GREEN LEAF

Tea prices to suffer from Coronavirus impact and oversupply - brokers

This will affect the commodity’s prices with effects being heavily felt by farmers

In Summary

•Global shipping lines have become cautious on voyages along key trading routes, among them China’s 34 major ports, a move that has threatened the global supply chain

•Prolonged rainfall in tea growing areas in the country has also seen overproduction of tea, as volumes being availed for trading continue to rise

Farmers pick tea in Kangaita village
Farmers pick tea in Kangaita village
Image: FILE

The global coronavirus pandemic coupled with overproduction is threatening tea trading patterns and prices, the East African Tea Trade Association (EATTA) has cautioned.

Global shipping lines have become cautious on voyages along key trading routes, among them China’s 34 major ports, a move that has threatened the global supply chain.

Prolonged rainfalls in tea growing areas in the country has also seen overproduction of tea.

 

This, according to EATTA will impact on prices which will eat into farmers earnings.

EATTA yesterday said it expects volumes at the auction to hit a high of 510 million kilos this year, compared to last year’s 454 million kilos and 488 million kilos the previous year.

“This means the prices are likely to go down. It is obvious when something is in excess in the market the demand goes down hence the prices,” said Brian Ngwiri, trade development manager at EAATA.

He spoke in Mombasa during a media tour of the tea auction.

Changing global transport and logistics patterns as a result of coronavirus are also likely to affect the commodity’s export, Ngwiri noted.

Kenya Tea Development Agency (KTDA) has projected low returns to farmers this year due to oversupply.

Smallholder tea farmers under KTDA delivered 150.5 million kilos of green leaf in January 2020, the highest ever amount recorded by KTDA-managed factories in a single month, driven by heavy rains that that spilled over from 2019.

 

Average tea prices at the Mombasa Tea Auction averaged $2.21 (Sh225.7) between July 2019 and January 2020, a 14 per cent drop compared to $2.58(Sh263.6) in a corresponding period in 2018, KTDA data shows.

The January amount is 15 per cent above the 130 million kilos delivered in December 2019 and 21.8 per cent higher than what farmers produced in January 2019.

Cumulatively, July 2019 to January 2020, production stands at 768.98 million kilos, compared to 733.48 million kilos for the same period in the previous year, a 48 per cent increase.

“We do not expect a stellar performance this year. Prices are probably going to be subdued,” said Vincent Mwingiriwi, head of sales and customer services-KTDA.

“The increase in production of green leaf is attributed to high rainfall experienced in tea growing areas, favourable temperatures and good farming practices by tea farmers,”KTDA said.

Pakistan, Egypt, UK, UAE and Sudan remain Kenya's key export destinations for the predominant black CTC-type of tea produced in Kenya.

Some of the countries have suffered political and economic challenges over the last several years affecting their purchasing power. 

President Uhuru Kenyatta in January spelled out a number of reforms to ensure tea farmers gain from the crop.

Among them was limitation of weekly volumes of tea traded at the Mombasa Auction to manage prices.

According to Uhuru, the management of demand and control will guarantee better pay for farmers, saying low returns are as a result of market saturation.