Tea prices drop amid glut, Covid

The average tea prices for factories managed by the Kenya Tea Development Agency (KTDA) have dropped by 13.3 per cent per kilo to $2.22 (Sh241) in the last seven months to January 2021.

KTDA Management Services Managing Director Alfred Njagi said the drop was attributed to high tea production in the region coupled with global oversupply.

The average price dropped from $2.56 (Sh279) per kilo for a similar seven-month period in the previous financial year as the sector grappled with persistent oversupply and the effects of the Covid-19 pandemic.

Green leaf deliveries stood at 726 million kilos in the seven month period.

“The volume of tea from countries that are served by the Mombasa Auction is still high due to favorable weather in the region. The high production coupled with the high volumes in the global supply chain has kept the prices at the auction depressed,” Njagi, said.

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

Data from the Kenya National Bureau of Statistics (2020) also shows that smallholder tea farmers across the country, including those delivering to KTDA-managed factories, have been increasing acreage under tea, which stood at 163,000 hectares in 2019 up from 141,800 hectares in 2018.

This has contributed to the increase in tea volumes on offer in the market.

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.

Global oversupply of the beverage coupled with market disruptions from the Covid-19 pandemic has seen prices continue on a downward trend for a third consecutive year.

Tea prices have been on a downward trend since 2018/19, and this has continued into the current financial year. In 2018, projections from the Food and Agriculture Organization (FAO) indicated continued pressure on tea prices due to increased world production above demand.