Tea to earn Kenya $1.1bn in 2011

Reuters, Saturday 18 Jun 2011

Revival in Egyptian demand and a fall in production are among the reasons for a predicted boom year

Kenya is likely to match last year's record-setting earnings from tea exports, thanks to resurgent Egyptian demand, stable prices and a weaker currency against the dollar, the head of its Tea Board told Reuters.

The world's top exporter of black tea earned 97 billion shillings (US$1.09 billion) from a bumper crop of 399 million kilogrammes last year, surpassing horticulture as the largest source of foreign exchange.

Production is set to fall to 360 million kilogrammes this year, dragged lower by bad weather in several growing areas.

"We have seen the exchange rate being reasonable. In terms of export earnings we do think we are holding onto what we projected last year that is round about the same money last year, that is 97 billion shillings," Sicily Kariuki said in an interview.

Demand from Egypt faltered during the political upheaval there earlier this year, pushing that market from the top buyer, to third biggest behind Pakistan and Britain, Kariuki said, adding Egyptian demand had started heading back to pre-revolution level.

"It is going there particularly now that it is anticipated we are not going to have the luxury of a large crop," Kariuki said.

The average price for all grades stood at $3 per kilogramme at auction in the first four months of this year compared with $2.99 per kilogramme last year, Kariuki said.

The shilling has depreciated significantly against the dollar this year, losing more than 10 percent and touching a record low of 90.85/91.05 on 16 June.

Kariuki said that the cold season, starting in the tea growing highlands, could inhibit development of leaves, cutting output.

"Already we are witnessing a reducing crop. We do think that we are going to have a lot less this year compared to last year during this period (July-August)," she said.

But the impact of the shortage was not likely to change the full year forecast for output, she added.

"We pretty much think we will get there. Given what we have seen coming through, we still don't think we want to alter that (2011 production forecast) at this point in time," Kariuki said.

China, which is one of the markets Kenya is courting, recorded an 80 per cent growth in the first four months of the year to 257,000 kilogrammes. Kenya has also been cultivating Iran, Russia and Kazakhstan.

"We focus on those markets quite a bit... China is opening to the world in terms of what we are doing. So we are meeting it half-way," Kariuki said.

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