SRI LANKA GOVERNMENT TO BUY TEA TO SUPPORT PRICES
COLOMBO, Oct 28 Asia Pulse - Sri Lanka's state-run tea promotion and regulatory body will buy large stocks of tea at auctions in Colombo this week, in a bid to support prices, government officials and brokers said. Sri Lanka Tea Board chairman Lalith Hettiarachchi said the move was agreed after prices plunged in recent sales creating cash flow problems for factories and small farmers.
The tea board will buy around 20 percent of the low grown and mid grown teas on offer at the Colombo auctions at an estimated cost of 250 million rupees, he told our sister news website Vimasuma.com.
Tea broker Asia Siyaka Commodities senior vice president Rohan Iddawela said the tea board decision was conveyed to the Colombo Brokers Association at a meeting today.
The total volume expected to be bought by the tea board is around 925,987 kilos of tea.
The tea board hopes to use its contacts and sell the tea and also store any unsold stocks in warehouses until the market stabilizes.
Hettiarachchi said the government has agreed to help inject 5-7 billion rupees in emergency funding to protect tea industry after prices collapsed. OPEC controls only 40 percent of global oil production, and has historically failed miserably to control oil prices when US monetary policy was benign, including the mid 1980s and the 1990s when prices fell to around US$10.00 a barrel.
Commodity prices spiked to unprecedented levels in 2008 amidst money printing by the US Federal Reserve, reminiscent of the 1973 'oil shock' when excessive money printing forced the US dollar off the gold standard and the dollar became a paper fiat money.
Classical economists and the International Monetary Fund predicted the collapse of the commodity bubble in 2008 after an underlying credit bubble burst last year. Oil prices have so far retreated to levels seen in early 2007, but tea prices have only just started to fall. Oil prices started to fall in August, rice in April, most precious metals including gold in March and wheat in February. (LBO)
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