Breaking News: Tea prices are set to soar after low production from India meets with surging demand from the country's thirsty population - with video.
Cost of tea set to soar after India crop devastated
Traders reading the tea leaves of world markets have warned that the prices are set to soar, as surging demand from Asian and Middle Eastern markets meets faltering production worldwide.
Flip van Rijen, director of Van Rees, a Rotterdam-based tea trader and supplier, said: "Normally higher crops mean lower prices, but the opposite happened because there was more demand than ever."
India's Tea Board said today [Tuesday] that exports from the world's second-largest tea grower declined 2.3 per cent to 193.3 million kilograms last year, after a pest attack devastated the nation's output. Shipments in December were 24.6 per cent lower than a year before.
The average price of tea, compiled by the UNFood and Agricultural Organisation, has remained roughly flat for the past three months. However, falling prices in India have masked a sharp increase in the prices of tea auctioned in Colombo and Mombasa, the three auctions which compose the FAO's average price.
Both Kenyan and Sri Lankan tea prices, at 294.5 cents per kg and 355.9 cents per kg respectively, were at their highest in January since October 2009.
But falling prices in Kolkata could be coming to an end as a result of lower Indian production. Mr van Rijen said he expected prices to rise, even though the crop in 2010 was 110,000 tonnes more than the year before.
Consumption worldwide was increasing greatly, eliminating the surplus that Sri Lankan and Kenyan tea producers had built up, Mr van Rijen said.
Indian consumption was increasing at a rate of 1 to 2 per cent per year, he said, while Iran, Iraq, Saudi Arabia and Egypt were all seeing high rates of demand.
Demand is surging in Egypt, one of the Middle East's largest tea markets, despite the country's revolution. "In the last three weeks, they've been drinking more tea than anything else," Mr van Rijen added.
Coffee prices have also soared to record highs in recent months, and on Monday coffee futures for March delivery rose another 2.66 per cent to $258.65.