As demand for South African rooibos soars, nature sets limits on farmers' ambitions

South African farmers are lining up to plant more rooibos tea as demand for the anti-oxidant-rich red brew it produces grows, but a natural limit on suitable land may mean supply will struggle to keep pace.

In 2018, farmers planted almost 65,000 hectares of rooibos, which only grows in a small, drought-stricken part of South Africa's southern tip. That was up 12 percent on 2017, itself a record year, according to industry body The Rooibos Council. The global herbal tea market is growing at 7 percent per year, according to data from Euromonitor International, and rooibos - with an established reputation for carrying health-giving properties - is increasingly popular.

Some established farmers expanded their harvests last year while others grew the crop for the first time. Rooibos processors are trying to project a picture of a maturing industry able to deliver security of supply to global brands like Nestle and Unilever.

Years of dry weather throttled yields and pushed the price of the tea up by 18.5 percent in 2018, but some producers now expect supplies to replenish, helping them venture into new markets including in Asia and the Middle East. Dawie de Villiers, managing director of processor Cape Natural, told Reuters his firm's investments in recent years had focused on supply, but that could now shift to the other end of the pipeline: building its client base and entering new markets.

"We haven't done that for a long time," he said. Martin Bergh, boss of the largest processor Rooibos Limited, said he expected this year's crop to be 20-30 percent bigger, giving new impetus to an existing "gentle" push into China and South East Asia.

HOT PRODUCT Wessel Lemmer, senior agricultural economist at lender Absa, said more frequent droughts could mean trouble for the plant, which doesn't tend to be irrigated and relies on specific climatic and soil conditions for survival.

"If they become the norm, we will have a problem," he said, adding some producers were starting to apply irrigation but it was too early to tell if it would be successful. Hans Moller, who planted rooibos for the first time in 2018 and plans to expand his crop over the next three years, said rooibos was relatively hardy.

One factor that tempted him to farm it was expectations of hefty future demand relayed by existing processors and exporters. "In the long term most of them predicted that in the... Western Cape we could not produce enough if the demand keeps going," he said. (Additional reporting by Tanisha Heiberg; editing by John Stonestreet)

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