Kenya Tea Development Agency (KTDA) has warned farmers to brace for low earnings this year following a 17 per cent drop in the price of the beverage in the first half of the 2018/2019 financial year.
High volumes pushed down the average price of KTDA tea to Sh271 per kilogramme in the first half of the review period, from Sh327 for the corresponding half of 2017/18.
The price is the lowest witnessed by the agency in the last five years, records show.
KTDA said indications point to continued weakening of prices which could significantly affect farmers’ earnings.
“Farmers should expect lower earnings for the year should this price drop continue.
“There is still a lot of stock within the global tea supply chain, which is lowering prices. It is an issue of supply and demand and its effect on price,” said KTDA Group CEO Lerionka Tiampati.
There was a marginal increase in green leaf production, 4.4 per cent, to 611 million kilos between July and December 2018 on account of good weather that spurred the rise in volume.
The company realised 585 million kilos of green leaf delivered to factories in the previous half of 2017/2018 year.
“Increased production in the six months to December was largely attributed to the reliable rainfall experienced in tea growing areas,” Mr Tiampati said.
“We also intensified sustainable agricultural practices such as fertiliser application that improved the quality and quantity of green leaf,” he said.
KTDA also said that tea producing countries such as India and Malawi also reported higher yields in 2018, adding to global stocks which pushed prices down.
The agency said that India, which is experiencing winter, will soon report higher production which could further affect global prices.
Kenyan farmers earned a record Sh85.74 billion riding on a bumper harvest in the last season, defying the fall in global prices and marking the third year of improved earnings.
Kenya’s tea earnings were up 9.4 per cent compared to the previous season’s income of Sh78.31 billion, according to KTDA.
A kilo of green leaf fetched about Sh52.51 in the last season, having dropped from Sh58.61 in 2017.
KTDA linked the drop in price to “escalating costs of production and depressed prices” during the last quarter of the financial year.