Black Tea Production Challenged by Strikes and Rain

A series of recent setbacks due to climate and labor strife combined this summer to significantly depress tea production in India, Sri Lanka, and Kenya, the world’s leading producers of black tea. Global black tea production for the first half of 2016 grew by 8.8% compared to 2015, according to estimates published in the Global Tea Digest. This despite early season declines in Sri Lanka, India, and Bangladesh. Only Kenya exceeded spring totals beginning in January with a sharp rise of 8.7 million kilos. The pattern continued through the early months of the year with Kenya consistently setting the pace. Sri Lanka India managed a small increase of 9.4 mkg to reach 416.7 mkg through June. Torrential rainfall last month in Assam could reduce yields by as much as 25% according to Indian growers. Meanwhile Kenya added 70.8 mkg to reach 214 mkg by mid-year. Ironically it was heavy rains last October that boosted Kenyan production. Tea exports there rose to 200.5 mkg during the first half of the year – a 33% increase compared to the previous year, Edward Mudibo, managing director of the East African Tea Trade Association told Bloomberg News. The average price in the period declined 10% to $2.26 a kilogram because of the higher output, he said. Prices reached $2.19 at last week’s auction, the lowest in a year. “The increased supply resulted in decreased competition,” Mudibo said. “The earnings for the first half of the year were $474 million at the tea auctions.”

Tea is continuously harvested in Kenya by 650,000 small-scale farming households that are dependent on processing at hundreds of local factories. Beginning in June, a series of strikes idled factories and left tea in the fields. Factory workers demanded a 30% pay increase, a sum endorsed by local courts in a country experiencing 6.4% per year inflation. While they returned to factories for half of that, a “long-term solution” has yet to be found, said Apollo Kiarie, chief executive officer of the Kenya Tea Growers Association, whose members are responsible for 40% of the country’s output. “Two weeks is too long to recover from and the opportunity cost lost is huge,” Kiarie told Bloomberg. “We have said 30% [wage increase] will make tea-growing in Kenya uneconomical; it will lead to big farmers gradually diverting” from the crop, he said. It is now likely that production will fall below 450 mkg, which is less than the 500 mkg projected by the East African nation’s government, said Mudibo. Source: Bloomberg, Tea Board of India, Sri Lanka Tea Board, Kenya Tea Development Agency