Kenya: High coffee, tea prices boost exporters’ earnings

Business Daily

November 7,  2011

A woman plucking tea at a plantation in Nandi Hills. 

Photo/JARED NYATAYA  

Beverage exporters are expecting a boom in earnings this year following sustained high prices and favourable foreign currency exchange rates.

New data from both the Nairobi Coffee Exchange (NCE) and regional tea auction in Mombasa show that earnings for the soon ending 2010/11 season would hit historic highs.

“The prices of coffee have been very high this season and the earnings at the end of the season will be good,” said Isaac Muchomba, secretary of the Kenya Coffee Traders Association.

By the end of September, total earnings at the coffee exchange had hit Sh21.5 billion from the sale of 552,057 bags and with several auctions to spare.

The country earned Sh16 billion from the 2009/10 coffee season, having jumped 50 per cent from the previous year, according to statistics from the Coffee Board of Kenya.

“The supply of coffee crop was extremely low this season and that has boosted prices on demand,” Mr Muchomba said.

The country’s coffee marketing season has this year had massive challenges brought about but supply shortages that even saw the auction sessions temporarily cut short in April.

The shortfall has partly been blamed on an unusually early crop this season.
Traditionally, coffee volumes at auction surge around March but they peaked earlier this year after the country witnessed unusually heavy rains in the first months of last year.

Because of the unpredictable weather, coffee bushes flowered when they should not and produced coffee berries at different stages of maturity.

The country’s coffee marketing season traditionally breaks around the July-August window.

This was, however, not the case this time owing to supply shortage that forced managers at the NCE to suspend trading nearly three months earlier.

A head of the forced break in April, the volume of crop offered for sale at the auction had dropped to an average 10,000-15,000 bag per auction against an optimal 30,000 bags.

Tea traders at the Mombasa auction are also expecting a boom in earning this year supported by higher prices.

Tea Board of Kenya (TBK) exports could fetch more than Sh100 billion this year, surpassing last year’s Sh97 billion.

Tea traders from Kenya and Burundi have reaped most from quality crop to post the highest price increases at the weekly regional auction over the past 12 months.

“This year looks an impressive one in terms of tea earnings and we expected a boom. Things are shaping up well,” Charles Kimani, a dealer said.

“Kenya tea has fetched premium prices across the season and that should reflect in overall earnings,”

Latest data showed that of all the 12 countries participating at the Mombasa-based auction, Kenyan and Burundian tea remained most popular in the year- to- date, fetching premium prices compared to the rest.

The average auction price of Kenyan tea stood at $3.01 per kilo as at this month compared to $2.74 last October, marking a variance of $2.7 a kilo.

Analysts said the performance in tea prices reflected a shift by buyers towards premium quality offers brought to the auction.

Tea prices have also been bolstered by demand due to drought conditions that slashed production.

Dry weather

During the first half of the year, the volume of Kenyan tea sold through auction stood at 128.8 million kilogrammes, 16 per cent lower than during the same period last year, statistics showed.

This lower sale volumes at the auction volumes reflected a dip in output of the beverage with data by the TBK showing that the country’s tea production for the first half of the year fell 16 per cent year-on-year due to hot and dry weather and poorly distributed rainfall, sending exports lower.

Output of the commodity dropped to 178.4 million kilogramme compared with a similar period of 2010, with the eastern Rift Valley more affected than other growing areas.

The effects of this thinned output reflected on the export side where shipments fell to 211.7 million kilogrammes from 216.9 kilogrammes.

Apart from the premium prices fetched as result of shortage-triggered demand, traders said a weak shilling against the dollar will boost earnings.

---

aodhiambo@ke.nationmedia.com