In July 2024, Uganda’s tea prices fell to an average of $0.82 per kilogramme, according to the Mombasa Tea Auction Sale number 30, which closed on July 23, 2024. This represents a significant drop compared to the average prices in neighboring countries: Kenya at $2.22, Rwanda at $2.47, and Tanzania at $0.74.
Uganda has struggled to keep its tea prices above $1 for nearly a year, highlighting ongoing issues within the tea industry. William Mbonigaba, a tea farmer from western Uganda, reported a sharp decline in farm-gate prices from about shillings 500 to shillings 200 in many tea-growing regions. In some areas, prices have plummeted to as low as shillings 130, with workers receiving shillings 100 and farmers left with just shillings 30, which barely covers garden maintenance costs.
The average production cost in Uganda is approximately $1.20 per kilogramme, according to Onesimus Matsiko, a tea farmer and sector expert. This discrepancy between production costs and selling prices poses a significant challenge for the tea sector.
In the latest auction, Uganda contributed only 7% of the total tea offered, down from its historical 15%. This decline reflects the closure of many tea factories. Matsiko noted that while some of the reduction is due to increased direct sales bypassing the auction, a troubling trend is the abandonment of tea gardens and the shift to growing less valuable crops like maize and sugarcane in areas such as Kyenjojo.
Factories reliant on outgrower leaves have been forced to cut farm-gate prices to reduce costs. Mbonigaba explained that the reduction in prices has led to unsustainable earnings for farmers, impacting their ability to maintain their gardens.
The Mombasa Tea Auction Sale 30 revealed that 63.7% of the teas were unsold. This high rate of unsold tea indicates that global production is exceeding demand. The performance of the market is evaluated based on price earnings and the percentage of teas absorbed. Union Tea Brokers Ltd reported that the Kenya Tea Development Agency (KTDA) offered more than 70% of the teas at Sale 30, but 75% of these teas remained unsold, representing over 90% of the total unsold teas.
Despite Uganda’s reduced contribution to the auction, only 15% of its tea was unsold, making up just 2% of the total unsold teas. This compares favorably with Kenya’s large-scale tea plantations, which contributed 16% of the volumes but had 17% unsold. Uganda’s performance in price earnings is comparable to Kenya’s large-scale plantations.
The poor market performance is primarily affecting CTC (cut, tear, and curl) black teas. Matsiko noted that orthodox teas, such as green and specialty teas, are performing more consistently.
Farmers believe that short-term, practical interventions are needed to address the crisis. Mbonigaba suggested that fertilizer application could improve the quality of CTC black tea and potentially raise average prices from $0.79 per kilogramme to $1.05. The government has allocated sh41 billion for tea fertilizers, which could significantly boost Uganda’s foreign exchange earnings if effectively implemented.
However, despite the cabinet’s resolution to provide subsidized fertilizers starting in March 2024, there has been no sign of fertilizer supply to farmers for the second rainy season. Matsiko criticized the government’s focus on providing free tea seedlings rather than supporting established tea gardens.
Uganda’s tea acreage has increased from 21,000 hectares in 2001 to an estimated 49,000 hectares recently. However, current yields are only about 50% of the potential for Uganda’s tea-growing environment. Farmers believe that fertilizer application could increase productivity by at least 50%, raising yields from the current 1,633 kilograms per hectare to at least 2,500 kilograms, approaching the potential of over 3,000 kilograms.
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