Sri Lanka banks on quality to hold tea prices up

May 22, 2008 (LBO) – Tea exporting countries last week agreed to stick to a minimum quality level to prevent oversupply from depressing prices, strengthening Sri Lankan efforts to prevent shipments of so-called 'refuse tea', a top official said. Tea Board chairman Lalith Hettiarachchi said producing countries adopted the measures owing to growing concern the supply of tea could exceed demand in the years ahead, depressing prices and national incomes.

Major producers agreed to stick to the ISO 3720 standard for exports at last week's Intergovernmental Group on Tea of the Food and Agriculture Organization of the United Nations meeting in Hangzhou, China.

"The IGG-FAO meeting expressed concern about the difference between demand and supply of tea," Hettiarachchi said.

"Supply is going to be one percent more than demand growth over the next few years as they expect bigger production from major producers. This means there'll be a tendency for prices to drop."

Sri Lanka is one of the big tea exporting countries that has been campaigning to ensure producer countries only ship teas that meet the ISO 3720 standard, to prevent a glut of low quality teas that could bring down prices.

Hettiarachchi said there was general agreement a