In South China, the recent drought has affected 61 million residents and 5 million hectares of crops in Yunnan,  Guizhou,  Sichuan,  Guangxi and Chongqing, the official Xinhua News Agency said, citing the Ministry of Civil Affairs.

Rain began falling at the very end of March.

It’s not just Puerh Tea that’s been threatened by the longest drought of 60 years.  Sugar, rice, flowers, vegetable and oils have all been hit.  As a result, the prices have risen.

Large parts of South West China have been affected by this drought, pushing up energy costs,  living costs and causing food and water shortages.

Some farmers are saying that they will only be able to harvest 1/3rd of their tea crop. But the question is – how will this affect Puerh prices ?

There was an incredible price rise of Puerh between 1999 and 2007. Prices increased about tenfold making a kilo of Puerh about £220. And then the Puerh crash happened leaving many wrecked.  Since then prices have made a comeback but not to those bubble prices of ’07.

As of this  March when the first harvest was meant to be in, there are reports that the harvest is down 80%. Prices have subsequently risen by about 10% at the market in Beijing.  Some estimates even state that the total production of Puerh will be down by half.

An example in the China Daily explained the situation,  “The tea is at its best during spring, but the severe drought has delayed the harvest this year and both the quality as well as the quantity have been greatly affected,” said Gao Lixia, a tea trader based in Kunming, capital of Yunnan. “For example, the price of pu’er from Banzhangshan, a tea base in Xishuangbanna, used to be 700 ($102) to 800 yuan a kilogram. It has soared to 1,100 to 1,200 per kilogram,” Gao said.

Here is the article from the China Daily:

Severe drought, cold front create uncertainty for crop and market

KUNMING – Li Xueli, a tea farmer in Dahuangba village of the Xishuangbanna Dai autonomous prefecture in Yunnan province, is helplessly watching his trees wither and die amid the worst drought in 50 years.

Li, 37, said he may be able to harvest only one-third the total amount of pu’er tea leaves of previous years if there is no rain by mid-April.

He is desperately praying for rain for his 0.53-hectare farm and is just one of the farmers growing the region’s famous crop hit by the dry spell.

The prices of different pu’er varieties have been rising, with some going up by four times, she said.

As the country’s second-largest tea production base after Fujian province, Yunnan produces about 180,000 tons of tea a year and spring tea accounts for up to 30 percent of the annual amount. The ongoing drought has reportedly hit more than 260,000 hectares of tea plantations, accounting for 80 percent of the total growth area. The dry spell is also expected to halve spring tea production.

The purchase price of raw tea increased by 10 to 20 percent, to 70 to 90 yuan a kilogram this year, said Wang Bin, the vice-president of Hong Kong-listed Longrun Tea Group Co Ltd.

Still, Wang said there will not be any large increase in prices of his company’s tea products. There will be steady growth in prices instead, he said.

Pu’er tea is considered to improve in quality the longer it is kept well, leading to a number of buyers purchasing large quantities of the product for investment and boosting prices, as well as creating bubbles, in the industry.

But a number of investors exited the market in the second half of 2007, creating a supply glut and big slide in prices.

Many pu’er farmers and traders, including Kunming-based wholesale dealer Tang Cuiping, are expecting prices to rebound in line with pu’er’s reputed health benefits and the large decrease in production this year.

Still, wholesale prices of pu’er have been stable so far at Maliandao Tea Street of Beijing’s Xuanwu district, with its more than 1,000 tea shops and the 18,000-square-meter Beijing International Tea City that is regarded as a benchmark of Chinese tea prices.

Business here has been relatively slow and vendors said they have stocks of aged pu’er that was harvested three to six years ago.

Pu’er tea is typically sold in patties that weigh 357 grams each, said Zuo Xiao, sales manager of the Ping Yue Tea Co

Current prices range from 100 yuan to 1,000 yuan a patty, similar to last year’s prices, Zuo said.

But pu’er prices have been declining in recent years and less customers are choosing the tea, said Liu Yu’ai, manager of the Zhen Long Quan Tea Shop.

Both Zuo and Liu said there will be a slight fluctuation in pu’er prices but the weak demand will rein in any significant price increase.

“You cannot see soaring prices at wholesale markets as vendors are trying to sell as much as they can because of overstock,” said a tea trader surnamed Wu at the Beijing International Tea City.

But a number of tea shops in central Beijing tell a different story, with vendors adjusting prices because of consumers’ anticipation of higher prices amid reports of the drought.

“They just want to profit more from it,” Wu said.

Cold weather in the past two weeks has also hit more than 100,000 hectares of plantations growing the famous longjing tea in Zhejiang province.

Tea shop manager Liu Yuai said shops are still selling longjing stocks that were harvested before the drought so prices have remained stable.

But there will most certainly be a 10 to 15 percent increase in prices when the new stocks arrive in the next two weeks, Liu said.

Many tea drinkers remain unfazed by the weather’s effect on crops.

Sun Mingshan, a 62-year-old tea drinker living near Maliandao Tea Street, said there are thousands of types of good tea available in the country and he will pick other kinds that are not affected by the weather.

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