This archive report was first published on 13 September 2019.
Kenya's tea industry is facing a tough time, with prices plummeting due to global economic factors. According to the Kenya Tea Development Agency (KTDA), the agency is finalizing reviews on factory accounts, which will determine the payments to tea farmers. However, farmers should expect lower payments as global forces drive tea prices down.
KTDA anticipates issuing payments as soon as it finishes reviewing its 69 factory accounts. The agency will declare the second payments after September 26. However, global factors have led to a decline in Kenya's tea performance, with prices dropping by 10% in the past year.
Slumping Tea Prices ¶
At the Mombasa Tea Auction, a kilo of tea was worth Kshs. 281.6 in 2017/2018, but the same quantity sells for Kshs. 250.5 this year. In June 2019, a kilo of tea sold for Kshs 224.5, compared to Kshs 265 in June last year.
KTDA attributes the dropping prices to global overproduction of the commodity, with other tea exporters also experiencing plummeting prices. For example, Sri Lanka saw a decrease of 22% in tea prices, while prices in India fell by 12%.
Data from the Kenya Bureau of Statistics show a decline in both tea prices and exports. Kenya exported tea worth Kshs. 40.09B in the first quarter of 2018, compared to Kshs. 31.37B in 2019.
The agency also notes that the performance of the economy of tea destinations drove the drop. For example, inflation in Pakistan led to a decline in earnings of exports to the country. Kenya exported tea worth Kshs 18.61B in Q1 2018 against Kshs 13.05B in Q1 2019.
Moreover, other economies like Iran and Egypt also suffered through economic turmoil and sanctions, respectively. These events affect Kenya's tea performance. Egypt experienced currency devaluation, while Iran faced US sanctions that affect tea exports.
