Determinants of Exports of Agricultural Commodities in the World Markets: Case Study of Kenyan Tea

Abstract

Analysis of Kenyan export performance shows that the country has been able to expand its export volume to compensate for losses due to deteriorating terms of trade or achieve growth in real exchange rate. Tea industry is playing an important role in the general export earnings. This export Market is volatile and susceptible to many factors, some of which include policies of importing countries vying for the same markets. Also on export market, tea is more exposed to a strong competitive situation by other countries vying for the same market. This paper is concerned with the factors affecting Tea export including an analysis of the export trends. Export supply functions are specified and estimated for three countries, United Kingdom, Pakistan and Egypt in addition to the overall total exports. Two methods of analysis were employed in this study. Regression analysis was carried out to find whether prices (price of tea and its substitutes, in this case coffee), Real Exchange Rate and income of the consuming country affected tea exports and they did, to what extend. Time series analysis was also employed to analyze the trends in tea exports. The study utilized secondary information from Central Bureau of Statistics and information from Tea Board of Kenya annual publications. The results of the analysis attribute the slow-down of the tea Industry to a poor regulatory framework that is not in harmony with privatizing the industry; poor processing and\ marketing services to farmers by the tea authority and conflicts and dissatisfaction among farmers. Also the future growth in Tea exports will rely on the government intensifying efforts to overcome the major bottlenecks in the industry. Maintenance of high quality standards of the produce is paramount to the success of the industry