This archive report was first published on 8 October 2019.
Kenya Tea Industry Faces Turbulence Amid Global Surplus ¶
As the year draws to a close, many tea farmers in Kenya are bracing themselves for a gloomy end to the year, with their earnings from the commodity taking a hit due to a rough year for the industry, both in Kenya and globally.
According to Lerionka Tiampati, the chief executive of the Kenya Tea Development Agency (KTDA), the world is currently producing more tea than consumers are taking, resulting in a surplus of 200 million kilograms.
"World production of tea was at 5.6 billion kilograms while consumption was at 5.3 billion kilograms. At the moment, there is a surplus of 200 million kilograms of tea. The world is producing more tea than consumers are taking," Tiampati said.
Other factors contributing to the surplus include the growth in tea production in countries such as Rwanda, Uganda, and Tanzania, which have focused on improving the quality of their tea.
Major buyers of Kenyan tea, including the US, Iran, and Pakistan, have also been affected by various challenges, leading to a decline in earnings for tea farmers.
"The current low returns to the multinational tea companies and the KTDA small-scale tea farmers in the form of the annual final payments popularly known as ‘tea bonus’ is a reflection on the increased costs of production and the low international prices. Some tea producers have actually recorded losses," said Gideon Mugo, Chairman of the East African Tea Trade Association.
"While tea prices have been on the decline or stagnated, the industry is grappling with increased costs of production such as labour, fertiliser, electricity and fuel," Mugo noted.
"With the prevailing low average price of tea, most producers are not able to sustain the costs of production," he added.
Currently, only five percent of the tea produced in Kenya is consumed locally, with the bulk of the product – 95 percent – exported. This is unlike in other markets where the local markets consumed upwards of 30 percent and some up to 50 percent of the tea produced locally.
"An increased local market for tea could help the industry absorb shocks in the export markets," Mugo said.
