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Uganda Tea Enjoying High Prices At Auction As Drought Hits Kenya
The East African (Nairobi)
Esther Nakkazi
March 7, 2006
Following the shortage of green tea leaf in Kenya occasioned by a severe drought,
Ugandan tea growers are bracing themselves for better prices at the Mombasa Tea
Auction, where the country sells the bulk of its tea. The drought in Kenya has pushed
prices at the Mombasa Tea Auction up by about 15 per cent, from $1.5 per kg to $1.7
per kg in January. They are set to rise even further due to a fall in production in.
Kenya is the biggest participant in the auction market. Isaac Munaabi, executive
secretary, Uganda Tea Association (UTA) said, "The upside of the drought in Kenya is
that it has given Ugandan tea a chance to earn more from the Mombasa auction
market and tea producers are expected to make a small profit but we know the
situation in Kenya is only temporary.
Uganda tea producers have been spending more money on production and
transportation of tea than they receive at the Mombasa Tea Auction, in effect making
losses. UTA officials say tea producers have been receiving less than a dollar per kilo
compared with their production costs, which are up to $1.2 per kilo of tea. Mr Munaabi
said many of the tea producers had expressed dissatisfaction with the low prices
offered by buyers at the weekly Mombasa Tea Auction and most wanted to give up on
tea production because of the high expenditure and the losses they were incurring.
The high costs of production are blamed on the high cost of electricity and transport
to Mombasa. In the past, falling prices at the Mombasa auction were pushing
Ugandan producers to look for markets elsewhere, where they could sell their tea
directly.
Last year, the Pakistan government sent officials to Uganda to discuss with UTA
officials the possibilities of importing tea directly from Uganda. Uganda is also
considering penetrating new export markets like Sudan, with the aim of eventually
reducing the quantities sold through the Mombasa auction and fetching better prices.
But before the producers find new markets, the country can take advantage of the
increasing prices at Mombasa. The bulk of the tea production cost is incurred on
power generation because of the erratic power supply in the country. But this
component is set to go down due to new tax exemptions on diesel. The government
has waived taxes on fuel-diesel for generators used by industrialists and large-scale
enterprises to enable them to run heavy commercial generators. Although Mr
Munaabi did not mention how much the production costs would go down as a result of
tax free diesel, players in the sector are optimistic that costs will reduce substantially
as most tea factories run on generators.
Over the past decade, Uganda has doubled its tea production to diversify from its
traditional reliance on coffee as the main foreign earner. Records from UTA up to
December last year show a steady increase in the production and export of tea over
the past five years. Although exports fell by 6.3 per cent in 2002 due to the extensive
drought that the country suffered, UTA officials say the drought did not affect the crop
much this year and production is expected to be slightly lower than the annual
production.
The East African (Nairobi)
Esther Nakkazi
March 7, 2006
Following the shortage of green tea leaf in Kenya occasioned by a severe drought,
Ugandan tea growers are bracing themselves for better prices at the Mombasa Tea
Auction, where the country sells the bulk of its tea. The drought in Kenya has pushed
prices at the Mombasa Tea Auction up by about 15 per cent, from $1.5 per kg to $1.7
per kg in January. They are set to rise even further due to a fall in production in.
Kenya is the biggest participant in the auction market. Isaac Munaabi, executive
secretary, Uganda Tea Association (UTA) said, "The upside of the drought in Kenya is
that it has given Ugandan tea a chance to earn more from the Mombasa auction
market and tea producers are expected to make a small profit but we know the
situation in Kenya is only temporary.
Uganda tea producers have been spending more money on production and
transportation of tea than they receive at the Mombasa Tea Auction, in effect making
losses. UTA officials say tea producers have been receiving less than a dollar per kilo
compared with their production costs, which are up to $1.2 per kilo of tea. Mr Munaabi
said many of the tea producers had expressed dissatisfaction with the low prices
offered by buyers at the weekly Mombasa Tea Auction and most wanted to give up on
tea production because of the high expenditure and the losses they were incurring.
The high costs of production are blamed on the high cost of electricity and transport
to Mombasa. In the past, falling prices at the Mombasa auction were pushing
Ugandan producers to look for markets elsewhere, where they could sell their tea
directly.
Last year, the Pakistan government sent officials to Uganda to discuss with UTA
officials the possibilities of importing tea directly from Uganda. Uganda is also
considering penetrating new export markets like Sudan, with the aim of eventually
reducing the quantities sold through the Mombasa auction and fetching better prices.
But before the producers find new markets, the country can take advantage of the
increasing prices at Mombasa. The bulk of the tea production cost is incurred on
power generation because of the erratic power supply in the country. But this
component is set to go down due to new tax exemptions on diesel. The government
has waived taxes on fuel-diesel for generators used by industrialists and large-scale
enterprises to enable them to run heavy commercial generators. Although Mr
Munaabi did not mention how much the production costs would go down as a result of
tax free diesel, players in the sector are optimistic that costs will reduce substantially
as most tea factories run on generators.
Over the past decade, Uganda has doubled its tea production to diversify from its
traditional reliance on coffee as the main foreign earner. Records from UTA up to
December last year show a steady increase in the production and export of tea over
the past five years. Although exports fell by 6.3 per cent in 2002 due to the extensive
drought that the country suffered, UTA officials say the drought did not affect the crop
much this year and production is expected to be slightly lower than the annual
production.
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