Sri Lanka Tea Board Discourages Further Cultivation

Sri Lanka's tea board is not encouraging the expansion of tea cultivation in an effort to prevent over-supply from depressing prices and has warned the industry against being carried away by current high prices.

Sri Lanka Tea Board chairman Lalith Hettiarachchi said that although tea prices were now at high levels there was concern that the growth in consumption was not keeping pace with the expansion in production, "We do not encourage the expansion in land area although we do encourage productivity and quality improvements to maintain prices," he said.

"The rapid growth in tea production in the last two decades despite falling markets reflects the drive by producer countries to expand tea areas in order to spread the cost of production," Mr Hettiarachchi told the annual general meeting of the Colombo Tea Traders' Association Friday.

"We would also like to expand but the Tea Board in particular does not encourage any production expansion area-wise in Sri Lanka because of the dire consequences that would entail by over-production in the long-run."

The UN's Food and Agriculture Organisation expressed concern over the possibility of excess production at the recent Inter-Governmental Group on Tea meeting of tea producing and consuming countries in China.

"The FAO is concerned that tea production growth is in excess of demand and finds the situation alarming. This should be of concern to the tea industry. The expansion has come mainly due to record crops in China, Vietnam and India," Hettiarachchi said.

World tea prices on average rose 6.5 percent in 2007, on top of an 11 percent rise in 2006.

"This is a phenomenal increase in price," Hettiarachchi said. "Prices are expected to maintain their upward trend in 2008 too because of tight supply, made worse by the decline in crop in Kenya."

Hettiarachchi said the FAO is also alarmed over the sharp price increases.

Source: Lanka Business Online