According to KTDA CEO Lerionka Tiampati, this week alone a kilo of made tea sold at an average price of Sh179.26 for small holders against Sh272.79 the same period last year which is the lowest price realised since 2008.
He attributes the sharp drop in prices to oversupply of tea in the market as a result of favourable weather conditions and vastly improved crop husbandry.
“This is a very steep drop in prices compared to previous years. However, this is not a unique phenomenon. In 2008, tea prices dropped drastically from Sh290.11 to Sh202.98 and this affected farmers earnings. The short term situation may look bleak, but in the long term, prices will rebound as production and consumption balance out,” Tiampati said.
Farmers have now been urged to borrow carefully in line with anticipated reduced earnings adding that with the onset of the long rains, prices may take longer to recover to previous levels due to high production.
In the 2012/2013 financial year, Kenya produced 432 million kilogrammes of tea compared to 370 million kilogrammes in 2011/2012, an increase of 62 million kilogrammes.
In 2013, 384 million kilogrammes of tea were sold at the Mombasa auction compared to 322 million kilogrammes over a similar period in the previous year.
Tiampati says tea producers in the country will be negatively affected by the drop in tea prices, and this is expected to have a negative impact on tea earnings by farmers this year.
The decreased earnings are also likely to affect the economy, as tea is the number one foreign exchange earner in the country.
Last year, the small scale tea farmers earned a total of Sh35.6 billion as second payment (bonus) at an average rate of Sh31.65 per kilo of green leaf, against Sh33.9 billion earned in the 2011/12 financial year.