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Tea farmers face sour times as earnings dip

Tea earnings will this year drop by 5.6 per cent to Sh133 billion from Sh140.86 billion recorded in 2018 production period, Agriculture and Food Authority (AFA) has said.

The food and agriculture sector regulator said production, earnings and export volumes will record a decline in the current production period. For, example, it is estimated that the total production for 2019 will drop by 12 per cent to about 416 million kilogrammes compared to 492 million kilogrammes recorded in 2018.

However, AFA said in a report titled “Kenya Tea Industry Performance Highlights for 2018 and Preliminary Outlook for 2019” released yesterday that farmers will benefit from marginal auction price increase at the Mombasa auction despite the expected drop in total earnings.

AFA Interim Director General Anthony Muriithi attributed the expected slight drop in tea production to the depressed rainfall experienced during the 2018 short rain period.  

“Owing to depressed rainfall conditions experienced during the 2018 October-December short rains and the effects of the current dry weather situation in the country, tea production volumes for first quarter of 2019 are expected to drop slightly compared to the same period of 2018,” he said in the report.

Consequently, Muriithi added, the total production for 2019 is expected to drop to about 416 million kilogrammes, representing a 12 per cent decrease from 2018.

Similarly, he said, export volumes are expected to drop by the same margin of 12 per cent to reach 422 million kilogrammes from 474.86 million kilogrammes registered in 2018. “With regard to auction prices, a 10 per cent increase is expected from an average of $2.58 (Sh258) per kg recorded in 2018 to $2.84 (Sh284),” he added. 

Good weather

Muriithi said owing to good weather conditions experienced in tea growing areas during the first half of 2018, made tea production for the year reached 492.99 million kilos compared to 439.85 million kilos returned in 2017.

During the period ended December 31, 2018, the country exported 474.86 kgs of clean tea which was 59.14 million kgs higher than 415.68 million kgs shipped in 2017. The export earnings increased by Sh11.59 billion from Sh129.27 billion recorded in 2017 to Sh140.86 billion.

Muriithi said due to increased supply, Kenya tea auction prices declined significantly from an average of $2.98 (Sh298) per Kg recorded in 2017 to $2.58 (Sh258).Tea from other producers in the region also experienced significant reduction in auction prices, with most of them recording an average of $2 (Sh200) per kg.

The lower prices were attributed to improved supply in tea production within the region owing to favourable weather conditions.

“This was exacerbated by other global market dynamics such as the uncertainty over sanctions against Iran, which prompted some of the orthodox tea producers supplying tea to that market to shift to CTC tea production targeting existing CTC markets,” Muriithi said.

Local currencies

Other factors such as continued pressure of dollar on respective local currencies in most markets, he added, also affected demand for tea owing to reduced consumer purchasing power.

“This was despite a lower unit export price and a strong exchange rate of the shilling to the dollar which stood at an average of Sh102.42 against Sh103.28 during the previous year. However, there were imports of more Kenyan tea into most markets in comparison with 2017,” the AFA report says.

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