High production and a global oversupply have pushed down the average tea prices for factories managed by Kenya Tea Development Agency (KTDA) to Sh239.78 ($2.22) in the nine months to March 2021, a 12 per cent drop.
The average price dropped from Sh272.16 ($2.52) for a similar period in the previous financial year while tea production dropped by 8.6 per cent. KTDA data shows factories processed 218.9 million kilos of tea compared to 239.6 million kilos a year earlier.
KTDA prices over the same period have however been 17 per cent higher than the average Mombasa auction price for all teas - at Sh205.2 ($1.90). “The teas stuck in the global supply chain are still high and these are having an adverse effect on pricing,” said KTDA Management Services Managing Director Alfred Njagi.
The Agriculture and Food Authority (AFA) has also cited the Covid-19 pandemic as a major driver to the continued price depression.
“Demand has also been affected to some extent by reduced consumer purchasing power due to the effect of the global economic recession that is perpetuated by the Covid-19 pandemic as well as the devaluation of some foreign currencies against the US Dollar,” AFA said in a Tea Industry performance report for February.
AFA further notes that the huge amount of stocks and high production continue to exert pressure on prices but expects the amount of tea coming from factories to ease up this year.
“Notably, since the weather patterns expected this year may differ from that of last year, lower production trend recorded in the first two months is likely to continue throughout the rest of the year,” the Authority said.
Farmers are however likely to get a slight reprieve from the favourable exchange rate with the Kenyan Shilling having depreciated to an average of Sh109.05 to the US Dollar during the nine months compared to Sh102.62 a year earlier. Tea exports are made in USD and the weaker exchange rate will thus yield slightly more in Shillings.