Jan 27, 2023

Mawazo Writing Africa

Writing about the main

Low prices, market access brew storm for EA tea industry

East Africa’s tea sector is at risk of underperforming as its two key markets – Russia and Ukraine – remain closed.

Observers worry that traders are not only taking full advantage of the quality of tea produced in the region, but Also, production is now slowing amid fears it would cause a flood that would push prices down, which have recovered after a pandemic slump on a recovery rate from $2.94 per kilogram in 2021 to $3/kg in January 2022 and on track to pre-pandemic prices of $3.05/kg in January 2020.

Rwanda increased its exports to 35.2 million kilograms per year.

In the first months of 2022, tea exports increased by 7.3 percent, reflecting a gradual reopening of markets.

According to Charles Kenge Iruta, deputy sales and marketing director of Rwanda Mountain Tea, the recovery will be the volume growth and the h Credited with the country’s high-quality tea ch has attracted demand from international buyers.

But Mr Iruta says Rwanda’s key markets are not fully open and now the Russian invasion of Ukraine threatens further logistical disruption as both countries are some of the biggest tea consumers.

“Some destinations are not yet open; We are still facing shipping issues. Freight bookings for different destinations are very difficult to pinpoint. Some shipping companies have increased freight costs, which has caused some destinations to be closed,” he said.

Dollar shortages

Sudan, one of Rwanda’s key markets, has been wracked with political turmoil ever since faced last October when an interim government was overthrown. Importers have been largely reluctant to do business as the country has also faced a dollar shortage.

But if Rwandan producers feel their quality has not been fully rewarded, their competitors in the region have both Access and quality suffered in the market.

At the tea auction in Mombasa, tea from Tanzania fetched the lowest price due to its quality, followed by tea from Uganda, Burundi and Kenya.

At the weekly Last week’s tea auction saw around 12.7 million kilograms of tea put up for sale, according to the East Africa Tea Trade Association (EATTA), which runs the auction.

Of the total tea offered, it was only 9.4 Millions of kilograms were sold compared to 10.9 million kilograms in the same period last year.

The tea auction saw prices fall, with a kilogram selling at an average price of $2.30 compared to m it sold at $2.38/kg in the previous year, but up from $1.82/kg in the same period last year.

In Kenya, the turmoil has been such that even a set price has been challenged by the markets . Last July, the Kenya Tea Development Agency set a minimum price for processed tea at the Mombasa auction to prevent it from falling below $2.43 per kilo. But the price has stayed below that number since it was set.

EATTA Managing Director Edward Mudibo said the low prices are the result of oversupply despite a recent drought.

“We are to have more unsold tea of ​​about 25 percent of the total supply. We suspect most traders stockpiled their teas when there were strict Covid-19 containment measures and now they are flooding the market,” said Mr Mudibo.

The government’s move to set a floor price was a response to farmers’ reluctance to supply due to low prices, which hit an all-time low of $1.80/kg in July 2021, almost equal to the production cost of $1.70/kg.

During By setting the minimum price, the government capped the cost of producing a kilo of tea at $0.84/kg.

Ukraine War

Now, tea traders are also concerned that the Continued invasion of Ukraine by Russia could damage tea exports, putting pressure on the beverage’s already falling prices.

“Despite low prices in Kenya, we are also cautious about supplying more as some markets are struggling due to the tight Logistics may be affected to reduce purchases T ee from the Mombasa Tea Auction, the second largest tea market in the world after India,” said Dinesh Khan, a Mombasa-based tea broker.

In Tanzania, officials say the Russian invasion of Ukraine has had little impact as long as Dar can get its tea to the usual big markets.

Tea Board of Tanzania Director General Nicholaus Mauya says Russia and Ukraine don’t buy much Tanzanian tea.

“We are unaffected by the Russia-Ukraine war. In reality, our tea market remains marginal in these warring states,” Mr Mauya told The EastAfrican.

The main buyers of Tanzania’s tea are the UK, South Africa, Germany, Pakistan, the United Arab Emirates and the US.

About 80 percent of Tanzanian tea is exported to foreign markets and the remaining 20 percent is processed and consumed locally.

Tea is one of the leading agricultural products in Tanzania with annual sales of Tsh140 billion ($60 million).

Poor agronomy

But Tanzania has suffered from ancient farming practices that have caused yields to drop to as low as 35,000 tons per year, with a potential of almost twice as many.

The government encourages modernization of agriculture and provides agricultural advisory services to small farmers to increase production.

Goal i is to increase production to 60,000 tons and improve its quality. says the Tea Authority.

Uganda, Africa’s second-largest tea producer after Kenya, has an average annual production of 65,000 metric tons that are exported from the country.

However, Uganda tea achieves at Mombasa continues to auction lower prices than its East African neighbors.

For example, in January , a kilogram of tea from Uganda sold for $1.3, well below Kenya’s $2.38, Rwanda’s $3.23 and $2.47 for Burundi tea.

At the end of February, Rwandan tea was selling for $3.02 per kilo, while Kenya’s tea was selling $2.72, Burundi $2.44, Uganda $1.27 and Tanzania $1.15 for the same amount.

However, Ugandan tea’s underperforming could be improved with better agronomic practices, as experts say Uganda has only reached about 10% of its tea-growing potential. with around 52,000 hectares under cultivation.

The tea auction in Mombasa has remained the only market for the East African countries since the tea auction in Dar es Salaam was not successful.

The Mombasa tea Die Auction is the largest tea auction in the world with 75 percent of tea volume traded through the auction center. Almost 32 percent of the world’s exported tea passes through Mombasa.