Global prices of tea are expected to decline further next year, signalling tough times for Kenyan producers, a new World Bank report has indicated.
The beverage's returns at the Mombasa auction have dropped from $2.68 per kilogramme at the start of 2022 to $2.25 at the start of September this year.
The World Bank’s latest Commodity Markets Outlook had predicted a further dip in prices of tea by two percent next year reflecting robust leaf supplies including from Indian and East African producers.
This year, global tea prices dropped by eight percent, with the Kenyan produce helped by increased volumes and the weakening of the Kenyan Shilling with the local exports fetching more where imports are expensive.
“Lower tea prices reflect robust supply from major producers and exporters, including India and Kenya (East Africa’s largest tea supplier) as well as weak demand by key importers, including Iran,” said the World Bank in the report that was released on Monday.
“Following a projected eight percent decline in 2023, tea prices are expected to decline a further two percent in 2024 before stabilising in 2025 as supply in South Asia, especially Sri Lanka, recovers,” added the global lender in the report, which provides a preliminary assessment of the potential near-term implications of the conflict for commodity markets.
The World Bank noted that prices at the Mombasa auction declined two percent, while Kolkata (India) auction prices gained four percent. As a result, the tea price index sits 20 percent lower than in the third quarter of last year.
Bonus payment
Last month, Kenyan smallholder tea farmers started receiving their final payment for their supplies for the financial year ended June 30. This, said the Kenya Tea Development Agency (Holdings) Limited, amounted to a record payout of Sh44.15 billion.
KTDA, an agency for small-scale farmers, released the amount popularly known as bonus to an estimated 600,000 farmers affiliated with its 54 factories at the end of last month.
The bonus was paid alongside payments for green leaf supplied last month. Tea, one of Kenya’s highest foreign exchange earners might, however, be negatively impacted by the ongoing conflict in the Middle East.
The effects, the report found, should be limited if the conflict doesn’t widen beyond the Palestine area.
