NAIROBI, May 5: Kenya’s tea production is recovering quickly following good rains, and current relatively high prices at weekly auctions are expected to persist in the near term, the country’s leading producer said on Friday.
The east African country is the world’s biggest exporter of black tea but the industry has suffered in the last few months due to a severe drought, a strong local currency and oversupply in the international market.
However, rains have lately pounded key tea growing areas, pushing production 70 per cent higher in March to 19.8 million kg from 11.6 million kg in February.
With the commencement of the rains, tea production has gone back to normal and factories are now running at maximum capacity, Leronka Tiampati, managing Director of the Kenya Tea Development Agency (KTDA), told reporters.
KTDA, owned by small-scale farmers, manages 54 factories across the country which produce more than 60 per cent of Kenya’s total tea output.
The rest is grown by plantations like the Kenyan unit of Unilever Tea, Williamson Tea Kenya, Limuru Tea and Sasini Tea & Coffee.
The share prices of the companies have weakened on the Nairobi Stock Exchange due to drought.
The tightening of supply had boosted tea prices in the last three months, and Tiampati said he did not expect them to drop much despite the current rains.
Tea prices have been relatively good and stable during the last three months, he said. We expect this trend to continue as we head to the cold spell in June and July ... when production is expected to drop.
Tea is Kenya’s leading foreign exchange earner.
Analysts say a spike in prices at the weekly auction in the coastal resort of Mombasa is unlikely to offset the impact of the drop in production in the first three months of 2006.
The domestic tea industry is also grappling with the effects of a strong Kenyan shilling which has wiped out 10 per cent of farmers’ earnings as well as high costs of oil used in manufacturing and transporting tea leaf, Tiampati said.
Kenya’s main labour union has threatened to disrupt operations at the big plantations if they do not rescind a decision to mechanise plucking of tea.
Tiampiati said KTDA was not planning mechanisation because its members have very small farms, but added that if the farmers chose to embrace it to cut costs, KTDA would not stop them.—Reuters
