Tea producers can't keep up with demand

MUMBAI, India — A global tea shortage may widen this year and extend into 2011 as a rebound in production in Africa, Sri Lanka and India trails increases in demand, the world's biggest tea-plantation company said.

The deficit may reach as much as 287 million pounds by April, compared with the 532 million pounds forecast in September, and prices may rise to a record again this year as shortages persist, Aditya Khaitan, managing director of McLeod Russel India, said. Last year's deficit was an estimated 220 million pounds.

Tight supplies will raise costs for tea marketing companies. Prices reached a record at the world's biggest auction centers last year after dry weather in Kenya, Sri Lanka and India reduced output.

"I don't think any of the three big producers have the wherewithal to make up for the shortfall," Khaitan said Tuesday. "We are seeing consumption growth taking place not only in India, but also in the Middle East, Pakistan, Egypt and mature markets like the United Kingdom and Ireland."

India's biggest tea-growing states, Assam and West Bengal, won't produce tea until early April as the plantations enter the so-called cold period, Khaitan said. India, the world's largest tea consumer, will need an additional 77 million pounds to meet a 3.5 percent growth in demand this year, he said.

"Most tea packers are currently operating on a hand-to-mouth level of inventory," Azam Monem, McLeod's sales director, said. "Tea packers are able to pass on the increased cost of leaf prices to consumers without much of a problem."