Kenya tea earnings rise in 2011 on high prices

• Dry weather, frost lowered output
• High prices, weak shilling lift earnings
• Output seen down 17 pct in Q1

NAIROBI (Reuters): Kenya produced less tea in 2011 from the previous period due to adverse weather but earnings from the crop soared to 109 billion shillings ($1.27 billion), thanks to high prices and a weaker local currency against the dollar, the government said on Wednesday.

The world’s largest exporter of black tea, the east African nation produced 377 million kg last year, down 5 percent from 399 million kg in the previous period, when it had earned 97 billion shillings from the crop.

“The price of tea has been very high and the exchange rate also helped, we were double lucky. But our strategy is still to increase the yield,” Romano Kiome, permanent secretary at the Ministry of Agriculture, told a news conference.

The average price of Kenyan tea at auction edged up to $2.99 per kg during the year from $2.75 per kg in 2010, statistics from industry regulator Tea Board of Kenya showed.

“Notably, the average price for the year was the highest that the industry has ever recorded for more than two and a half decades,” the board said.

The volume of tea sold at the auction at the port city of Mombasa fell 5 percent during the year to 247.3 million kg, it added.

Although the weakening of the shilling - which lost more than a quarter of its value against the dollar in October last year - was a blessing for farmers in one respect, it contributed to a sharp increase of input costs, most of which are imported.

Tea is consistently ranked as one of the largest hard currency earners for an economy that is dependent on farming.



Kiome said the production outlook for the first three months of this year pointed to a likely decline after frost hit about 2 percent of the total tea-growing areas.



The impact of the frost is likely to result in a reduction of output by 17 percent compared with the last quarter of 2011, both Tea Board and the government said, without indicating what the year on year fall would be.



Kenya has been trying to diversify its markets to cut reliance on the top markets of United Kingdom, Egypt, Sudan, Afghanistan and Pakistan, which account for 70 percent of total exports.



China, which is one of the markets that it has been courting aggressively, bought just over 2 million kg of tea from Kenya in 2011, representing a rise of 40 percent. ($1 = 85.8500 Kenyan shillings)