Tea farmers are starring at lower earnings after increased tea volumes and economic sanction imposed on Iran saw prices reduce by 17 percent between July and December last year.
According to the Kenya Tea Development Agency, the average price of KTDA teas between July and December 2018 sharply dropped to 2 dollars and 71 cents per kilo, down from 3 dollars and 27 cents during a corresponding period a year earlier.
Tea earnings have been on the decline in the recent past, something blamed on lower tea prices in the international market, increased production and higher operational cost for factories.
Last year, smallholder tea farmers pocketed an average of 52 shillings and 51 cents per kilo of green leaf delivered to Kenya Tea Development Agency factories last year, a drop from 58 shillings and 61 cents earned in 2017.
This is set to further reduce this year, if latest data from the KTDA is anything to go by.
KTDA chief executive Lerionka Tiampati says the average price of tea in the six month period to December 2018 dropped 17 percent to 2 dollars and 71 cents per kilo.
This was attributed to higher tea production that suppressed prices, coupled with economic sanctions imposed on Iran, which is a key tea buyer, by the USA. Tiampati is warning farmers to brace for reduced earnings in the year to June this year.
He says: “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.”
Tiampati says indications point to continued weakening of prices, which will significantly affect farmers’ earnings at the end of the financial year.
Between July and December 2018, greenleaf production for smallholder tea farmers under KTDA rose 4.4 percent to 611 million kilos.
Tiampati adds: “The increased production six months to December was largely attributed to the reliable rainfall experienced in tea growing areas, as well as intensified sustainable agricultural practices such as fertilizer application that improved the quality and the quantities of green leaf.”
KTDA says other tea producing countries such as India and Malawi also reported higher tea production in 2018 adding to global tea stocks which pushed prices down.
India, currently experiencing winter, will soon be reporting higher production, which could further affect global prices.