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MeetingInternational tea prices: Insights into the nature of price volatility - CCP:TE 22/CRS 2 2022International tea prices are characterized by relatively elevated volatility, which constitutes a major challenge for producers and other market operators. The objective of this document is to identify and examine the nature, extent and implications of volatile tea prices, highlighting possible policy actions. We identify four major sources of price movements based on economic literature and the specific nature of the tea market. These are: 1) global economic activity, as a proxy for shifts in aggregate demand; 2) changes in net supply of tea, to account for tea-specific demand and supply shocks; 3) the value of the United States of America dollar (USD) with respect to that of other major international currencies; and 4) oil prices, as a proxy for energy costs. The applied empirical framework splits the effects of these four factors and estimates the extent of their contribution in explaining tea price booms and busts. Results indicate that the bulk of the price movements in the tea market is attributed to shocks that are specific to the sector, that is changes in the fundamentals of tea demand and supply. It should be noted, however, that the impact of the economic activity on tea prices was greatest in the first three months of 2020, coinciding with the onset of the COVID-19 pandemic and the resulting lockdowns and global economic downturn. Clearly, an effective way to reduce volatility is to bring about a permanently improved balance between supply and demand.
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Journal, magazine, bulletinDairy Market Review - Emerging trends and outlook, December 2020 2020
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No results found.The December issue of the FAO Dairy Market Review highlights the emerging trends and outlook. It indicates that international dairy prices are rebounding slowly, but remain below their pre-pandemic levels. Considering the overall dairy product price movements from January to November, only cheese quotations registered an increase, reflecting persistent and robust import demand from Asia and internal demand in Europe. Despite COVID-19-related market disruptions, world milk production is rising, mostly in Asia, but also in Europe and North America. In the meantime, international trade in butter, cheese and whole milk powder could expand, but skim milk powder trade (SMP) may contract.
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