Kenya's Tea Exports Face Mixed Brew in 2026 Amid Climate Headwinds and Market Shifts

Nairobi, Kenya – February 6, 2026 – Kenya, the world's third-largest tea producer and leading exporter of black tea, faces a complex and evolving landscape for its crucial export sector in 2026. While global demand for tea continues to show robust growth, the East African nation's outlook is tempered by persistent climate change impacts, ongoing market disruptions, and a critical need for value addition. The Kenya Tea Market is projected to experience mixed growth patterns, peaking at 12.67% in 2026 before settling to -2.99% by 2029, reflecting underlying vulnerabilities and opportunities.

Navigating Recent Performance and Persistent Pressures

Kenya's tea industry is a significant pillar of its economy, directly employing over 600,000 people and supporting approximately three million livelihoods. In 2024, the sector recorded strong export earnings, hitting a record KSh 215.21 billion (approximately $1.7 billion), a notable increase from KSh 180.5 billion ($1.4 billion) in 2023. This growth was partly driven by expanded access to new export destinations, with Kenyan tea reaching 96 countries in 2024. However, the first quarter of 2025 saw a dip in production, attributed to poor rainfall and global trade disruptions. By October 2025, exports rebounded sharply by 22.12% to 53.28 million kilograms, driven by stronger overseas demand, though overall production remained largely unchanged at 49.70 million kilograms.

Despite this export surge, the financial year 2024/2025 presented significant challenges for farmers. The Kenya Tea Development Agency (KTDA) announced in early February 2026 that green leaf payment rates for factories in Nyamira, Kericho, and Bomet counties would remain at KSh 24 and KSh 23 per kilogram, respectively. This decision was necessitated by low tea absorption and depressed auction prices, which negatively impacted factory revenues and cash flows. Total payments to growers by KTDA in 2024/2025 decreased to KSh 69 billion, down from KSh 89.29 billion the previous year. Principal Secretary for the State Department for Agriculture, Dr. Paul Kipronoh Ronoh, attributed these lower bonus rates primarily to external market dynamics, including the appreciation of the Kenya shilling against the dollar from an average of 144.21 to 129.37, and a decline in global tea prices from USD 2.69 to USD 2.46.

Climate Change: A Growing Threat and Adaptation Efforts

Climate change continues to pose an existential threat to Kenya's tea industry. Rising temperatures, erratic rainfall patterns, and increased occurrences of pests and diseases, such as blister blight and root rot, are increasingly common. Research indicates that suitable land for tea cultivation in Kenya could decline by up to 25% by 2050 under moderate climate scenarios, with optimal growing conditions potentially reducing by 26.2%. Dr. Jane Kimani, a climate scientist at the University of Nairobi, emphasizes that tea, being a long-term investment, is particularly vulnerable, as farmers cannot easily switch crops. Some projections even suggest that 70% of Kenya’s tea production might disappear due to increased temperatures.

In response, the Tea Research Institute (TRI) in Kericho has developed drought-resistant cultivars, such as TRFK 31/8, and promotes climate-smart agricultural practices. However, the adoption of these measures remains limited, particularly among smallholder farmers who cultivate approximately 60% of Kenya's tea acreage and often lack the resources for adaptive infrastructure like irrigation.

Market Diversification and Value Addition as Strategic Imperatives

Kenya's traditional export markets, led by Pakistan (accounting for 40% of exports in October 2025), Egypt (17.3%), and the UK, remain crucial. Trade with the United Kingdom, for instance, surged to KSh 360 billion in the last quarter of 2025, largely driven by rising Kenyan exports, including tea. However, the industry's reliance on bulk, low-margin exports is a persistent concern, with value-added tea exports representing only 3% of total shipments in October 2025.

To mitigate over-reliance on traditional markets and enhance profitability, the government and industry stakeholders are actively pursuing market diversification and value addition. Efforts are underway to expand international market access in regions such as China, Iran, the United States, and Europe, supported by trade diplomacy under the African Continental Free Trade Area (AfCFTA). The government has also allocated KSh 3.7 billion for the modernization and retooling of factories to boost efficiency and increase the production of high-value teas. Furthermore, reforms within KTDA, including the operationalization of a Tea Quality Analysis Laboratory in Mombasa and addressing price disparities between tea-growing regions, aim to strengthen institutional governance and improve farmer earnings. A new leadership at KTDA, with Engineer Francis Miano appointed as acting Group CEO, took effect on January 16, 2026, signaling a renewed focus on these reforms.

What This Means for Agricultural Lenders

Agricultural lenders operating in Kenya's tea sector must adopt a nuanced and proactive approach in 2026. The mixed growth outlook, coupled with the profound impacts of climate change, necessitates a thorough re-evaluation of risk profiles. Lenders should prioritize financing for climate-smart agriculture initiatives, including the adoption of drought-resistant tea varieties and irrigation infrastructure, particularly for smallholder farmers. Products that facilitate access to these adaptive measures, potentially with longer repayment cycles or climate-indexed insurance components, will be crucial.

Furthermore, the push for market diversification and value addition presents new lending opportunities. Financing for tea processing upgrades, packaging facilities, and marketing initiatives aimed at penetrating new and high-value markets will be in demand. Lenders should assess the financial viability of such ventures, considering the long-term returns from premium tea products. The stability of the Kenyan shilling, which appreciated in 2025 but is expected to gently weaken to around KSh 134 per dollar by end-2026 due to fiscal and current account deficits, will influence export competitiveness and farmer earnings. Lenders should factor in potential currency fluctuations when structuring loans and assessing repayment capacities. Close monitoring of KTDA reforms and their effectiveness in improving farmer payments will also be vital for assessing creditworthiness within the smallholder segment.

Conclusion

Kenya's tea export sector in 2026 is poised at a critical juncture. While global demand and strategic government initiatives offer avenues for growth, particularly in value-added products and diversified markets, the pervasive threat of climate change and ongoing market disruptions demand urgent and sustained attention. The industry's ability to adapt to environmental shifts, enhance product value, and streamline its supply chain will determine its resilience and profitability in the coming years. For financial institutions, a strategic shift towards supporting climate adaptation and value-addition initiatives will be key to fostering sustainable growth in this vital agricultural sector.