Cumulative green leaf production for smallholder tea farmers under Kenya Tea Development Agency (KTDA) rose to 868.9 million kilos in the first nine months of the 2018/19 financial year (July 2018 to March 2019), amid a 19.5% drop in tea prices over the same period.
This compares to 824.8 million kilos of green leaf delivered to KTDA-managed factories in the first nine months of the previous year FY (July 2017 to March 2018). However, the month of March 2019 recorded a decline of 25% compared to a similar month in 2018.
“Despite the drought experienced in the last several months, high production of tea towards the end of last year continued to dampen the prices. The drought has recently led to reduced production and we anticipate this reduction could see prices improve as less tea volumes are offered for sale” KTDA Group CEO, Lerionka Tiampati said.
The average price of KTDA teas in the first nine months of 2018/19 declined to USD 2.62 per kg from USD 3.25 for the corresponding period of 2017/18.Turbulence in the international markets such as economic sanctions imposed on Iran by the USA and high inflation rates in Egypt also negatively impacted the tea market.
Compared to last year, the exchange rate dropped 1.6% as the Kenya Shilling strengthened against the dollar. Tea is traded in the US Dollar, which is then converted to KES.
Other tea producing countries such as India also reported higher tea production in 2018 adding to global tea stocks which pushed prices down.
“Despite the reduction in production due to drought, it is not anticipated that prices will improve significantly between now and the close of the financial year in June 2019. Farmers should therefore expect to receive lower total earnings for their produce this year,” Tiampati added.
In October 2018, KTDA announced record income of Kshs85.74 million from the sale of tea supplied by smallholder tea farmers. A total of Kshs62.35 billion (representing 74% of income) was paid out to farmers as monthly and second payments.