DOES THE TEA MARKET REQUIRE A FUTURES CONTRACT? EVIDENCE FROM THE SRI LANKAN TEA MARKET

Abstract

Tea is one of the most popular beverages in the world. Its consumption exceeds the consumption of milk, coffee and orange juice. Despite its importance, tea has not been considered a commodity on financial markets and there is still no futures contract on tea. This study adds to the current literature by providing an overview of the development of the world’s oldest and largely unknown tea market. In addition, this study examines the issue of whether it is feasible to introduce a tea futures contract that would be advantageous for tea market participants. In conclusion, this analysis indicates that introducing a successful tea futures contract is viable but challenging under the existing market structure.