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Kenyan tea glut pushes prices to multi-year lows, trade body says

BUSINESS
By Reuters | Aug 3rd 2019 | 2 min read
By Reuters | August 3rd 2019
BUSINESS
A worker picks tea at a plantation in Githunguri near Kenya's capital Nairobi [Photo, Reuters]

Kenyan tea prices have slumped to their lowest level in at least five years due to excess supplies and weak demand in the main export markets, the East African Tea Trade Association (EATTA) said on Friday.

Kenya is the leading exporter of black tea in the world and the crop is also one of its top foreign exchange earners, along with tourism, flower exports and cash sent home by the diaspora.

The average price of Kenyan tea at the weekly auction in the port city of Mombasa has fallen to Sh185.49 (USD 1.80) per kilogram, said EATTA, which represents growers, buyers, brokers and tea packers in 10 countries in the region.

That compares with last year’s average price of Sh265.87 (USD2.58), and the industry’s cost of production of around Sh206 (USD 2), EATTA said.

The last time average weekly prices dipped below Sh206.10 (USD 2) was in 2014, EATTA managing director Edward Mudibo said.

The Kenyan shilling sank to a near five year low earlier this week, partly due to concerns about export earnings in the wake of the slump in the price of tea.

Mudibo blamed the oversupply on stocks that were held over from last year, when Kenya had a bumper tea crop.

At the same time, global output last year was 5.85 billion kg against consumption of 5.61 billion kg, leaving a surplus of 240 million kg.

Economic challenges in the top three importers of Kenyan tea - Pakistan, Egypt and Britain - had also led to a reduction in demand, Mudibo said.

“The farmers should face the reality that they will not get a good bonus this year, it will be lower than last year,” Mudibo said, calling on action to be taken to stem the glut.

“The focus should now be on quality of the tea rather than volumes. We shouldn’t be proud of the quantities. We are calling for a go slow in terms of increasing the acreage under tea.”

He also called on farmers to switch to speciality teas, like purple tea, which attract higher prices from health-conscious consumers.

Officials in the government’s Tea Directorate, which regulates the industry, were not immediately available for comment.

Kenya’s tea industry relies on exports, with only 5 percent of the more than 400 million kg of annual production consumed locally.

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