It seems like the disorderly exit that I semi-predicted has begun.
L just called me. He said that there have been news that he heard that the markets in Kunming and in Guangzhou have started the big decline… and nobody is asking for Dayi (Menghai) goods at this point. Makes a lot of market sense, really, since as soon as the prices start dropping, everybody who wanted to buy will wait till the prices stabilize a bit before jumping into the fray again. All the tea investors who’ve been buying will want to let go of their goods very quickly. One of L’s customers in Tianshan Tea City told him that the biggest Dayi distributors in Shanghai has already called him a few times, asking him to help sell stuff for prices that you could only dream of a month or two ago.
This is welcomed news, really. The prices for a lot of these younger cakes has reached astronomical levels, with new, fresh off the mountain cakes selling for things like 250 RMB each, and a lot of these are cheap plantation teas that aren’t really worth that much. Many people I know who are the end customers for such things — tea drinkers like you and me, think that prices are simply far too high to buy any more new cakes.
I had thought that given the fact that much of the country still has to tap into the puerh craze, that there might be enough future customers to sustain the run for a little longer. However, once a fall happens it is hard to stop if everybody wants to exit the market, or at least withdraw from active buying. I think it started with Xiaguan teas — it briefly reached 220 RMB for a stick of 5 tuochas. That price was about 7x what I could’ve bought the same tea when I first arrived in Beijing. Somebody made a lot of money from investing in Xiaguan tea in the short term, but more people have now lost a lot of money. Xiaguan prices already fell a bit when I left Beijing for Shanghai. I wondered, at the time, whether it will cause a drop in Dayi teas too. Seems like people have woken up to the fact that investing in puerh is a risky business, and are no longer willing to take that risk.
We’ll have to see what happens in the next few weeks, but I think it will be hard for prices to pick up anytime soon. Hopefully this will usher in an era of more rational purchasing, as well as more sustainable development of products and farming techniques.
I am going to go to the Tea Expo in Shanghai this Friday. If what I’m hearing is actually true — this will definitely make it a very, very interesting experience.