Global tea prices likely to ease in 2010: FAO

The global tea prices are expected to dip in 2010 from a record high in the previous year as the weather patterns are observed normal in the major tea producing countries of Asia and Africa, said UN’s Food and Agriculture Organization.

The drought driven by weak weather condition in India, Sri Lanka and Kenya, had impacted the production badly amid increased demand, which led to a spurt in tea prices in 2009.

However, the global consumption surged sharply between 2007 and 2009 by 3.4% against the production. The concern is that tea producers could over-react to the current high prices by planting more crops, threatening an over supply in the market, FAO said.

The fact that demand for tea remained robust, despite the global recession, supports the assertion that tea consumption is “habit forming” and is relatively price inelastic for most blends except higher priced quality teas.

In addition, the share of household income spent on tea purchases is relatively small. Supply response to high tea prices has been delayed as it requires investment decisions that have long-term implications: it takes at least three years before a tea bush can be harvested.

Higher tea prices have not affected the consumer in developed countries because of intense competition in the beverages market.