World’s Top Black Tea Exporter to Miss Output Target on Strike

Tea output in Kenya, the world’s biggest exporter of the black variety, may miss the government’s target this year as a strike by tea pickers hurt harvesting, the East African Tea Traders Association said.

Employees stopped work for two weeks at the end of June demanding a 30 percent pay increase. 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 percent of the country’s output. This means production may be below 450 million kilograms (920 million pounds), or less than the 500 million kilograms projected by the East African nation’s government, said Edward Mudibo, managing director of the traders’ body.

“Two weeks is too long to recover from and the opportunity cost lost is huge,” Kiarie said by phone from the capital, Nairobi. “We have said 30 percent will make tea-growing in Kenya uneconomical; it will lead to big farmers gradually diverting” from the crop, he said. Inflation in the country is 6.4 percent.

Tea is the world’s most widely consumed beverage, after water, according to the Food and Agriculture Organization. Kenya ranks as the world’s third-largest producer of the leaves, behind India and China, and hosts the biggest auction of the crop, in the port city of Mombasa. Unlike India and China, it doesn’t consume most of its output. Kenya produced 399 million kilograms in 2015, earning the East African nation $1.24 billion.

Interim Agreement

Pickers and their employers haven’t found a solution to the pay dispute despite two meetings since coming to an interim agreement, Apollo said. “We are anxiously waiting to hear from the ministry to give us a way forward,” he said by phone, referring to the ministry of labor, social security and services.

Unusual heavy rains from October helped boost production earlier in 2016, and tea exports in the first half climbed 33 percent to 200.5 million kilograms from a year earlier, Mudibo said. The average price in the period declined 10 percent to $2.26 a kilogram because of the higher output, he said. Price 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.”

Source: American Journal of Transportation