Sri Lanka tea prices seen staying strong

Feb 14, 2008 (LBO) – Sri Lankan tea prices are forecast to stay strong this year because of international supply disruptions caused by the violence in Kenya and rising demand from consumers in oil-rich countries, brokers said. “Problems in Kenya will definitely have an impact on global supply during the first quarter of 2008,” brokers Asia Siyaka Commodities said in a market forecast.

“Long-term implications will unfold in the second quarter and third quarter. Kenya could have problems with seasonal dry conditions as well, if they extend beyond the first quarter. Kenyan quality will also be compromised due to instability.”

The brokers said that demand will be buoyed by increasing disposable incomes in oil exporting countries which have developed a liking for Ceylon teas.

Sri Lanka™s main tea export markets are in the Middle East and North Africa, which account for 53 percent of exports, and Russia and other former Soviet Union states which absorb 23 percent of exports.

These markets are likely to enjoy relative economic stability as oil prices would remain strong; in a year that economist™s forecast recession, Asia Siyaka Commodities said.

“Also tea is a part of the basic food basket for many fami