Tea farmers to reap higher earnings

• Falling supply and foul weather over most growing areas to improve pricing

Tea farmers are likely to reap higher earnings due to the combined effects of a fall in supply in the international market and foul weather in most growing areas.

Industry regulator Tea Board of Kenya (TBK) says major producing areas have received lower than expected short rains, which is likely to compound annual production by up to six per cent to stand at 325 million kilogrammes.

“During the month of October, some 14.7 million kg’s of tea was sold through the auction compared with 20.2 million kgs sold during a similar period in 2008,” says the TBK monthly report released on Tuesday.

The TBK report shows that supplies to the weekly Mombasa auction dropped by 27 per cent, pushing the prices by $0.50 per kilogramme of tea offered.

The Mombasa auction accounts for more than 70 per cent of all tea exports.

Due to the lower supplies, last month’s average tea price was higher, at $2.79 per kg, compared to $2.29 in October 2008.

On Tuesday, Kenyan tea prices hit a new record of an average $5.32 per kg for Broken Pekoe Ones (BP1s), up from $5.30 at last week’s sale, Africa Tea Brokers said in a weekly market report.

Best BP1s sold for between $5.20 and $5.44 per kg at this week’s auction in Mombasa, up from $5.22 and $5.38 last week.

Top Pekoe Fanning Ones (PF1s) fetched $3.78-$3.98 per kg, up from $3.76-$3.94 last week.

Overall, the prices recorded this year have been significantly higher compared to the previous years.

Tea auction prices worldwide have also stayed significantly higher this year owing to depleted production volumes, with Sri Lankan recording the highest auction prices at an average of $2.88 per kilogramme — nearly $0.25 per kilogramme when compared to the average Kenyan tea prices.

During the review period, producing areas west of the Rift Valley benefited from the onset of the October-December rains.

The country realised Sh6.05 billion from sales to 32 markets across the globe.

However, export volumes to most traditional buyers dropped by 11 per cent.

The UK dislodged Egypt and Pakistan as the top two traditional buyers, mopping up some six million kgs offered.

Pakistan bought 4.3 million kilos and Egypt 3.8 million kilos.

Other key markets included Sudan and Afghanistan that recorded the highest growth in sales.

Together, the five traditional buyers accounted for three quarters of total exports.

Drought affected many growing countries including Sri Lanka, China and India, leading to depressed volumes.

This year, the local industry is grappling with the high cost of electricity arising from the ongoing power rationing, shortage of fuel, high labour costs, costly fertiliser, and a fluctuating exchange rate which could impact negatively on performance in the future.

Should the dollar’s downward trend persist, farmers’ earnings are likely to increase in the next season.

Producers have the option of selling through the Mombasa auction, direct sales, or factory door sales.

TBK has forecast up to Sh65 billion in yearly earnings for the sector.

In 2008, the sector generated Sh62 billion.