Chai Trading Company Limited Officials carry out a tea tasting exercise at their offices in Mombasa. Photo/FILE
What you need to know:
Kenya earned Sh94.6 billion from 432.4 million kilogrammes of tea, up from 369 million kilogrammes in 2012.
The world’s largest exporter of black tea recorded export earnings of Sh112 billion in 2012 and Sh109.4 billion in 2011.
Tea prices at the auction stood at an average Sh218 ($2.53) a kilogramme last year compared to Sh276 ($3.19) in 2012.
Tea export earnings, Kenya’s top foreign exchange source, dipped below Sh100 billion last year following a sharp drop in prices despite a rise in production.
Data from the Kenya National Bureau of Statistics estimate that the country earned Sh94.6 billion from 432.4 million kilogrammes of tea, up from 369 million kilogrammes in 2012.
The world’s largest exporter of black tea recorded export earnings of Sh112 billion in 2012 and Sh109.4 billion in 2011.
The drop in earnings has sparked fears of lower tea bonuses for farmers for the second time in a row and is linked to over-production that has pushed prices to a six-year low.
The Kenya Tea Development Agency (KTDA), which manages the smallholders, paid out a bonus of Sh31 per kilogramme of tea in the year ending June 2013 compared to Sh32 in 2012.
Tea prices at the auction stood at an average Sh218 ($2.53) a kilogramme last year compared to Sh276 ($3.19) in 2012.
“The short-term situation may look bleak… the decreased earnings are also likely to have a negative impact on the economy, as tea is the number one foreign exchange earner in the country,” said KTDA.
“This is a very steep drop in prices compared to previous years. However, this is not a unique phenomenon. In 2008, tea prices dropped drastically from $2.43 to $1.70 and this affected farmers’ earnings.”
The situation could worsen with the start of the long rains expected to boost production and hence weaken the commodity’s price.
A total of 4.8 billion kilogrammes of tea was processed globally last year, with 4.6 billion kilogrammes consumed.
KTDA reckons political instability in some of the countries that are big consumers of Kenyan tea such as Egypt has compounded the problem.
Tea, horticulture, tourism and diaspora remittances are the country’s top foreign exchange earners.
Save for remittances, the other top foreign exchange earners have recorded lower receipts. Coffee earnings are estimated at Sh10.4 billion last year from Sh15 billion, according to KNBS data, on lower output and price.
Tourism has been hit by heightened security risks in the wake of threats by Somalia-based Al-Shabaab militants and the weak euro economy, which has also affected horticulture.
At the Nairobi Securities Exchange (NSE), firms dealing in coffee and tea have seen their profits take a hit.
Kapchorua Tea Limited issued a profit warning this week, informing investors that its net income for the full year ending December could fall by at least 25 per cent.
The NSE-listed company posted a 25.36 per cent drop in profit after tax to Sh77.17 million over the six month period ended June 2013 from Sh103.39 million posted over a similar period in 2012.
Limuru Tea Company saw its profits for the year to December drop to Sh41.5 million compared to Sh146 million in 2012 while Kakuzi’s earnings fell to Sh168.5 million from Sh408 million in the year under review.
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Note: The results are not exact but very close to the actual.
