Tea earnings increase as shilling falls against dollar

Tea export earnings increased to Sh138 billion last year from Sh136 billion in 2021 due to the continued depreciation of the Kenya shillings against the US dollar as well as improved prices, Tea Board of Kenya (TBK) has said.

 “During the year 2022, the Kenya shilling depreciated gradually against USD from an average of $109.64 in 2021 to $117.87 while the export value per Kg increased from an average of $2.23 (Sh288.116) per kg to $2.60 (Sh335.92),” it says the report.

However, this comes at a time Kenya Tea Development Agency (KTDA) chairperson David Ichoho has noted that depressed rains significantly impacted the production of the major foreign exchange earner.

Ichoho revealed last month that tea production had declined by 40 per cent across all the tea-growing areas significantly affecting the income of farmers.

The TBK report added that out of the total export volume, 98 per cent was black CTC type of tea while 1 per cent was Orthodox equivalent to 4.81 billion kgs and the remaining 1 per cent consisted of Green, Purple and tea extracts.

Bulk form

Peris Mudida, TBK managing director explained that 6.35 million kgs, accounting for about 1 per cent was in value added form while 99 per cent was in bulk form.

“Orthodox, Green, Purple and tea extracts, which are specialty teas, were offered to buyers overseas and fetched significantly higher prices compared to CTC teas,” she said.  Cumulatively for the year 2022, the total export volume was lower by 19 per cent from 558.92 million Kgs recorded in 2021 to 450.33 billion kgs. During the review period 2022, Mudida added, the total volume of Kenya tea sold at the auction was higher at 410.26 million Kgs compared to 388.28 Million Kgs in 2021 but lower against 415.98 million Kgs in 2020.

However, auction prices for Kenya tea were higher at an average of $2.49 per Kg (Sh321.708) compared to $2.10 (Sh271.32) for the year 2021 and $2.01 (Sh259.692) in 2020. In 2022, tea offered for sale by the smallholder tea factories fetched significantly higher prices at an average of $2.72 (Sh351.424) per Kg for the main grades from an average price of $2.45 (Sh316.54) in 2021 and $2.23 (Sh288.116) in 2020.

 She noted though the auction prices have been on an upward trajectory since August 2021 after experiencing a declining trend from 2019, during the period from March to December 2022, the prices were negatively affected by global economic shock experienced in most markets due to the effect of the Russia-Ukraine crisis.

Trading logistics

Mudida said the crisis, which commenced towards the end of February 2022 affected global trading logistics leading to gradual increase in commodity prices and weakening of local currencies against the US Dollar which in turn affected consumer purchasing power within the markets.

“Notably, during the period to-date, exporters of tea to Russia and Iran markets participated less in tea buying at the auction. Buyers exporting to key markets such as Pakistan and Egypt also bought less due to challenges of payments in the markets attributed to inadequate forex exchange reserves,” she added.