Global glut pushed down tea prices in 2020 – KTDA

 

Oversupply of tea at the Mombasa auction affected prices in the second half of last year, the Kenya Tea Development Agency has said.

This was further worsened by the Cobid-19 pandemic that interrupted the global supply chain leading to  low uptake in key markets.

Average prices at the weekly Mombasa auction remained below the two-dollar mark for the better part of the year, with the last auction fetching an average $1.87 (Sh206.13)—East African Tea Trade Association(EATTA) data.

The KTDA teas however fetched a higher price than the market average during the period, despite shedding some 14 per cent compared to the previous year.

A kilo, of KTDA teas, fetched $2.18 (Sh240.30) on average, a drop compared to $2.54 (Sh279.98) recorded in the same period in 2019.

This is despite a slight drop on the volume of green leaf produced by smallholder tea farmers under KTDA management during the six months ending December.

The volumes dropped marginally by 0.7 per cent to 615 million kilos , compared to 619.5 million kilos recorded during the same period in 2019.

There was however high supply from the region, in addition to the global oversupply which affected the prices.

“High volumes of tea produced in the East African region and elsewhere on the globe have contributed to the continued price decline in the global market,” KTDA management services managing director, Alfred Njagi, said.

The Mombasa Tea Auction is one of the largest in the world where teas from Kenya, Uganda, Rwanda, Tanzania, Malawi, Ethiopia and the Democratic Republic of Congo are traded.

The drop in prices however came with a weakening shilling to the US Dollar, cushioning farmers' from a  major plunge in earnings.

This is the third year in a row that prices have declined due to global supply surplus above the market demand and in line with a 2018 Food and Agriculture Organization (FAO) market forecast.

The high tea production in Kenya is mainly as a result of favourable weather conditions during the period, besides the rapid expansion of acreage under tea over the years.

In the last financial year (2019/2020), smallholder farmers under KTDA produced 1.454 billion kilograms of green leaf, up from 1.13 billion kilograms the previous year (2018/2019). This represents a 28.7 per cent increase in production.

Data from the Kenya National Bureau of Statistics (2020) also shows that smallholder farmers across the country, including those delivering to KTDA managed factories, have been increasing acreage under tea, which stood at 163,000 hectares (2019).

This is up from 141,800 hectares (2018) which has contributed to the increase in tea volumes on offer in the market.

‘‘The impact on tea prices of the commencement of the Tea Act 2020 that requires all black tea exports processed and manufactured in Kenya to be sold exclusively at the tea auction floor will soon be realized” Njagi, said.

President Uhuru Kenyatta signed into law the Tea Bill of 2018, on December 23.

“We are waiting to see the full effects of the new law to the industry in the coming months,” Njagi said.

In 2019, the world produced 6.1 million kilos of made tea during which time consumption stood at 5.86 million kilos, spilling an excess of 290 million kilos that continues to crush the markets.

The increased global tea production is responsible for the downward movement of prices.

Njagi yesterday said to improve tea prices for the smallholder tea farmers, the Kenyan government, through the newly created tea board, needs to assist grow the African market for Kenyan teas.

This is through courting some of the West and North African countries such as Morocco, Nigeria and also markets in other continents that are importing tea from outside Africa.

Meanwhile, Pakistan remains among the biggest buyers of Kenyan tea taking up 38 per cent of total exports. Other key markets are Egypt, the UK and Sudan.

The commodity has started fetching better prices this year compared to last year, with the first and second auctions of the year recording an average price of $1.94(Sh 213.85).