Markets & Finance

Tea prices drop at Mombasa auction despite fall in volumes

tea

Eunice Mwanza picks tea at Unilever Tea Estate in Kericho County. PHOTO | TONNY OMONDI

Tea prices at the weekly Mombasa auction have continued to fall despite a decline in volumes brought about by cold weather.

In this week’s auction, a kilogramme of tea was sold at Sh228 on average, compared with Sh234 at which it traded during last week’s sale.

The volumes offered for sale in this week’s auction declined from 7.4 million kilogrammes previously to 7.1 million kgs in the latest sale.

Tea Directorate head Samuel Ogola said he anticipated the prices to firm up in the coming weeks due to the fall in supply.

“We are anticipating that the quantity offered for sale will decline in the coming months and this will definitely lead to high prices resulting from increased demand,” he said.

The months of July and August are normally characterised by extreme cold that normally affects the production of tea bushes in major growing belts.

In the corresponding period last year, a kilogramme of the beverage traded at Sh314 while the volumes were at 5.6 million kilogrammes.

This year’s low prices of tea will eat into farmer’s earnings for the just-ended financial year. The growers normally receive second payment — bonus — in October.

The earnings from tea grew to Sh125 billion last year up from Sh101 billion that was recorded the previous year. The crop is among Kenya’s top foreign exchange earners besides remittances and horticulture.

Kenya is trying to capture new markets and expand the existing ones such as China, which have the potential to buy more of the local tea. Tea Directorate officials were in Russia for talks on how to boost export after sales to the country dropped by 10 per cent last year.

Russia is a major buyer of Kenyan tea but last year the volumes dropped to 25 million kilogrammes from 28 million kilos in 2014.

Mr Ogola noted that the current low prices at the auction is as a result of the dependency on a few traditional markets that buy almost the same volumes annually.