Tea Prices Expected to Decline Further

Tea Prices Expected to Decline Further

Tea prices fell this year, reaching a new low of $1.76 per kilo in July 2019. East Africa Tea Trade Association (EATTA) Chairman, Gideon Mugo, expects the prices to decline further.

EATTA runs the weekly Mombasa Tea Auction Centre trading tea taken from 10 member countries thus offering variety for consumers. Key markets include Pakistan, Egypt, UK, Sudan, Yemen, Afghanistan, and the United Arab Emirates.

Tea contributes about 4% of GDP and more than 20% of foreign exchange raked in; KSh120Bn in 2017 and KSh 140Bn in 2018.

In 2018, the Mombasa tea auction traded over 400 million kilograms of tea valued at over $1 billion.

In 2013 the average price declined by 2.5 percent in relation to 2012 to $2.79 per kg. In 2014 the average price declined further to $2.65 per kg. The average price of tea was $2.73 per kilo in 2015, $2.29 per kilo in 2016, $2.98 per kilogram in 2017 and $2.58 in 2018.  

Mombasa Auction volumes – Source EATTA

Causes for the decline in prices

Factors contributing to the low prices and returns are the overproduction of tea as a result of increased planting, husbandry, and rehabilitation.

Tea production was 350 million in 2012, 432 million kilos in 2013, 445 million kilos in 2014 and 399 million kilos in 2015. The production was 473 million kilos in 2016, 439 million kilos in 2017 and 492 million kilos in 2018.

Furthermore, currency devaluations in a number of tea importing countries such as Pakistan have had a negative impact on disposable income for consumer goods.

On top of that, inflation in Egypt reached highs of 20% in
2018 but is projected to drop to 14% in 2019. The United Kingdom continues to
be unpredictable in the wake of uncertainties associated with Brexit.

In addition, the decline in quality of some teas because of weak enforcement of Tea Regulations resulting in leaf hawking, mushrooming of new tea factories and in some instances, substandard processing machinery has contributed to low prices

Furthermore, levying of VAT on direct sales by local exporters, levying of VAT on buyer inter-trading, lack of adequate consumer-driven research, and development and promotional activities have been blamed for the low prices.


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