Kenya’s tea and coffee growers are upbeat that last year’s record output will be sustained in 2011 on the back of favourable weather, as well as continued recovery in the global economy.
However, dry weather could cut production.
Last year’s tea output and export earnings attained record levels, posting 399 million kgs and Ksh97 billion shillings ($1.2 billion) respectively.
This was a 27 per cent growth in output and 40 per cent in earnings.
“The market is still weighing the favourable factors to see if they can sustain growth,” said Sicily Kariuki, the Tea Board of Kenya managing director, while expressing confidence that there will be no fresh shocks that could hurt tea earnings and output.
Ms Kariuki said Kenya is still attracting the emerging middle class among Asian countries to its tea, especially in India and China, two of the largest tea producers.
“In 2010, India increased its buying by an impressive 46 per cent, an interesting development since we have not marketed our tea in that country,” she said.
The Coffee Board of Kenya on the other hand, has lowered earlier projections that the commodity would rise by 28 per cent to 51,000 tonnes, from 40,000 tonnes.
The Board now predicts that volumes could dip by a similar percentage due to drought, although total value is expected to stay high.
The current production is a pale shadow of the peak of 129,926 tonnes in 1987-88.
Reports from the growing zones, however, indicate that the sector is headed back to 1980 levels when it acquired the nickname black gold.
“The prices are high and we expect better prices in the coming seasons,” said Loise Njeru, managing director of the Coffee Board of Kenya. Income from coffee exports will rise by 7 per cent this year to Ksh16 billion ($197 million) as higher prices offset lower production, the board said.
“Going forward, commodity prices are expected to rise a supported by the strength of global demand, especially from emerging economies,” said the IMF, adding that the rise will be steepest in oil and metals prices.
While the latest import data shows that consumption of coffee in importing countries picked up strongly in 2010, after a weak first quarter, especially in the European Union, the Economic Intelligence Unit continues to take a fairly gloomy view of demand growth.
Growth in demand will be constrained by increases in retail and coffee bar prices in response to higher wholesale costs (particularly for the popular mild arabica variety), as well as by renewed concern about the EU debt crisis and the outlook for the euro.
Kenya’s benchmark coffee grade AA surged as much as 40 per cent at the first auction of 2011 as buyers replenished their stocks after a five-week break, the Nairobi Coffee Exchange said.
The top AA grade sold for as much as $1,008 per 50-kilogramme bag, compared with $721 at the previous sale.
The International Coffee Organisation has projected that prices will remain high for many years, which offers developing countries like Kenya an opportunity to increase production.
By CATHERINE RIUNGU, The East African
http://in2eastafrica.net/tea-coffee-farmers-smell-record-profits-in-2011/
