Tea prices are set to climb 10-15 per cent higher next year from current record highs because global inventories are depleted following crop failures by main exporters, the world's largest tea leaf producer has forecast.

The view of Mcleod Russel, the India-based plantation company, is shared by others in the industry as production has been hit by simultaneous droughts in India, Sri Lanka and Kenya. Demand has remained strong in spite of the global economic downturn as retailers say consumers treat tea as an essential that they are not willing to cut back on.

The forecast comes after prices hit a record high at an auction in the Kenyan city of Mombasa, which sets the world's benchmark. Best quality tea prices rose last week to $3.97 a kilogram, up 36 per cent from January and almost double the price in 2005.