Kolkata: Tea output in India, the world’s largest producer after China, may reach a record this year as favourable weather in the main growing regions boosts yields, according to the Tea Board of India.

“The harvest may climb to 1.13 billion kilograms this year from 1.11 billion kilograms in 2012," chairman M.G.V.K. Bhanu said in an interview at his office in Kolkata. “Production may increase further to 1.2 billion kilograms by 2017," he said.

A bigger harvest may cap a rally in prices, which have almost doubled since 2007, benefiting retailers including Tata Global Beverages Ltd. and Hindustan Unilever Ltd., while potentially crimping earnings at producers such as McLeod Russel India Ltd. and Jayshree Tea & Industries Ltd. Monsoon, which accounts for more than 70% of the country’s annual rainfall, will be normal this year, the India Meteorological Department said on 26 April.

“Tea being a semi-perishable commodity, any supply-demand imbalance beyond a particular limit will affect the prices very badly," Bhanu said. Production primarily depends on weather conditions. Prices should be such that producers make profits and are in a position to pay for the increase in input costs.

Average auction prices in India surged to Rs121.81 ($2.15) per kilogram last year from Rs67.27 in 2007 as output remained stagnant and domestic consumption expanded by about 20 million kilograms annually, according to board data. Rising labour and fertilizer costs also fuelled the rally, according to the board.

“McLeod expects a rebound in its production this year because of favourable weather," chief financial officer Kamal Baheti said in a phone interview. “We had lost about 8% of our crop last year due to bad weather. We should be able to recover the crop this year," he said.

“India plans to boost exports to 250 million kilograms by 2017 from about 200 million kilograms now," Bhanu said. “We have to ensure that exports remain at about 200 million kilograms every year as domestic market is growing by about 25 million to 30 million kilograms per year," he said. Bloomberg

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