Nairobi — Persistent excessive manufacturing and a worldwide oversupply have pushed down the common tea costs for factories managed by Kenya Tea Improvement Company to USD2.22 within the 9 months to March 2021, a 12% drop.
The common worth dropped from USD2.52 for the same nine-month interval within the earlier monetary yr whereas tea manufacturing dropped by 8.6%.
KTDA knowledge reveals that the factories
processed 218.9 million kilos of tea in the course of the interval in comparison with 239.6 million kilos a yr earlier.
Regardless of this drop in worth, KTDA costs over the identical interval have been 17% larger than the common Mombasa public sale worth for all teas, which averaged USD1.90.
KTDA and different regional producers have been grappling with poor costs during the last three years as world oversupply, excessive manufacturing, and financial weaknesses in key market nations exert strain on the tea commerce.
“Regardless of the slight lower in manufacturing, the teas caught within the world provide chain are nonetheless fairly excessive and these are having an hostile impact on pricing, not simply in Kenya but additionally different tea auctions all over the world,” KTDA Administration Providers Managing Director, Alfred Njagi, mentioned.
The Agriculture and Meals Authority (AFA) has additionally cited the Covid-19 pandemic as a significant driver to the continued worth despair.
“Demand has additionally been affected to some extent by lowered shopper buying energy because of the impact of the worldwide financial recession that’s perpetuated by the Covid-19 pandemic in addition to devaluation of some foreign currency echange in opposition to the US Greenback,” AFA mentioned in a Tea
Business efficiency report for February.
AFA additional notes that the massive quantity of shares and excessive manufacturing proceed to exert strain on costs however expects the quantity of tea coming from factories to ease up this yr.
“Notably, because the climate patterns anticipated this yr might differ from that of final yr, decrease manufacturing pattern recorded within the first two months is more likely to proceed all through the remainder of the yr,” the Authority mentioned.
Farmers are nevertheless more likely to get a slight reprieve from the beneficial alternate charge with the Kenyan Shilling having depreciated to a mean of Sh109.05 to the US Greenback in the course of the 9 months in comparison with Sh102.62 a yr earlier. Tea exports are made in USD and the weaker
alternate charge will thus yield barely extra in Shillings.
The excessive tea manufacturing in Kenya is majorly a results of favorable climate situations in the course of the interval, apart from the speedy enlargement of acreage below tea over time.
Information from the Kenya Nationwide Bureau of Statistics (2020) reveals that smallholder farmers throughout the nation, together with these delivering to KTDA-managed factories, have been growing acreage below tea, which stood at 163,000 hectares (2019), up from 141,800 hectares (2018) which has contributed to the rise in tea volumes on provide out there.
Within the final monetary yr (2019/2020), smallholder farmers below KTDA produced 1.454 billion kilograms of inexperienced leaf, up from 1.13 billion kilograms the earlier yr (2018/2019). This
represents a 22% improve in manufacturing.
The interaction between crop manufacturing and realized costs can be evident in different tea-producing nations.
In accordance with trade knowledge, throughout the identical interval, Rwanda’s manufacturing
elevated barely by 3% and as anticipated, their costs remained flat. India and Sri Lanka’s manufacturing additionally elevated by single digits with a damaging impact on costs, additional illustrating the impact of manufacturing on worth.
International oversupply of the beverage coupled with market disruptions from the Covid-19 pandemic has seen costs proceed on a downward pattern for a 3rd consecutive yr because the 2018/19 monetary yr.
In 2018, projections from the Meals and Agriculture Group (FAO)
indicated continued strain on tea costs because of elevated world manufacturing above demand.
KTDA continues to accentuate its efforts in decreasing the consequences of this worth drop by bettering operational efficiencies to curb prices via numerous initiatives.
These embrace funding in small hydropower stations for cheaper energy provide, diversification to orthodox teas to scale back reliance on Black CTC teas, and coaching of farmers on monetary literacy, earnings diversification, and administration.