India

According to Aditya Khaitan, managing director, of McLeod Russel India Ltd., quoted in an interview with Reuters, a global tea shortage will not ease in 2010 and will continue in 2011 as demand continues to outstrip supply, even though production has been ramped up in Kenya, Sri Lanka and India. Poor rainfall affected tea crops and boosted prices in 2009 to record highs.

"The deficit [estimated at 100 million kg in 2009] may reach as much as 130 million kg by April, compared with the 110 million kg forecast in September, and prices may rise to a record again this year as shortages persist," Khaitan, told Reuters.

 "I don’t think any of the three big producers have the wherewithal to make up for the shortfall. We are seeing consumption growth taking place not only in India, [which] will need an additional 35 million kg of tea to meet a 3.5% growth in demand this year, but also in the Middle East, Pakistan, Egypt and mature markets like the United Kingdom and Ireland."

The overall result is that tea manufacturers, such as Tata and Unilever, can expect to pay more for their tea, while tea traders, such as McLeod Russel, stand to benefit.

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