An oversupply of tea increasingly places Kenya-grown tea at adisadvantage at the Mombasa Tea Auction where volume is less a priority asdemand for quality rises. Competing nations are sometimes getting better pricesas discerning buyers contend with a glut of tea.
Kenyais the world’s largest exporter of black tea.
A bounty of tea does not benefit industrious Kenyan growerswhen prices fall 18.6%. Revenue through June stood at Ksh69.7 billion ($7.1 billion) comparedwith Kh85.7 billion ($8.8 billion) the previous year.
Kenya is once again experiencing the downside of ideal weatherconditions and growing efficiencies in production. The nation’s tea growers,virtually all cultivating small tracts of land, have honed their skills inrecent years to better cope with harsh weather and expensive inputs.
Smallholders now produce 90% of Kenya’s tea but multinationals,where production costs average $1.90 per kilogram have also suffered. Workersexpressed concern that this year’s annual bonus payment of Sh8.9 billion ($85.8million) is down from Sh11.2 billion ($108 million) last year, resulting inbonus payments to growers of only 11 shillings per kilogram, of green leaf.
Smallholders protested the decline, threatening to tear outtea bushes in Kissii and Muranga counties and filing lawsuits to force theKenya Tea Development Agency (KTDA) to reduce factory costs.
According to KTDA, “The cause of low bonus paymentshould be blamed on the international market, and not be attributed tofactories. In the past four years, the same directors have presided over betterbonus payments.”
Globally, there is currently a 200 million kilogram surplus astea production reached 5.85 billion kilograms in 2018. Africa produces about12.2% of the world’s tea, approximately 717 million kilograms in 2018. Kenyaexports totaled 654 million kilograms of that total.
Tea prices during the first six months of the year averaged amere $2 per kilogram of tea for the five East African countries that sell at theMombasa auction, according to reports in The EastAfrican. In July exports reached a recent low of $1.76per kilogram, compared to $2.98 in July 2017. Currency devaluation and slackdemand due to sanctions placed on Iran also contributed. Inflation in nearbySudan, for example, has increased to 70% dampening demand.
To complicate matters, Rwandagrowers earned an average $2.68 per kilogram of tea this year, followed byKenya at $2.59, Burundi at $2.21 per kilogram, Tanzania $1.36 and Uganda $1.21.
Thehuge increase in tea production, “had an impact on the global prices and has resulted in reduced incomefor our factories,” according to Lerionka Tiampati, KTDA managingdirector.
At a press conferenceTiampati told reporters Kenya must lessen its reliance on export and, “promote local consumptionespecially among the youths through the introduction of new specialties and flavoredtea varieties."
During the year ending inJune, small-scale farmers in Kenya led in tea production at 481 million kilogramsfollowed by Uganda at 61 million, Tanzania at 37 million, Rwanda at 30 millionand Burundi at 9 million, according to Tiampati.