The staple beverage of households across the region is set to rise in the coming months. Tea prices at the world's leading commodity centers surged in June, pushing up auction averages across Calcutta, Colombo and Mombasa to record levels – last seen a year ago. Unseasonal droughts, possibly as a result of worldwide climate change, and insufficient fertilizer application in 2008 on the back of record high oil prices, have resulted in dramatic harvest cuts this year. This has lead to a decrease in the availability of black tea in world markets and an increase in prices, as demand continues to steadily grow. Tea sales as a whole have been seen to be relatively immune to the impacts of recession and in fact, tea demand is now beginning to benefit from its association with health and wellbeing – an increasingly important driver of consumption in many markets today. “Due to drought in the three largest black tea-producing countries earlier this year, there has been a considerable loss in crop resulting to shortage in supply,” said Sanjay Sethi, Director, Dubai Tea Trading Centre. “In the first half of 2009, overall crop shortage in India, Sri Lanka and Kenya is estimated to be over 85 million kilos, declining total output by 20 percent compared to the same period last year. This constraint of supply has resulted in much higher tea prices. We believe that demand and prices of tea will remain buoyant in the months to come.” Tea producing countries such as Kenya, Sri Lanka, and India are struggling to produce sufficient crops to meet market demand. Indian tea production fell to 62,590 tonnes in April, down 22 percent on the 80,042 tons produced in the same month last year. The F O Licht three auction commodity average rose to $2.76 per kg in June, beating the previous record set in the peak month of July 2008. According to the Tea Board of Kenya, the country's tea production fell to 139283 tons in the first half of 2009, falling 11.5 percent versus the same period last year. The Board reported that dry conditions in the East of the Rift Valley saw output in that area drop 35 percent to 50600 tons in the first half of 2009, down from 77358 tons in the same period in 2008. May 2009 saw dramatic price rises in Calcutta where the average price during this month rose to $2.876 per kg – almost 50 us cents per kilogram higher than in the same month last year. Likewise, Sri Lankan tea output has fallen by a massive 24 percent this year, with Jan-June 2009 crop totaling 130 million kilograms (versus 171 million kilograms in the Jan-June 2008 period). Available data for April shows that Sri Lankan tea export shipments also fell by a substantive 44 percent, compared to the same month in 2008. With tea being consumed in almost every home across the region, householders can now be expected to experience first hand, a trend of rising tea prices in their grocery budgets. This falls on the back of very serious underperformance from tea harvests from the three largest tea growing nations of India/Sri Lanka/Kenya – who together account for over 60 percent of Global annual black tea production.
