Kenya crisis to boost local tea

Production in the drought-hit country declined 54% in February

The drought in Kenya, which brightened prospects for the Indian tea industry, has resulted in February recording the lowest-ever monthly production in the last five years.

According to the latest estimates compiled by the Tea Board of Kenya, production for February registered a decline of 54 per cent compared with the same period last year and 35 per cent below the January figure.

The worst affected were the tea-growing regions in the west of Rift Valley, which registered a production decline of 69 per cent from 14.7 million kg to 4.7 million kg. However, east of Rift registered a lower production decline at 36 per cent.

Owing to inadequate availability of green leaf most factories were operating at under capacity while seven factories were temporarily closed leading to an increase in production overheads.

Cumulatively, during January to February, exports declined by 3.3 million kg compared with the same period last year. The Tea Board of Kenya expects the export volume for March to drop while prices were expected to increase marginally.

The drought in Kenya has had a dramatic effect on Indian tea. Most of the firm are keeping a close tab on the situation in Kenya as it happens to be one of the largest exporters. A drought will thus imply a global shortfall.

Aditya Khaitan, director McLeod Russel (India), said new season teas were atleast Rs 15-20 per kg higher than the teas produced last year. Teas which were sold at Rs 85 per kg last year were now being sold at Rs 100 per kg. The average price in April last year was around Rs 68 per kg.

However, a better idea regarding pricing would emerge once the new season teas hit the auctions, which would be around mid-April.

The industry was expecting Indian teas prices to pick up dramatically on account of higher domestic consumption and increased exports, after the drought in Kenya.

However, there was some hope the the effects of the drought situation in Kenya on the tea industry would be offset with the recent long rains.

The Tea Board of Kenya was expecting the withered bushes to recover soon.

Based on recent weather forecasts, the Tea Board expects production for March 2006 to slightly improve over the February production but will still fall short of the production for the corresponding month last year.

In January, the board had projected Kenya's production to drop by around 16 per cent from 328 million kg recorded last year to 276 million kg.