Home Commodities Tea cash grows by Sh9 billion in seven months

Tea cash grows by Sh9 billion in seven months

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Commodities

Tea cash grows by Sh9 billion in seven months


James Finlay

Tea pickers at work. FILE PHOTO | NMG

Kenya’s tea earnings grew by Sh9 billion in seven months to July helped by higher value per unit and a weak shilling that offset a sharp drop in imports by the country’s top buyers of the beverage.

Data from the Tea Directorate shows that earnings in the review period expanded to Sh80 billion when compared with the Sh71 billion recorded in the corresponding season last year.

The price per kilogramme went up to $2.53 from $1.93 in the previous period, boosted by a relatively high demand for the beverage and a high exchange rate against the shilling.

The directorate said the volume of tea exported in the current period declined to 275 million kilogrammes from a high of 339 million kilogrammes in seven months of last year.

“During the seven-month period, average auction prices for Kenya tea stood at $2.53, which was significantly higher compared to $1.93 for the same period of 2021, boosting the earnings,” said the directorate.

The local currency has slumped significantly over the months, boosting earnings for exporters such as tea growers. The shilling is currently trading at an average of 121 units to the greenback whose demand has surged amid increased local and global economic jitters.

Low tea export volumes were recorded in all the top destination countries, which account for over 80 percent of total exports from Kenya. For instance, sales to Pakistan dropped by 19 million kilogrammes with Egypt declining by 12.4 million kilogrammes. The UK market recorded a drop of 9.5 million (kgs) while Russia was down by 5 million kilogrammes.

The Russia-Ukrainian war chopped tea demand to the world market as it disrupted the supply chain. Pakistan is a key buyer of the Kenyan beverage, accounting for nearly 40 percent of the total exports with the economic turmoil facing the country resulting in poor uptake of the beverage by this Asian nation.

In June, the Pakistani government urged its citizens to cut the volume of tea that they consume and moved ahead to limit the amount of money that importers can access from the banks to curb expensive imports in the wake of a weakening rupee.

The tea directorate said though the prices in the review period are impressive, they have slackened due to the effect of the global economic shock brought about by the Russian war.

“The crisis, which commenced towards the end of February, has had a negative effect on the economic growth of most markets, causing a global recession,” said the regulator.

The regulator said most global economies are experiencing a scarcity of foreign exchange reserves and depreciation of their local currencies leading to high inflation, slow economic growth, and low purchasing power.

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