Tea output at a five-year low, may drive prices

Tea production in India, the world’s biggest grower after China, dropped to the lowest level in five years after pests damaged crops in the nation’s main growing region, boosting speculation prices may gain.

Output dropped 1.3 per cent to 966,400 tonnes, the lowest since 2005, the state-owned Tea Board of India said on its website. Production in north India, which accounts for more than 70 per cent of the country’s harvest, fell 1.6 per cent to 723,000 tonnes, it said.

Lower output may fuel food inflation in India, which is at the highest level in a month, and cut tea inventories, pushing up costs for companies including Hindustan Unilever Ltd. and Tata Global Beverages, owner of Tetley brands. Higher prices may boost profits at Indian producers including McLeod Russel India Ltd. and Jayshree Tea & Industries Ltd.

“The decline in production and rising consumption will deplete inventories and that’s certain to push up prices,” said Anup Ranadive, an analyst with Tower Capital & Securities Ltd.