De Beers, the world's biggest producer of rough diamonds, has cut diamond production by 40 percent and is expecting a 5-10 percent decline in consumer demand globally, a top official of its marketing arm said.

A global liquidity crunch has slashed demand for commodities including diamonds, forcing output cuts by De Beers, which is 45 percent owned by miner Anglo American (AAL.L: Quote).

We have reduced our production of diamonds by around 40 percent in all of our mining companies; Botswana, Namibia, South Africa and Canada, Varda Shine, managing director of Diamond Trading Company told reporters in Mumbai on Friday.

We have had major cuts in operating costs and capex... that allows us to be able to continue this business without being pushed to sell, she said.

Demand from the consumer end is going to decline by 5-10 percent. Supply is going to be cut more than that ..so demand for us is likely to pick up sometime next year, she said.

The company has also cut diamond prices after a slight rise last year when there were a lot of exports from India, Shine said, without elaborating on the price cut.

India processes about seven in every 10 of the world's diamonds, mostly cheaper stones less than a carat and holds about 57 percent of the diamond processing industry.

(Reporting by Aniruddha Basu; Editing by John Mair)

© Thomson Reuters 2009 All rights reserved