the content is a blend with lower quality teas or with Nepalese teas that taste similar to Darjeeling hills teas. India wants explicit definitions to protect brand name (Assam, Darjeeling, Nilgiri) because they fear loss of revenue from illegally labeled teas. A Japanese research institute has also reportedly isolated signature flavor/smell of Darjeeling teas, provoking fears that other tea growing areas may attempt to produce Darjeeling-like teas in the future.
And then we have the present issue of climate effect (prolonged drought) that will impact first and very possibly 2nd flush crop yield and quality.
This climate anomalie, 2007-08 cold phase ENSO, depressed ocean temps in the North Indian Ocean and altered general precipitation patterns in IndoAsian subcontinent. The ColdPhase ENSO reformed in Fall 2008 after having subsided in summer to net neutral conditions. This influx of cold water resulted in excessive wet and cold in the south (where cold and wet air masses collided). These storms adversely affected Autumn harvest in Sri Lanka. Ethnic warfare disrupted commerce as the government brought down heavy military strike action on the Tamil Tigers.
In Fall 2008, the resulting movement of drier air along the Indian east coast towards the north into the Lower Himalayan foothills; this dry air caused a drop in seasonal precipitation in October, producing daily shortages by late November that persist to the present.
Dry conditions thwart the setting of new leaves on tea plants during the cooler and wetter conditions of Fall/Winter in the foothills of Darjeeling.
So we have: a government/international trade crack-down on illegal marketing of the Darjeeling brand, tribal worker unrest, falling government tax revenues and support of utilities and consequent shortages of water and power to tea plantations, and climate-induced crop failure.
Be very, very glad if prices don't climb precipitously, shortly.
Since Ilya mentioned flavored black tea, another observation:
The VAST majority of new consumer interest in teas has centered on flavored black and on healthful green and oolong teas, to increase market share among unsophisticated consumers who are unfamiliar with quality teas, have zero palate conditioning towards teas in general, and thus prefer 'doctored' (flavored) teas, that function like tisanes. Low quality oolongs and green teas have been marketed specifically for weight-loss and health-improvement, respectively.
These teas are 'blender' types, average-to-lower quality than those of single source (gardens. estates, farms) teas. Synthetic and natural extracts, flowers and berries provide the majority of perceived flavor signature. Thus, flavored teas now dominate sales volume within the retail trade.
This ramp in interest in flavored teas has ultimately hurt quality tea sales, by encouraging tremendous growth in planting and production of inferior plants to meet impressive consumer demand for "heathy teas", especially after the post 9/11, Katrina, and Eastern Europe stability drain/recession began to fade in the US and Western European markets, and demand began to also rise in Asia (economic boom of the past decade). In recent years, dozens of reports of beneficial effect of tea drinking on body fat, cancer and chronic disease risks, including neurodegenerative respiratory and cardiovascular diseases. Aggressive marketing of 'health teas' has played a significant role in expanding tea consumption throughout the world.
We also have an underlying issue - that which will not be spoken in public - of middlemen, and in some cases colluding vendors, that seek to manipulate the market, to keep supply low and demand up, even during tough economic times. This observed trend is true mainly for quality teas. Supply of some of these teas would be expected to be abundant due to increased production of mainstream cultivars and drop in consumer discretionary income in the past two quarters.
As I have alluded to in the past, this pattern is true for many products, mainly food commodities, paper and plastic products, oil and gas.
Gas futures remain at very low pricing as of this week due to very weak demand and cashflow shortages. Lo and behold, gas prices at the pump have recovered 30% in the last month due to cut in global production, necessary to "stabilize eroding price" (read: gouge the West to shore up "falling revenues" for oil producing nations and the oil production cartels).
Meanwhile, finished oil products (lubes and diesel) have mysteriously gone UP, ins ome cases by >40% in the past 6 months. The cause? Distributor collusion to fix prices. No government has the balls to even investigate, their hands being full propping up a criminally negligent investment and banking industry.
Wasn't that JUST DUCKY that the US government dumped nearly all of its massed oil reserve supply in early 2008, and again in winter 2009? That helped boost oil prices to exorbitant levels by mid-2008 and a more recent return to higher pricing in early 2009. This pattern is of serious concern to consumers, as the price of food and home heating/energy has failed to drop with declining crude futures in late 2008 and early 2009.
Each and every major oil producer posted record profits in 2008, with a very modest decline in the fourth quarter, a telling sign of just how BIG the profits were in the first 3 quarters.
Going back to tea:
So we also have: suspected excess of teas that store well, sitting in cheap warehouses in the distribution grid, waiting for cash and credit market recovery. Demand has declined, and supply has yet to slow as farmers bring in crop under contract. Tea retail pricing has risen steadily, despite record supply, 2005-2008, suggesting a decoupling of demand from supply, clouded by dominant sales of flavored and 'heath' teas.
Welcome to the world of globalized supply and demand.
"On paper, it looked good".
Edited on 3/4 to improve readability.