Tea crop forecast cut

Reuters: Sri Lanka now expects 2012 tea production of around 325 million kg, below its target of 330 million kg, as output has fallen in the last five months due to drought, the State-run Tea Board said.

Tea production in the first half of the year fell 4.3 per cent year-on-year to 163.26 million kg from 170.66 million kg and June output fell 13.2 per cent to 25.8 million kg compared with 29.74 million kg in the same month a year ago.

The Tea Board had earlier expected output to be slightly higher than last year’s 328.37 million kg, and saw 2012 export revenue at a record high, surpassing last year’s $ 1.5 billion, due to higher prices.

“Severe drought is the basic reason for the fall,” Sri Lanka Tea Board Director General H.D. Hemarathna told Reuters. “With June having a severe drop in high grown areas, then 325 (million kg) is more rational than 330 (million kg).”

High grown tea output, which accounts for about a fourth of production, fell as much as 29.4 per cent in June, amounting to 60 per cent of the total fall.

Output hit a record 331.43 million kg in 2010.

Revenue from the country’s top agricultural export commodity fell 11.7 per cent to $ 421.1 million in the first four months of 2012 compared with the previous year, Central Bank data showed.

Analysts say the earnings outlook for 2012 is unclear due to a possible dip in exports to Iran, which buys a fifth of Sri Lanka’s tea directly.

Other countries in the Middle East are also major buyers, but political turmoil may limit their appetite for Sri Lankan tea, traders say.

Tea is one of the $ 59 billion economy’s main foreign currency earners, along with remittances, garment exports and tourism.