June 24, 2008 (LBO) – 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. “If the decrease in availability of tea is more than 10 percent a greater price hike can be expected. This can lead to over-reaction with speculative buying which can drive prices higher than anticipated.
“This situation is alarming because it can in the long-run have a tendency to depress prices.
“To maintain the sustainability of the world tea economy it is important to resist any over-reaction to high prices, especially any expansion of tea area,” Hettiarachchi said.
He also noted that although tea prices have increased world wide, the cost of production in many countries too has risen mainly due to high fuel and labour costs.
“This is common to all producing countries. But it affects us in Sri Lanka particularly because our cost of production has been the highest among all tea producing countries,” Hettiarachchi said.
“So we must be careful not to forget the importance of cutting down the cost of production. If we are carried away by high prices and if we neglect attempts to