Tea and coffee are key export commodities, but both segments remain vulnerable to price volatility

Tea and coffee are among Kenya’s most important export commodities and both have seen production and export values expand considerably in recent years. However, both segments are also heavily dependent on the international export market, leaving smallholder farmers vulnerable to volatility in world prices for the two crops.

While Kenya is one of the world’s top producers of high-quality black tea, systemic disparities and falling world tea prices have dampened growth forecasts. Coffee production, meanwhile, has suffered from decades of decline, with the country’s high-quality beans remaining a bulk export despite significant opportunities to add value domestically.

Tea Production

Local tea production began in 1903, when European settlers introduced the first black tea plants to the Limuru area of central Kenya. Early settlers and colonial governments initially restricted tea and coffee cultivation to large-scale farmers and multinationals, reserving this lucrative cash crop for European farmers, although independence in 1963 brought with it various land reform bills that opened the sector up to local farmers.

The crop has since spread across the country, and today it is an important contributor to the Kenyan economy. Tea exports generated a total of KSh112bn ($1.28bn) for the country in 2011/12, making it the single largest foreign exchange earner. Kenya is the world’s top exporter of black tea and the third-largest producer overall, behind China and India.

The country’s tea sector is overseen by two main organisations: the Kenya Tea Development Agency (KTDA) and the Tea Board of Kenya (TBK). The KTDA is in charge of managing small-scale farmers, who contribute around 60% of the nation’s supply, while the TBK is mandated to license tea manufacturing factories; research tea crops through the Tea Research Foundation of Kenya (TRFK); register growers, buyers, brokers and packers; and promote Kenyan tea in both local and international markets.


Kenya’s competitiveness in tea production can be attributed to a number of factors. The country is home to the Mombasa Tea Auction Centre, the world’s second-largest tea auction (after Colombo in Sri Lanka), which provides direct feedback of market prices to factories and farmers.

Kenya’s tea-growing regions are also ideally located, with rich, volcanic red soil and well distributed rainfall that has historically averaged between 1200 mm and 1400 mm annually, combined with long sunny days. On top of that, the government offers incentives to growers and investors, including value-added tax exemptions and tax holidays for producers that process and package tea, and has established export processing zones that offer favourable conditions for exporters. The main export destinations for Kenyan tea are Egypt (21%), Pakistan (18%), the UK (13%), Russia (10%) and Sudan (8%).

Year-Round Activity

The segment is active year round, with the two main peak seasons running from March to June and from October to December and coinciding with the long and short rainy seasons. Young tea shoots are plucked in regular cycles ranging from seven to 14 days, and manufactured using the cut, tear and curl method to ensure maximum cuppage per unit weight. Kenyan tea is generally grown free of agrochemicals, winning international acclaim for its flavour and quality.

Following the KTDA’s privatisation in 2000, the area under tea cultivation increased dramatically to 120,000 ha in 2013, from 77,000 in 1995, while smallholder green leaf production expanded to over 1.1bn kg in 2013, for the first time in history. The KTDA currently manages 65 tea factories serving 565,000 small-scale farmers who produce crops worth KSh61.4bn ($699.96m) annually, with an additional factory commissioned in 2013 and two others in the planning stages.

Production & Prices 

Production has shown particularly strong growth in recent years, increasing from 369.2m kg of tea in 2012 to reach 432.2m kg in 2013, the highest production levels recorded over the past decade. The TBK attributes these yield and quality improvements to the TRFK, which has developed over 1000 improved clone seeds since its inception, with 50 currently in use in Kenyan tea fields. The TRFK reports that 13 of these clones are capable of yielding between 5000 and 8000 kg of tea per ha annually; although Kenya is ranked third in annual tea production, the country holds the top position worldwide in terms of productivity.

However, the rise in tea production has coincided with a worldwide decline in tea prices, which has created significant challenges for the industry, particularly small-scale farmers. World tea prices dropped by around 30% between July 2013 and April 2014, and farmers were earning just KSh22 ($0.25) per kg for their tea as of April 2014, compared to KSh27.13 ($0.31) in 2012. As a result, the bumper crop of 2013 did not deliver stakeholders the returns they had hoped for, and while the KTDA usually pays its farmers a mini-bonus in April each year, this was delayed significantly in 2014, even after a presidential directive was issued in June ordering payments to be made by the end of the month.

Coffee Growth

Although smaller in scale than the tea segment, coffee production also represent a critical economic driver for Kenya. Under the Ministry of Agriculture’s Agricultural Sector Development Strategy for 2010-20, coffee is an integral part of efforts to deliver the 10% annual growth rate envisaged in the economic pillar of Vision 2030, Kenya’s long-term development programme. Although it is a relatively small producer at the moment, global roasters have been quick to snap up Kenya’s supply of high-quality arabica beans.

Coffee was first introduced in the country in 1896, and currently the industry is comprised of 700,000 small-scale farmers and 3850 coffee estates, with small-scale growers clustered within 450 cooperative societies. The sector is overseen by the Coffee Board of Kenya (CBK), which establishes policies and rules to regulate and develop the industry, while the Coffee Development Fund was set up under the Coffee Act of 2001 to provide affordable credit facilities to coffee farmers. Important market players in Kenya include multinational companies, such as Nestlé Foods Kenya, which owes its dominance to an affordable, recognisable brand. This is something that the domestic industry has yet to establish.

Kenya produces almost exclusively washed arabica beans, although there is also limited production of robusta beans in certain low-altitude areas. The main crop-growing season sees plants flower between March and April, is harvested between September and December, and sold between January and July. The lower-quality fly crop season flowers between October and December, is harvested between April and June, and offered for sale from September to December.

Production Down From A High

After reaching an all-time production high of 130,000 tonnes per year during the late 1980s, coffee production underwent a decline in the subsequent decades. Annual production is approximately 880,000, 50-kg bags, with top-quality beans comprising 25% of the total, fair/average quality, 45%; Mbuni, or unwashed coffee, 15%; and poor-quality beans, 15%. In its “Economic Survey 2014”, the Kenya National Bureau of Statistics reported that coffee production declined by 18.8% in 2013, reaching 39,800 tonnes, compared to 49,000 tonnes in 2012. Coffee production is forecast to grow by around 15% during the 2013/14 growing season to reach a total of 45,000 tonnes, well below the industry peak.

Abolishing a KSh1m ($11,400) security deposit on direct bean purchases has been suggested as one method through which to increase direct bean purchases, although supply chain issues continue to hinder direct purchasing, meaning it could be some time before Kenyan-branded single-origin coffee flourishes. Beans are also susceptible to coffee berry disease and leaf rust, although new breeds of coffee bean, including the Batian variety introduced by the Coffee Research Foundation in 2010, have helped to mitigate the problem.


Kenya’s earnings from coffee exports fell to $18.2m in the nine months to September 2013, representing a 35% decline over the same period in 2012. Auction sales during the 2012/13 season also declined by 13% to reach $166.7m. However, Reuters reported in May 2014 that prices for Kenyan coffee had increased to $370 per 50-kg bag, compared to $346 earlier that month, while the total value of coffee sold between September 2013 and March 2014 jumped by 24% to reach some $83.5m. The increases in price were driven by both improved global prices and high-quality crops. An ongoing drought in Brazil, expected to drive world prices higher for the rest of the year, has made for an especially bright short-term forecast for the industry.

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