Malawi tea output slumps 5.1 percent

Malawi’s tea output is expected to drop by about 5.1 percent this year to 44 million kilogrammes (kg) from 46.4 million kg the year before, a signal that production of the crop is on the downward trend.

Figures sourced from Tea Brokers East Africa Limited show that on a five-year period, output for tea has gone down by 14 percent from 51.5 million kg in 2010. Malawi’s record tea output of 52.5 million kg was produced in 2009.

The drop in output could result in reduced earnings for tea, the second largest foreign exchange earner after tobacco.

Last year, the crop raked in K16 billion in foreign exchange earnings, up from the previous year’s K10.7 billion. The average price for the crop has been hovering at around $1.30 (K660) per kg.

Tea Association of Malawi (Taml), a grouping of large tea estates, has attributed the decline in tea output, over the past years, to climate change.

Taml chairperson Sangwani Hara said the drop underscores the “impact of climate change on our industry.”

He also said declining tea prices on the global market have also had an effect on tea output.

The slump in tea output comes against the backdrop of a warning from the Intergovernmental Group (IGG) on tea that if there is no correction in the global tea market through adjustment in supply, the price of the commodity will continue to weaken.

Local tea industry experts say this could potentially affect Malawi’s foreign exchange revenue from the crop. Malawi is the second biggest producer of tea in Africa after Kenya.

IGG, a forum for intergovernmental consultation and exchange on trends in production, consumption, trade and prices of tea, noted that average Food and Agriculture Organisation (FAO) composite price for tea has weakened over the last two consecutive years, largely due to poor crush-tear-curl (CTC) auction prices of the commodity.

“This downward trend would continue and pose a real threat to the global tea Industry sustainability and its ability to support a number of economies that rely on the industry,” warned Taml chief executive officer (CEO) Clement Thindwa in an interview last week.

He said while overall growth in demand for tea is increasing, most of it is happening in the green and specialist tea segments.

Similarly, Thindwa said price of traditional tea has continued to increase firmly, underpinned by a strong growth in demand in traditional orthodox tea markets of the near East and the Russian federation.

But he said in the medium term, projections suggest the supply and demand of black tea, which Malawi produces, will be in equilibrium in around 2023 at a price of $2.81 (K1 447) per kg of quality teas, recovering from its lowest point of $2.59 (K1 333) per kg in 2015 after market adjustments.
“Although this indicates an increase in nominal terms, in real terms, prices would actually decline. Worse still, if there is no correction in supply response and assuming that output increases say a further five percent, the impact on prices would be quite dramatic, for example,  a 40 percent decline over the next 10 years,” he said.

In view of the serious threat to the tea prices on the global market, which could have negative impact on Malawi, the IGG called for caution and that efforts need to be directed at expanding demand.
In Malawi, only two percent of the tea produced is consumed locally, suggesting that the country does not consume much of its tea.

The drop in output also coincides with the decline in Malawi’s traditional tea markets.  United Kingdom (UK), Malawi’s traditional market for tea, seems to be on a steady decline, according to Taml.

Six years ago, UK used to absorb over 16 000 metric tonnes of the country’s tea, but that is no longer the case. Figures from Taml show that in 2013, the country’s exports to the market registered a 30 percent drop.

Industry analysts attribute the observed “unprecedented drop mostly to emerging and proliferation of competing beverages on the market, which are augmented by heavy marketing campaigns despite tea’s inherent superior health attributes”.

Similarly, South Africa which absorbed over 18 000 metric tonnes of Malawi tea in 2009, only bought slightly over 12 000 metric tonnes in 2013, indicating a 33 percent drop.

Overall, national tea exports have also continued to decline over the past years.