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The global tea market could suffer distortions as producing countries rush in to expand their areas under crop in a bid to cash-in on the current high prices, the Food and Agriculture Organisation (FAO) warned on Tuesday.

The FAO Tea Composite price, the indicative world price for black tea, reached a high of $3.18 a kilogramme in September amid droughts in India, Sri Lanka and Kenya against increased demand for the product, compared to an average price of $2.38 per kilogramme in 2008.

And now, FAO is concerned that some tea producers could over-react to the current high prices by planting more crops, threatening an over supply in the market.

"Some producing countries, such as India, have acted responsibly and announced that they would not be expanding current tea areas beyond what is required for replanting and rehabilitating existing tea gardens" said Kaison Chang, secretary of FAO's Inter-Governmental Group on Tea (IGGT).

Tea Board of Kenya (TBK) managing director Sicily Kariuki, however said local producers are unlikely to expand their area under crop.

"Several neighbouring countries are already sinking investment to expand their area under crop but here in Kenya the focus would be to compete on productivity and quality," she said.

According to FAO, the current record high prices are expected to ease in 2010 as weather patterns returns to normal in the main tea-producing regions of Asia and Africa.

"The return of normal weather patterns in the main producing regions indicates that the tight global market situation should begin to ease alleviating the pressure on world tea prices in the New Year," Mr Chang said.

Although consumption growth outpaced production between 2005 and 2009, the gap between consumption and production growth was largest between 2007 and 2009, when it reached 3.4 percentage points, coinciding with the surge in prices.

Mr Chang said the fact that demand for tea remained robust, despite the global recession, supports the assertion that tea consumption is "habit forming" and is relatively price inelastic for most blends except higher priced quality teas.

"In addition, the share of household income spent on tea purchases is relatively small. Supply response to high tea prices has been delayed as it requires investment decisions that have long-term implications: it takes at least three years before a tea bush can be harvested," he said.

Higher tea prices have not affected the consumer in developed countries because of intense competition in the beverages market.

However in developing countries manufacturers are likely to transfer a larger share of the price increase to consumers, as tea procurement costs account for a significant share of the final retail price.

"In India, for example, average retail tea prices were quoted about 15 per cent higher in September 2009 than in September 2008," FAO said.