STiR coffee and tea magazine

STiR coffee and tea 47 Cultivation Smallholder farmers Primary processing Tea Factory Transportation Traders Secondary processing/Use Tea brands, consumers Planting, application of fertilizers and pesticides, pruning, and plucking of tea leaves. Withering, rolling, fermentation,and drying Tasting, valuing and large vessel distribution Blending, packaging, consumption Green leaf Green leaf Dry Tea Dry Tea Tea bag Source: The True Price of Tea from Kenya | IDH The Sustainable Trade Initiative and True Price (2016). Health & Safety Income Land use Air pollution Air pollution Air pollution Gender Water pollution Energy Income Gender Air pollution Soil pollution Water pollution Water pollution Harrassment Energy Materials Child Labour Social Security Soil pollution Water pollution Energy Energy Social Security Materials Water use Supply chain step Externalities in scope Output Product Activities Njagi explains suspending the reserve price will have no appreciable influence over buyers because "I don't see any increase in demand that dramatically absorbs the excess supply. Demand growth cannot happen overnight. I see the industry learning lessons from the excess supply—basi- cally, low prices can't sustain the business. Already, it's happening. Some tea factories have closed down in Tanzania and Uganda. I see many more fol- lowing suit, especially with the forecast by FAO of prices dipping," he said. Karanja said KTDA will sell the excess stock through private con- tracts, alluding to transactions reportedly totaling 30 million kilos since June. Teas must be sold before October to contribute toward the bonus. While the Mombasa auction is the primary avenue for selling tea, fac- tories have also been using Direct Selling Overseas (DSO) outlets since the clause in the 2020 Tea Act forbidding the practice was suspended by the courts, Njagi explains. "They realized they were missing a great market outlet. So, amending the law will be facilitative," he said. Export partners on the hunt for low-cost tea include Pakistan and Egypt. Pakistan was Kenya's leading export destination, overtaking the US in 2023 by volume with imports of 210 million kilos, a 15% increase compared to 2022. The tea was valued at $494 million. Sales to Pakistan are up 10.6% through June, totaling $272 million (KSh 35 billion). High Expectations The annual tea workers' bonus, which is based on fiscal year-end sales, will likely reach a record high. Kenyan tea exports increased 31% to 523 million kilos in 2023, as earnings topped Ksh 180.5 billion, a record high. The tea industry de- livered $1.22 billion in foreign exchange dollars, second only to tourism. minimum pricing policy did not address the declining quality of Kenyan teas, a significant factor in the low prices. Moreover, setting a minimum price did not in- centivize improvements in tea quality." In the letter, Kenya's Prime Cabinet Secretary Musalia Mudavadi complained the policy created an uneven playing field "since the pricing policy was ap- plied exclusively to smallholder KTDA teas, excluding independent tea factories primarily West of the Rift." In 2022, the average price of tea auctioned at Mombasa was $2.49 per kilo. In 2023, auction pric- es averaged $2.24 per kilo. The average price was $2.09 per kilo in the last week of July 2024. Black tea prices at auctions globally averaged $3.15 per kilo during the second quarter of 2024. Independents continued to sell at flexible prices, making their teas more attractive than KTDA teas at $2.40 per kilo, wrote Mudavadi. "This has estab- lished a market preference for independent factory teas over KTDA teas, leading to an accumulation of unsold tea at auction." The surplus is compounded by the approximately 95.2 million kilos of fresh teas that remain unsold at the end of June. The accumulation of unsold tea hampers producers' ability to pay farm- ers on time, significantly affecting their income." The True Price of Tea

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