The Tea Industry and a Review of Its Price Modelling in Major Tea Producing Countries

Abstract

The global production and consumption of tea has been steadily increasing over the past decades. The tea industry has become a significant contributor to the economies of producing countries such as Kenya, Sri Lanka, India and China. Apart from its economic importance, the environmental and social importance of tea production has been recognised in the literature. However the industry is confronted by a number of challenges. These challenges include resource constraints, competition for land, unavailability of adequate labour, and climate change, as is noted in this article. All of the major tea producing countries have identified climate change as being a major challenge. Therefore, identification of the appropriate methods for modelling tea prices by incorporating a group of interacting time series variables such as price, production and weather variables to explain the dynamic relationships among these time series is important for producers. This article reviews and examines the approaches used to model tea price. In particular, various time series techniques are reviewed. The analysis clearly shows that quite a number of studies have been done on tea pricing. We found that VAR techniques have the ability to model the non-structural relationship of tea price alongside other time series variables which are endogenous and exogenous in nature. This paper also contributes to the existing literature by summarising the research undertaken on tea pricing to date.