Tea exporters in Rwanda are reeling as prices drop to an all-time low of below $2 per kilogramme on the international market, due to low demand and oversupply.
Before the Covid-19 pandemic hit the sector, the country exported up to 9,317 tonnes of processed tea worth Rwf25 billion ($27.6 million) between January and March 2020, compared with Rwf20 billion ($21.8 million) the same period last year.
Prices started dropping in the second quarter as key buyers closed shop due to the restrictions imposed on movement of goods and services due to the pandemic.
Rohith Peiris, the general manager of Sorwathe, a tea growing and exporting company said. “The first half of the year has been tough. Tea prices have been declining significantly; a kilogramme of processed tea now stands at $2 on average. It was $3 and above per kilo last year. “This is the lowest it has ever been. The prices fluctuate, even below $2 per kilo,” said.
Pie Ntwari of the National Agriculture Export Board said, “Tea consumers have sharply reduced and some established buyers have already closed. This explains the reduction of prices on the international market.”
He added that Rwanda was exploring new markets including the Middle East and Russia.
The higher prices recorded between January and March are largely attributed to bigger auctions. India played a big role leading to an increase in demand for the East African auction, before being greatly affected by the pandemic.
John Baffes, the senior agriculture economist with World Bank’s Development Prospects Group said, “Tea prices, especially at the Kolkata and Colombo auctions, increased recently, while prices at the Mombasa auction remain subdued. Kolkata and Mombasa auctions reached 13 and six-year lows, respectively.
“In response to ample supplies in Kenya, there have been disruptions of tea shipments to various importing countries, and disappointing demand (in part due to the lockdown in India).”
He added that tea prices (auction average) are “expected to drop 10 per cent in 2020 mostly due to weak demand, before experiencing a relatively softer recovery in 2021”.
Tea exports to top three global markets declined significantly in the first quarter as the world grappled with the Covid-19 pandemic.