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Commodities

Farmers face earnings cut as tea prices dip to 12-year low

The average price declined to Sh256 a kilo from Sh274 in the previous period for same quantity, a value last witnessed in 2008.
The average price declined to Sh256 a kilo from Sh274 in the previous period for same quantity, a value last witnessed in 2008. FILE PHOTO | NMG 

Farmers affiliated to the Kenya Tea Development Agency (KTDA) are staring at another season of low earnings after the price of the commodity declined to a 12-year low on the back of high volumes in the financial year ended June 30.

The average price declined to Sh256 a kilo from Sh274 in the previous period for same quantity, a value last witnessed in 2008.

KTDA said production rose by 29 percent to 1.4 billion kilogrammes from 1.2 billion kilogrammes during the previous year.

“This growth came amid a tumultuous second half of the year that saw global tea prices plummet on the oversupply of the product in the market as well as disruptions occasioned by the Covid-19 pandemic,” said KTDA in a statement yesterday.

The growth in output is attributed to favourable weather across tea-growing regions and improved crop husbandry among farmers.

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The agency said the Covid-19 pandemic reduced demand for tea across markets as a result of restrictions on movement of goods and services across the world when the outbreak was announced.

As a result, the Tea Directorate said Kenya’s earnings from the beverage in the five months to May dropped by Sh1.3 billion.

The regulator pointed out that the demand for tea remained low in the review period, which also impacted negatively on price per kilo.

The tea auction has been performing dismally since the beginning of the year with the price per kilo averaging at below Sh200 for the last 25 weeks.

Farmers’ earnings had dropped by 22 percent in the financial year ended June 2019, marking the lowest returns for growers in the last six years.

Farmers affiliated to KTDA earned Sh69.7 billion in the review period compared with Sh85.7 billion that they pocketed in 2018.

The trend in falling prices is replicated across other markets such India and Sri Lanka that have also posted similar price declines on oversupply.

The 54 tea factory companies, which own the 69 factories managed by KTDA, will close their financial books for the year and also declare the final payment to each of their tea factory farmers, with the second payment for growers expected to be announced in September or October.

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