India Tea Output Seen Down.

MUMBAI -- India may see a drop in its tea output this year because of insufficient rainfall along the main producing regions of the northeastern parts of the country, Indian Tea Association Chairman, Aditya Khaitan, said Monday.

"We are anticipating that India may produce around 20 million-25 million kilo grams less than last year, considering weak rainfall" during the March-May period, Mr. Khaitan said in an interview.

The country produced 980.8 million kgs of tea in 2008.

India's tea production during the January-April period fell 15% on year to 144.5 million kgs, according to the government-run Tea Board of India.

The northeastern province of Assam and the northern part of neighboring West Bengal account for about 75% of the country's tea production.

About 35% of the total output is generated during the first half of the year, while the remaining 65% is produced in the second half, industry officials said.

If rainfall continues to be insufficient, "the deficit would be more," Mr. Khaitan said.

Monsoon rainfall in India's northeastern region this year is expected to be 92% of the long-term average, according to the Meteorological Department of India.

But despite an expected fall in production, India, the world's second-biggest tea exporter, may maintain last year's export level of 196 million kilograms in 2009, Mr. Khaitan said.

He, however, noted the eventual export volume will depend on local demand and the rupee's exchange rate against the dollar which determines India's export competitiveness.

Meanwhile, the demand for Indian tea is expected to be higher this year due to supply shortages in Kenya and Sri Lanka, he said.

"At the end of April, there was a global shortage of 80 million kgs and I think that number may have gone up further after May," he said.

Tight supplies and higher demand is likely to keep Indian tea prices firm this year, Mr. Khaitan said. In late May, average prices were around 122.47 rupees/kg, up 56% on year.

Mr. Khaitan, who is also the managing director of McLeod Russel India Ltd., said he expects the company's output to rise to 84.5 million kilograms in the year ending March 2010, partly helped by its recent acquisition in Vietnam.

"There is a slight growth in our tea output, and in India, we will produce around 80 million kilograms. We are targeting 4.5 million kilograms production in Vietnam," he said.

In March, the company's overseas unit acquired Vietnam's Phu Ben Tea Co.

McLeod Russel, the nation's biggest tea producer and exporter by volume, has 55 tea plantations in Assam and West Bengal and produced around 75 million kilograms in 2007-08.

Mr. Khaitan said the company expects to export of around 27 million kgs of tea in 2009-10, the same amount as last year, excluding contribution from Vietnam.

"If we include output from Vietnam, exports would be about 32 million kgs," he added.

"Prices have gone up and that will reflect well in our balance sheet at the end of year," Mr. Khaitan said.

Mcleod Russel plans to increase its tea production in Vietnam to 10 million kgs over the next two to three years, he said.

He said India's tea consumption is growing by 3%-3.5% annually and that momentum is likely to continue in 2009.

According to data from the Tea Board of India, the country's tea consumption was around 802 million kgs in 2008.


Source : The Wall Street Journal