Falling tea supply at auction raises May earnings for farmers

A seven per cent drop in the supply of tea at the weekly auction during May pushed prices up in what could trigger higher forex inflows and earnings for farmers.

Industry monitor- the Tea Board of Kenya (TBK) blamed poor rainfall for the reduced supply, which pushed prices to $2.88 per kilogramme compared to $2.53 recorded in May 2010, helped by a seven per cent drop in production to stand at 32.8 million kilogrammes over May last year.

Growers in the western parts of the country were the most affected with a 9.1 per cent reduction in production while east of Rift Valley production was lower by 5.6 per cent. Overall, production for the first five months dropped by 18 per cent from last year’s 183.1 million kilogrammes for a similar period.

Intake by Egypt and Pakistan — two of major exporters both declined by 13 per cent and 28 per cent respectively. Along with Afghanistan, Sudan and the United Kingdom they accounted for 71 per cent of total exports also bought by 32 other countries.

“Notably, most markets imported a relatively higher volume of tea during the month of May compared to the same period of last year in anticipation of less supplies due to the cessation of the long rains season,” said TBK managing director Sicily Kariuki in a statement.

It remains to be seen whether Kenya’s top income earner would hold ground to return another record breaking performance recorded last year when favourable weather saw increased production, a massive improvement in earnings brought about by higher export volumes sold at consistently high prices at the auction.

In 2010, Kenya exported close to 25 per cent of the global tea market (or 400 000 tonnes) with revenues reaching the Sh97 billion mark in 2010.

Last week, the board said the weak currency coupled with stable auction prices could push earnings beyond the Sh97 billion recorded last year but the Kenya Tea Development Agency said expensive farm inputs would erode gains made from the weak shilling that has lost ground against the dollar by about 13.5 per cent.

In May, the currency averaged 85.50 before sliding further to the 90.70 level at the close of Friday. The sector is entering the June to August cold season that normally inhibits development of tea leaves, cutting production.