Poor weather drives tea prices to record high in 2009 – UN

Tea prices reached a record high in 2009, but should ease next year as weather improves in the main tea-producing regions in Asia and Africa, the United Nations Food and Agriculture Organization (FAO) reported today.

The agency’s Tea Composite price, the world’s indicator for the price of black tea, reached a high of $3.18 per kilogramme in September as India, Sri Lanka and Kenya experienced droughts while demand surged, compared to an average price of $2.38 a kilogram in 2008.

FAO said that there are concerns that producers could plant more crops to take advantage of the current high prices, flooding the market with tea.

“Some producing countries, such as India, have acted responsibly and announced that they would not be expanding current tea areas beyond what is required for replanting and rehabilitating existing tea gardens,” said Kaison Chang, Secretary of FAO’s Inter-Governmental Group on Tea, the world’s only tea authority.

Some of the price increases this year were reflected in rises in prices for consumers, with retail prices climbing 5 per cent in supermarkets across Europe.

That demand for tea has remained robust in the face of the global recession supports the assertion that tea consumption is “habit forming” and is relatively price inelastic for most blends, FAO noted.

Higher prices have not impacted consumers in developed countries due to intense competition in the beverages market.

However, the rise in prices will likely be transferred to those in developing nations because tea procurement costs account for a major share of the final retail price. For example in India, average retail tea prices were some 15 per cent higher in September 2009 than in the same month the previous year.