Kenyan Tea Exports Rise by 19% During the First Half of 2021

Bulk Black Tea

Kenya

Published Nov 12, 2021

Tea exports from Kenya, the world’s leading black tea supplier, increased by 19% in the first half of 2021 compared to last year, reaching 298.67 million kg. Despite a 9% reduction in tea production to 274.07 million kgs, shipments rose, as export volumes often include unsold tea carried over from previous production years. To mitigate the market concentration risk on black tea, and the over-reliance on four main markets, which account for 70% of Kenya’s tea exports, the country has begun producing orthodox teas that are rising in global demand and fetching higher prices.

Tridge interviewed Christine Simon, a Kenyan tea Marketer, and Trader, to gain insight into the current Kenyan tea landscape.

Exports rise despite a drop in production

Tea is one of Kenya’s leading trade items. Tea, coffee, and spices account for 28% of the country’s exports. During the initial six months of 2021, Kenya shipped about 44K metric tons of tea, reaching USD 86.2 million. Pakistan is the largest market for Kenyan tea, with a 35% market share, followed by Egypt, the UAE, and the UK. According to the Kenya Tea Development Agency, the country’s tea shipments were also disrupted by the effects of COVID-19, as global shipping and logistics were disrupted and the demand for tea reduced in key markets. From January to August, Kenyan tea production dropped by 33.31 million kg compared to the same period in 2020, owing to dry weather conditions that have heavily impacted the country’s tea production. Despite these challenges, the country’s tea exports continued to grow, with volumes boosted by unsold tea stocks from previous harvests. Kenya’s tea export revenue also benefited from the favorable exchange rate between the Kenyan shilling and the US dollar.

Tea prices drop

Prices play a vital role in the trade of Kenyan tea, as it is one of the country’s leading earners of foreign currency, boosting the Kenyan economy. However, Kenyan tea prices have decreased since 2018 as supply continues to exceed demand. In 2021, the Kenyan government also instituted a floor price for tea to safeguard local farmers from being undercut by traders.

“There are recent minimum floor prices that have been set by the Kenyan government to protect the interest of farmers. Because of this, prices will not drop to a point where local farmers fall victim and some importers from CIS countries especially, are looking to India once again,” states Simon.

Kenyan tea prices continued to decrease in 2021. Kenyan tea is traded through an auction system administered by the Mombasa tea auction, where about 12 million kgs of black tea are sold weekly. According to Simon, the logistics surrounding the auction begin two and a half weeks before the date of sale.

“The Mombasa Tea Auction takes place on two consecutive days with secondary grades auctioned on Monday and primary grades on Tuesday. Through designated tea brokers, the Kenya Tea Development Agency, which manages small-scale farmers, along with other firms distribute samples weighing 50-80 grams of each lot/invoice of tea to be auctioned to prospective buyers. The buyers then determine the price range within which they would bid for the teas on offer at the auction,” explained Simon.

According to the Kenya Tea Development Agency Ltd, average tea prices at the Mombasa tea auction decreased by 8% to USD 2.18 per kg from June 2020 to June 2021, compared to the previous year. Despite this dip in prices, the Kenyan shilling has a favorable exchange rate to the US dollar, pushing the export revenue of Kenyan tea higher. According to the Tea Board of Kenya, during the first half of the year, the average price was USD 1.96 per kg, decreasing from USD 2.07 per kg in the first half of 2020. However, prices have rebounded of late, reaching USD 2.10 per kg in August, following a 7 month low of USD 1.75 per kg in July.