Currently, Kenya is ranked third behind China and India as leading producer of tea worldwide and the only country in Africa to produce a substantial amount of tea for the world market.
The product also remains one of the top foreign exchange earners for the country alongside tourism, horticulture, and coffee.
The Eastern African nation has also recently emerged as a major source of innovation in new varieties of tea and single origin artisan teas. Over 60 percent of Kenyan tea is produced by scale farmers and marketed through the Kenya Tea Development Agency (KTDA).
Market
Kenya’s top 10 traditional tea markets account for over 80 per cent of the exports to over 30 destinations. Pakistan remains the main buyer of the produce. Recent industry performance indicates that Karachi, Egypt, United Kingdom, United Arab Emirates, Russia and Sudan among other top buyers accounted for the lion’s share of the commodity. Exports to Pakistan for instance, was 14 million kilograms in the period under review (February 2017-February 2018) – a growth of 55 per cent from the same period last year when exports to the country were nine million kilos.
Egypt maintained the second position at 7.5 million kilograms with the imports having increased by 28 per cent from 5.5 million kilos last year, while UK came in third after buying 4.1 million kilos in the same period. The volumes to UK grew by a significant 48 per cent as fears arose that export would drop following after the exit of Britain from European Union (Brexit). Experts warned that after Brexit, there could be a drop in volumes of tea that the UK imports from Kenya due to anticipated decline of its (UK) re-export market to other nations.
The UK is a major re-exporter and in 2014 it exported 17 per cent of the beverage it imported, with countries such as Republic of Ireland, Germany, Poland and France its major markets.
Export destinations declined from 44 countries to 39 countries in the period under review.
Among the emerging markets that recorded significantly higher tea imports from Kenya included Sri-Lanka, Switzerland, Somalia, the US, India, Ireland, Turkey, the Netherlands, Iran, Indonesia, Japan and Oman.
Kenya is trying to open up new markets and expand the existing ones such as China, which has the potential of buying more of the local beverage, to protect farmers from low earnings.
Local tea consumption for February 2017 stood at 2.20 million kilos against 2.26 million in the 2016 period.
Prices
Tea prices in the world’s biggest exporter of black tea hit record high this year as buyers stocked up over fears that drought in the country would affect production.
The average price for Best BP1’s leapt to $5.01 per kg from the traditional record of $4.00-$4.7 per kg. “Brighter BP1’s met very strong competition and gained $0.34 to $0.66,” a regular market report by the Africa Tea Brokers said.
Forecasts of better than average rains due to begin in October have failed to dampen prices for the best tea, although prices for some lower quality grades fell. There was good but irregular demand for the 77,529 packages (4.9 million kgs) on offer with much tea remaining unsold (19.81 per cent).
Best BP1s fetched $5.06 – $5.01 per kg up from $4.72-$4.22 per kg, at the last sale, while top PF1s changed hands at between $3.58-$3.334 per kg down from $3.70-$3.50 per kg.
Kazakhstan was dominant especially on best BP1s while Pakistan Packers, Yemen and other Middle Eastern countries showed more interest with Egyptian Packers quieter at the start but was more active towards the close.
Tea Prospects for 2018
According to the country’s Agriculture and Food Authority Tea Directorate, tea export earnings are forecast to rise further this year (2018), while total output is expected to improve after a fall in production last year (2017).
Export earnings will rise 5 percent in 2018 to 135 billion shillings ($1.33 billion), while total output is expected to hit 452 million kg buoyed by good weather conditions, after drought had cut the country’s production in 2017, the directorate said in a statement. Total export earnings rose to 129 billion shillings in 2017 – the highest in five years – from 120 billion shillings a year earlier, while total output was down 7 percent to 439 million kg. Drought hit many parts of Kenya’s farming areas in early 2017, affecting the output of tea while processing factories received fewer deliveries. Export volumes were seen rising slightly to 423 million kg this year from 415 million kg a year ago, the directorate added. The average price per kg of tea at the Mombasa-based auction was expected to rise to $3 per kg from $2.98 per kg last year.
Kenya’s main tea export markets are Egypt, Sudan, Afghanistan, Pakistan, UK and UAE with emerging markets including Angola, Vietnam, Philippines, Azerbaijan, South Korea, Czech Republic, Myanmar and South Sudan.
Challenges
Weak trend in the export price of tea. This export price problem is as a consequence of worldwide tea export increases, which has occurred more rapidly than world consumption. Over the last ten years, there has been a consistent surplus of tea supply into the world market, this has had the effect of depressing auction prices. The dollar price released for Kenya tea is at the same level as it was 10 years ago. This problem can be solved by a number of measures, some of a long-term nature, while others can be implemented immediately. Regulating the supply of tea into the world market has also been suggested.
Rising costs of production. This applies most forcibly to the estate sector where labour account for some two thirds of production costs ex-factory. The main problem arises from the pattern of wage awards imposed on the industry. Since 1990, the basic wage rate has risen 10 times; in fact since 1998 it has gone up by more than 50 percent. The danger signals are evident: small producers have been resigning from the industry body in order to escape the statutory basic wage award.
Lack of credit facilities is a major concern to the small-scale farmers. Poor infrastructure, unreliable electricity, high costs of fuel and packaging materials further increase production costs. The factories have been the hardest hit by the ban on procurement of wood fuel from the forest. This is because they rely on wood fuel to cure the tea. Since the ban was effected three years ago the factories have been forced to procure fuel from farms where trees are rare and therefore sold at exorbitant prices.
Negative publicity by some churches is a challenge the tea industry has to overcome. Many do not know the benefits of consuming tea. A study conducted by Dr. Weilsburger director meritus at the American Health Foundation, consuming tea has health benefits. Among the many benefits, tea extracts have been shown to cause cancer prevention these tea extracts prevent the growth of breast cancer and prostate cancer cells.
