Kenya, the world’s top exporter of black tea is failing expectations in value and volume on a crop critical to the country’s foreign exchange. Production is down 8.5% to 316.8 million kilograms, according to the Kenya Tea Directorate.
A combination of dry weather and very low prices saw exports fall to 37.25 million kilograms during the first nine months of the year, off by 240,000 kilograms compared to the 37.49 million kilograms exported during the same period in 2018.
Average weekly prices at the Mombasa auction were $2.19 during the period, down from an average $2.65 during the first nine months of 2018. Revenue is expected to fall well below the $1.4 billion (SH140 billion) earned from last year’s crop.
Weakening demand for Kenyan tea is also partly to blame for the slump. The UK is Kenya’s largest tea trading partner. Sales of black tea are down 3.4% in the UK, according to Kantar market research.
Unilever is UK’s largest buyer of Kenyan tea. Last week The Telegraph of London reported Unilever was considering selling its PG Tips brand, until recently the UK’s top selling tea brand.
“PG Tips and Lipton are very popular brands, and although growth of black tea in developed markets has slowed down…we are focused on turning this around, while also expanding the brands into herbal teas and other segments that are growing,” a Unilever spokeswoman told Reuters.
The Kenyan government created a $10 million financing package for tea smallholders to help them diversify their crops and to assist in targeting foreign markets. The goal is to encourage less production of commodity cut, tear, and curl (CTC) in favor of high-earning orthodox teas. Agriculture Cabinet Secretary Mwangi Kiunjuri, said that repayments do not begin until a year after the loans are made as a cushion for farmers. The loan rate is 3% compared to commercial loans that average 13%.