Price of tea hit by droughts
Apr 1 2009 by Iain Laing, The Journal
DROUGHTS in key producing countries and the impact of the weak pound are putting tea prices under pressure.
Low rainfall in the growing regions of India, Kenya and Sri Lanka – which together account for half the world’s exports – have led to poor crop yields, according to the United Nations’ Food and Agriculture Organisation (FAO). Civil unrest around Kenya’s elections also caused problems last year.
Prices at weekly auctions in Mombasa – the global benchmark for the industry – have risen 15% since December, to £2.38 a kilogram. Wholesale black tea prices surged 11% last year to an average of £2.17 a kilogram last year – the highest annual average since at least 1993.
While the supply problems are unlikely to have too much impact on mainstream tea prices, premium teas such as Darjeeling could be affected.
Kaison Chang, a tea specialist at the FAO, said high altitude teas such as Darjeeling have been hit by the drought and “the quantity is not expected to be as much as last year”.
It is understood that part of the supply problem stems from Sri Lanka, which is set to see production fall to a seven-year low after the drought and farmers’ unwillingness to use expensive fertilisers.
William Gorman, executive chairman of the UK Tea Council, said that while the price of a cuppa had risen, this was the first increase in 10 years.
He said the typical cost of 80 tea bags, which retailed at £1.89 in 1999, had recently gone up to £1.97. The increase was predominantly a product of the weakness in the pound, as tea is traded in US dollars.
“We have had to find more pounds to pay for our tea,” he said.
The UK consumes the second-largest amount of tea per head after Ireland and is the world’s second biggest importer, after Russia.
Mr Gorman said the UK bought around 50% of its tea from east Africa, particularly Kenya. But he stressed there was “plenty of tea in the world” and that it could be supplied from other countries if there was a repeat of last year’s problems.
FAO preliminary estimates for 2008 show world consumption rose to 3.85 million tonnes, up 4.8%, while production grew to just 3.78 million tonnes, up 1.2%.
