S.Lanka sees 2006 tea output outstripping Kenya

COLOMBO, Mar 17 (Reuters) Sri Lanka's tea output will likely hit a record 325-330 million kg in 2006, its tea board said on Friday, with both production and export seen likely to outstrip drought-hit rival producer Kenya.

Sri Lanka Tea Board Director General H.D. Hemaratne said small growers -- who produce 62 per cent of the total crop -- were expanding, and that the island would therefore likely become both a larger producer and exporter than Kenya in 2006.

''Kenya has a problem due to drought,'' he told Reuters in a telephone interview. ''We will be higher than Kenya ... I think it will happen. Here, our production is rising. But we are not going for volume, we are going for quality.'' Tea makes up some 13 per cent of the island's export income, and production had risen steadily since regulations limiting the amount of tea that could be planted were scrapped in 1992, Hemaratne said, with smallholders tending to produce better quality.

Last year, Sri Lanka produced 319 million kg of tea, making it the world's fourth-largest producer after China, India and Kenya and the second largest exporter after Kenya -- China and India consuming most of their own output.

Kenya produced 328 million kg in 2005, but a drought that has slashed food and crop output across East Africa has left its tea board experts predicting a 16 per cent fall in production to 276 million kg.

Hemaratne said local growers might benefit from better prices if Kenya's largest consumer, Pakistan, began buying more Ceylon tea.

Sri Lanka also competes with Kenya for buyers in Russia, which accounts for 19 per cent of exports from the island.

''It's too early to be certain,'' he said. ''But we do have some expectations. Last year, we exported 299 million kg -- this year we expect 305-310 million.'' But overall, he said many tea growers in Sri Lanka -- which switched to tea production under British rule in the nineteenth century after a blight annihilated coffee plantations -- were still losing money on every kilogramme of tea they produced.

The large tea plantations in the central highlands, still rejoicing in British names such as Eskdale and Queensberry, were suffering from poor quality tea and damage to leaves just as wage demands were increasing sharply.

''The problem is mainly between the field and the factory,'' he said. ''You are getting a lot of damage to the leaf. You get lower quality. We are conducting seminars and classes to address this.'' REUTERS SD PM1627