East African (Nairobi)
5 June 2007
Posted to the web 5 June 2007
Kenya's tea production has risen dramatically since last year, but authorities warn that this might lead to reduced earnings, a situation exacerbated by a strong shilling.
The Tea Board of Kenya managing director, Sicily Kariuki, said that despite a global campaign to reduce tea production, more of the commodity is being offloaded into the markets.
Global tea consumption last year stood at 3.4 billion kg against a supply of 3.5 billion kg.
The Food and Agriculture Organisation estimates that in 2007, tea production would grow by 1.8 per cent while consumption is projected to increase by 1.3 per cent.
The Kenya Tea Development Agency (KTDA), which manages 54 factories on behalf of small-scale farmers, is putting up six new factories despite saying last year that it was putting off such developments until overproduction is stemmed.
The agency says the existing factories' capacity cannot cope with production, hence it needs to build more factories to stop wastage of green leaf.
During the first quarter of 2007, tea production in Kenya rose by 120 per cent to 108 million kg from 49 million kg during the same period last year.
The Tea Board attributes the growth to well distributed rainfall in tea growing areas across the country, particularly in the west of the Rift Valley, which last year was one of the areas worst hit by drought.
The increased production has seen a corresponding slump in export prices, with the unit price dropping by six per cent to $1.85 a kilo from $1.97 recorded between January and March last year. Mrs Kariuki said the high production coupled with low prices was likely to prevail throughout the year.
The shilling is still holding at below Ksh70 to the US dollar - with no signs of changing - leading to less export earnings. Fortunes for the sector, at one time Kenya's leading foreign exchange earner, declined last year when it swapped places with horticulture.
The produce earned Ksh47 billion ($671.4 million), compared with Ksh49 billion ($700 million) for horticulture and Ksh56 billion ($800 million) for tourism. Mrs Kariuki said that value adding and diversification of markets were the only options left for increasing earnings.
She added that Kenya, the second largest supplier of tea, must urgently brand its commodity as opposed to the current system of selling in bulk, since with the latter arrangement it loses its identity despite being popular.
Mrs Kariuki said, "Kenya's tea is the most sought after because of its high quality, which is used to blend teas from other parts of the world, "but once it is bought in bulk at the Mombasa auction, it quickly loses its identity."
Locally, the board is pushing for increased consumption to reduce over-reliance on exports.
Data from the board shows that only five per cent of Kenya's more than 310 million kg is consumed locally, unlike in India where the sub continent drinks more tea than it produces.
Last month, the board kicked off a Ksh15 million campaign dubbed "Any Time is Tea Time" aimed at repositioning tea as the beverage of choice among Kenyans. The campaign will run up to December.
"Oversupply may lead to declining global tea prices and this has prompted producer countries to aggressively engage in tea promotion activities to increase and sustain domestic consumption," said Mrs Kariuki.
The board is hoping that at the end of the campaign, the commodity, which is facing severe competition from soft drinks and bottled water - especially among the younger generation - will have raised per capita consumption from the current 0.48 kg per person to at least one kg per to significantly raise domestic consumption.
To compliment the efforts, tea is being marketed as a healthy drink, with its life improvement properties taking centre-stage in promotional campaigns.
Across the oceans, the budding Dubai Tea Auction is creating jitters in the international tea markets with its exporting of blended teas. Although Dubai does not grow tea, it is emerging as a major re-exporter, targeting the very markets growers have been competing for.
In reaction to Dubai's entry, Kenya's tea firms are investing millions of dollars in branding and blending to remain competitive.
The KTDA has invested Ksh15 million ($214,285) in the acquisition of an ultramodern blending machine through its subsidiary Chai Warehousing Ltd, based in Mombasa, to meet the rising demand for blended teas.