Sustainable price of tea to be maintained to prevent price drop

Written by Commodities Bureau | Kolkata, Sep 21 | Updated: Sep 23 2008, 04:39am hrs
International tea prices are at slightly higher levels than the desired ones and are sustainable for the tea industry for the long term, said Kaison Chang, senior commodity economist with the Food and Agriculture Organisation (FAO). "The weighted global tea price is now at $2.15 a kilogram, higher than $2, which is the optimal sustainable price for tea according to us," Chang said. He was present at the launch of the Organic Tea Development Project in India.

Speaking to reporters after the press conference, he said that the sustainable price level is the ruling price, beyond which the tea producers are tempted to make more profit by increasing supplies.

According to him, with the rapid rise in the sustainable price, tea producers will start expanding gardens. It would affect the quality of tea produced, affecting the price as well.

"Tea price movements have a definite trend and it has been witnessed over the past thirty years that spikes in prices always resulted in over production, followed by a drop in prices," Kaison said.

"We want to keep the sustainable price at $2 per kilogram to maintain the supply of tea in such a way that it does not affect the quality and price in the long-run," he said.

"Major producers like India, Kenya, Sri Lanka and China have already agreed to the proposal to form a producers' body," Kaison said.

The Organic Tea Development Project, aimed at improved technology, skills and systems of organic tea production, would include the development of appropriate technology for the establishment of new tea growing areas. It would also look into conversion of existing tea gardens to organic tea farms.

This $4.05-million project will be conducted jointly by the Tea Board of India, the FAO-Inter-Governmental Group, the Common Fund for Commodities (CFC) and the International Foundation of Organic Agriculture Movements. CFC would provide almost 40% of the cost, amounting to $1.6 million, while the rest would be borne by the Tea Board and other tea gardens.

"The estimated duration of the project is three years," said Basudeb Banerjee, chairman of the Tea Board of India.

"The main purpose of this project is to increase production, certification and enhance the marketing strategy of organic tea in India," he said.