The Kenya Tea Development Agency (KTDA) is finalizing reviews on factory accounts, after which it will pay tea farmers. However, farmers should anticipate lower payments as global forces drive tea prices to the ground. Price trends comparing the beverages’ performance shows that tea performed slightly lower in 2019 than it did in 2018.
KTDA anticipates issuing payments as soon as its finishes reviews on its 69 factory accounts. Meetings to determine the second payments are underway. After September 26, the agency will declare the second payments. However, global factors have led to a decline in Kenya’s tea performance.
Slumping Tea Prices.
At the Mombasa Tea Auction, a kilo of tea was worth Kshs. 281.6 in 2017/2018 whereas the same grammage sells for Kshs. 250.5 this year. At the same time, a kilo of tea in June 2019 sold for Kshs 224.5 as compared to Kshs 265 in June last year.
KTDA attributes the dropping prices to global overproduction of the commodity as other tea exporters also experience plummeting prices. For example, Sri Lanka saw a decrease of 22% in tea prices whereas 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 as 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, whereas Iran faced US sanctions which affect tea exports.
The result of this cocktail of events amounts losses to tea companies in Kenya, which will eventually trickle down to the farmers.