GRATUITY

No party for tea farmers as low prices hurt 2019 bonus

Tea is grown in 21 counties with small farmers accounting for over 60 per cent of production

In Summary
  • Kenyan tea prices have slumped to their lowest in the last five years trading at an average Sh185 per
  • Low prices and returns blamed on overproduction as a result of increased planting, husbandry and rehabilitation

 

MARKET: Sacks of tea for export at one of the warehouses in Mombasa/File
MARKET: Sacks of tea for export at one of the warehouses in Mombasa/File

Tea farmers in the country should expect low bonus payments this year in the wake of a tea glut and low prices at the Mombasa tea auction.

Kenyan tea prices have slumped to their lowest in the last five years, latest market data shows, as geopolitics further dent exports and uptake of the tea in key international markets.

Last week, the commodity traded at an average US$1.80(Sh185)per kilogramme at the weekly auction compared to US$2.26(Sh233.25) per kilo in a similar auction last year, the East African Tea Trade Association (EATTA) market report shows.

 

The highest price the commodity fetched last week was US$1.84(Sh189) for a kilo having slightly picked from US$1.81(Sh186) the previous week. It averaged Sh237 in a similar period in 2018.

“The last time we had prices below two dollars was in 2014. You can be sure farmers will not be smiling this time,” EATTA managing director Edward Mudibo told The Star in an interview yesterday.

The low prices and returns have been pegged on overproduction of tea as a result of increased planting, husbandry and rehabilitation.

Tea production was 350 million in 2012, 432 million kilos in 2013, 445 million kilos in 2014 and 399 million kilos in 2015. The production was 473 million kilos in 2016, 439 million kilos in 2017 and 492 million kilos in 2018.

Greenleaf production for smallholder tea farmers under Kenya Tea Development Agency (KTDA) rose 4.4 per cent to 611 million kilos in the first half of the 2018/19 (July to December 2018), amid a 17 per cent drop in tea prices over the same period, the agency has notes.

This compares to 585 million kilos of green leaf delivered to KTDA-managed factories in the first half of the previous year (2017).

“The increased production six months to December was largely attributed to the reliable rainfall experienced in tea growing areas, as well as intensified sustainable agricultural practices such as fertilizer application that improved the quality and the quantities of green leaf,” KTDA Group CEO, Lerionka Tiampati said.

EATTA data shows tea prices started the year at US$2.15(Sh221.90) per kilo which was lower compared to the US$2.71(Sh279.70) per kilo average in January 2018.

The average price later fell to US$1.96(Sh202.29) around April before picking up around June-July (averaging US$2.20 or Sh227.06). This however fell to the current Sh185 average.

PRODUCTION

Greenleaf production for smallholder tea farmers under Kenya Tea Development Agency (KTDA) rose 4.4 per cent to 611 million kilos in the first half of the 2018/19 (July to December 2018), amid a 17 per cent drop in tea prices over the same period, the agency has notes.

Kenyan tea faces stiff competition from Rwandan tea at the auction which has been attracting prices of between US$3.0 (Sh309.63)and US$4.0(Sh412.84) per kilo, with its superior quality attracting more demand.

The average price for Kenyan tea was US$2.65 in 2014, US$2.73 in 2015, US$2.29 in 2016, US$2.98 in 2017 and US$2.58 in 2018.

The highest bonus now remains in 2016 where tea farmers earned a record Sh61.99 billion, the highest in five years, getting upto Sh70 per kilo.

In 2017/2018 bonus was at Sh65.10 per kilogramme with tea farmers countrywide receiving Sh57.4 billion.

This year's low prices have further been blamed on US sanctions on Iran which have affected the country's trade patterns.

Pakistan, which continues to be a major player in the global tea trade, is currently feeling the impact of currency devaluation which has hurt its imports.

High inflation in Egypt and South Sudan ( recently at 20 per cent and 70 per cent respectively), and uncertainity around Brexit have also been blamed for the fall.

The increased production six months to December was largely attributed to the reliable rainfall experienced in tea growing areas, as well as intensified sustainable agricultural practices.
KTDA Group CEO, Lerionka Tiampati

“A reduction in export to Arabian markets due to the Arab spring uprising, drop in oil prices and heat wave in Europe have all contributed to the declined demand and consequently low prices,” EATTA said in a statement yesterday.

The Mombasa tea auction is currently the largest black tea auction centre in the world and accounts for 32 per cent of global tea exports.

Tea is grown in 21 counties with small scale tea farmers accounting for over 60 per cent of Kenya’s production through 69 KTDA managed tea factories while 40 per cent is produced by the medium and large size tea estates.

Tea has for many years been the largest foreign exchange earner in Kenya contributing over Sh114 billion in 2013, Sh101 billion in 2014, Sh124 billion in 2015, Sh120.6 billion in 2016, Sh129 billion in 2017 and Sh140 billion in 2018.