Saturday, November 9, 2024
Home News Ugandan Tea Prices Close Below A Dollar In July Mombasa Auction

Ugandan Tea Prices Close Below A Dollar In July Mombasa Auction

by Jacquiline Nakandi
0 comments

By Nelson Mandela Muhoozi

In a startling revelation, Mombasa Tea Auction Sale number 30, which closed on 23rd July 2024, reported an average price of just $0.82 (sh3,047) per kilogram of tea for Uganda.

This starkly contrasts with the average prices for other countries: Kenya’s $2.22 (sh8,250), Rwanda’s $2.47 (sh9,179), and Tanzania’s $0.74(sh2,750).

Uganda’s struggle to keep its tea prices above a dollar has persisted for nearly a year, reflecting deeper issues within the industry.

With the average cost of production in Uganda hovering around $1.20 per kilogram according to Onesimus Matsiko, a tea farmer and sector expert, the current prices spell significant trouble for the nation’s tea sector.

In last week’s sale, Uganda contributed a mere 7% to the auction, a sharp drop from its historical 15%. This decline, Matsiko said, is symptomatic of numerous factories quietly closing down.

“While some of this reduction can be attributed to increased direct sales bypassing the auction, a more concerning trend is visible: malnourished and abandoned tea gardens, and significant acreage being uprooted in favor of low-value crops like maize and sugarcane in areas such as Kyenjojo, he added.

According to him, the capital-intensive nature of high-value enterprises makes it unaffordable for many excited tea farmers.

To remain afloat, farmers under the Uganda Tea Growers Association (UTOA) noted that factories reliant on outgrower leaf have resorted to the most immediate cost reduction measure available—reducing farm-gate prices for green leaf.

William Mbonigaba, a tea farmer in Western Uganda said prices have plummeted from about sh500 to the current sh200 in most tea-growing areas.

“At the lowest points, farm-gate prices have fallen to sh130, with the person harvesting taking sh100, leaving the farmer with a paltry sh30. This barely covers basic garden maintenance, let alone providing any surplus for the farmer,” he said.

International, regional market status

In Sale 30 at Mombasa, a staggering 63.7% of teas remained unsold, according to a tea market report by Tea Brokers East Africa Limited.

This, farmers said, indicates that global production is vastly exceeding effective demand.

Matsiko said the market’s performance is analyzed using two main parameters: price earnings and the percentage absorption of the offered teas.

Union Tea Brokers Limited reported that the Kenya Tea Development Agency (KTDA), known for producing high-quality teas from smallholder tea farmers, offered more than 70% of the teas at Sale 30. However, 75% of KTDA teas remained unsold, accounting for over 90% of all unsold teas.

Uganda’s tea production has drastically declined, contributing only 7% to Sale 30 compared to its previous 15%.

Despite this, only 15% of Uganda’s tea remained unsold, making up just 2% of the total unsold teas. This good absorption performance is comparable to Kenya’s large-scale tea plantations, which contributed 16% to Sale 30 volumes, with 17% remaining unsold.

Notably, Uganda’s best price earnings are on par with those of Kenya’s large-scale plantations according to Matsiko.

The poor performance in the global tea market primarily pertains to CTC (cut, tear and curl) Black teas.

“Orthodox tea, particularly green tea and various specialty teas is performing more stably in both absorption and price earnings,” Matsiko said.

According to farmers, the industry needs short-term, affordable practical interventions that impact a large proportion of key stakeholders in the core levels of the value chain (tea growers and tea processors) and cover wide areas across Uganda.

Mbonigaba said, fertilizer intervention will also enhance CTC black tea quality by generating blacker teas of higher density, noticeable by the market within three months of application.

He explained that a prudent assumption of at least a 33% price increase could raise average prices from the current $0.79 per kilogram (year-to-date 2024) to $1.05 after the intervention.

If effected, he said the cabinet resolution of sh41 billion for tea fertilizers, could double Uganda’s foreign exchange earnings from an estimated $25m (sh93bn) to $50m (sh186bn) in a season according to Mbonigaba.

Cabinet resolved to support tea farmers with subsidized fertilizers starting with the first rainy season of 2024 (in March).

The second rainy season has begun in some tea-growing areas, yet there is no sign of fertilizer supply to farmers according to Matsiko.

“The government spent too long on free tea seedlings supply intervention instead of supporting established tea gardens to generate household incomes for farmers and foreign exchange earnings for the economy,” he said.

Uganda’s tea acreage has raised from 21,000 hectares in 2001 to an estimated 49,000 hectares recently. Uganda’s current yields are about 50% of the potential for the country’s average tea-growing environment.

According to the farmers, fertilizer application can increase productivity by at least 50%, from the current 1,633 kilograms of made tea per hectare per year to at least 2,500 kilograms, against a potential above 3,000 kilograms since low yields are associated with high unit costs.

You may also like

Leave a Comment

Download Vision Group Experience App

Follow Us

All Rights Reserved © Harvest Money 2023

error: Content is protected !!