Demand from the Indian and Chinese markets supported Kenya’s tea prices in the first eight months of 2010, powering export earnings 51 percent higher than last year, the tea board said.

Good rains spurred production higher as well, the board said, adding that the east African producer, which is the world’s largest exporter of black tea, is on course to attain full-year production and earnings forecasts.

“It looks like it is going to be an interesting and exciting year for Kenyan tea. Volumes up, prices are reasonably firm and that is good for the farmers, good for everyone,” the board’s Managing Director Sicily Kariuki told reporters.

The average price for all grades at the weekly tea auction held at the port city of Mombasa was also up during the eight months at $2.75 per kg from $2.57 last year, Kariuki said.

“China and India, their markets are coming up with their big populations and growing economies. So they have come into the basket and they are helping in sucking in a lot of tea from the other origins,” Kariuki said.

“The economic recovery in the developed world which obviously impacted the developing world as well, is something that contributed to the prices.”

But the trend of growth in the two Asian markets would have to be sustained for a bit longer for the industry to derive full comfort from the development, she added.

“However two years is a short time, we would want to see these as fundamental drivers in a period of 3-4 years for us then to confirm this (trend) will remain,” she said.

Keeps Full Year Forecasts
Output rose to 260 million kg in the eight-month period from 182 million kg in the same period last year and the board maintained its full year forecast, despite predictions of dry weather towards the end of the year.

“We had projected we will be anywhere above 350 million kg by the end of this year. I can confirm that is going to happen, whichever way the weather goes,” Kariuki said.

The board expects full year earnings to exceed the 70 billion shilling mark, after jumping to 65 billion shillings ($804.9 million) in January-August 2010 from 43 billion in the same period last year.

However, the industry still faces challenges, Kariuki said.

“We are still dealing with rising costs of production… we have seen labour costs go up,” she said, citing a deal between factories and unions this year, awarding workers a 20 percent wage rise for two years.

High costs of fuel were also an issue, she added, saying output in 2011 could slide.

“Any time we experience a big crop, the following year seems to come down somehow. There is always an up and down movement,” she said.

Kenya’s tea crop is ranked the second biggest source of hard currency. Tea from the rest of the region like Burundi and Tanzania is sold through the auction in Kenya. (Reuters)