Friday, November 20, 2009

Tea Shortage from Droughts in Kenya and India

A global tea shortage may increase by 10 per cent next year as drought in Kenya, Sri Lanka and India, the top exporters, damage crops and propel prices to a record, the world’s biggest tea plantation company said.
The deficit may widen to 110 million kg (243 million pounds) by May to June next year, compared with 100 million kg this year, Aditya Khaitan, managing director, of McLeod Russel India, said in an interview. Record tea prices in Kenya and India may gain another 15 per cent in the next 12 months, he said.
Reduced supplies will increase costs for tea marketing companies including Tata Tea, owner of Tetley brands, and Unilever, while boosting earnings at producers McLeod, Goodricke Group and Jayshree Tea & Industries. African tea prices rose to a record at auctions on August 29, while Indian prices have gained an average 25 per cent this year.
“I don’t see any relief for tea consumers for the next one year,” said Harsh Gupta, an analyst at SMC Global Securities. “The global shortage isn’t likely to be overcome anytime soon as prices will firm up further.”
Stagnant prices for almost a decade since 1999 caused some tea estates to close and forced plantation companies to cut investment in replanting old bushes and adding new machines, said McLeod Russel’s Khaitan. “Tea is playing a catch-up with other agriculture commodities, which have shot up in the past couple of years,” he said. “The tea deficit is here to stay and the prices will continue to rise.”

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