February 29, 2012 / 9:30 AM / in 7 years

World drinks more tea, FAO predicts strong price

MILAN (Reuters) - World tea prices are set to be firm this year on the back of robust black tea demand exceeding demand, the United Nations’ Food and Agriculture Organization (FAO) said on Wednesday.

“High prices reflect the fact that demand for black tea, which accounts for most of world production, has exceeded supply since 2009,” the FAO said in a statement citing a report by its intergovernmental group on tea.

High tea prices, which averaged $2.85 per kg last year, lead to an estimated 2.2 percent rise in the export earnings of producing countries in 2011, boosting incomes of rural populations and household food security.

Total world tea consumption rose 5.6 percent in 2010, the latest year for which data were available, to 4 million tonnes, underpinned by the rapid growth in per capita income levels, especially in China, India and other emerging economies.

In China, total tea consumption, the biggest in the world, rose 1.4 percent in 2010 to 1.06 million tonnes, while demand in India increased 1 percent in 2010 to 828,890 tonnes.

World total tea output increased 4.2 percent to 4.1 million tonnes in 2010, with black tea output rising 5.5 percent in response to record prices and green tea production edging 1.9 percent higher.

China remained the world’s largest tea producing country with an output of 1.4 million tonnes and a 33 percent share of the world’s total.

World black tea production is estimated to grow at 1.87 percent annually in the next 10 years, slower than the 1.99 percent growth pace over the previous decade, to reach 3.28 million tonnes by 2021.

It is seen coming into equilibrium with demand at a price of $2.75 per kg, just under the current price.

FAO calculates its world composite tea price on the basis of the weighted average prices for black tea set at the world market’s major tea auctions.

Tea consumption is set to grow at 1.8 percent a year to reach 3.36 million tonnes in 2021.

World green tea production is expected to reach 2.6 million tonnes in 2021, growing at a rate of 7.2 percent a year driven by a significant anticipated growth in China, where production is expected to reach 2.3 million tonnes.

Reporting by Svetlana Kovalyova

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