This archive report was first published on 1 October 2019.
East African Tea Farmers Face Declining Prices ¶
Low international tea prices are set to hit East African farmers hard, with prices dropping from $2.98 per kilogramme in 2017 to $1.76 per kilogramme in July 2019.
The decline in prices is attributed to overproduction, depressed global demand, currency devaluation, and instability in key markets in Asia and Africa, as well as international politics.
According to the East African Tea Trade Association, global tea production in 2018 was estimated at 5.85 billion kilogrammes, with Africa contributing 717 million kilogrammes, accounting for 12.2 per cent.
However, global consumption posted a marginal 2.4 per cent increase to 5.6 billion kilogrammes compared with 5.4 billion kilogrammes in 2017.
Kenyan tea farmers are particularly affected, with production hitting a record high of 492 million kilogrammes in 2018. The market is experiencing a glut, leading to a decline in earnings.
The tea industry contributes about four per cent to Kenya's gross domestic market and more than 20 per cent of foreign exchange. Last year, the country earned $1.3 billion, up from $1.2 billion in 2017.
Kenyan tea farmers are facing stiff competition from emerging competitors like Rwanda, Uganda, and Ethiopia, which are investing in high-quality teas that are fetching premium prices.
"Kenya needs to focus more on quality than volumes. This is what countries like Rwanda are doing, making its tea fetch good prices," said Gideon Mugo, chairman of the East African Tea Trade Association.
Uganda is targeting to produce 100 million kilogrammes, while Ethiopia is making inroads in Kenya's traditional markets.
Small-scale tea farmers affiliated to the Kenya Tea Development Agency (KTDA) have been warned to brace for a 30 per cent decline in bonus payment.
"We are witnessing a decline in month-on-month production this year, and the market is responding favourably," noted Mr Mugo.
