The tea auction: Major buying nations such as Pakistan and Egypt did not show much enthusiasm. PHOTO | FILE
What you need to know:
The current drop in prices represents an 18-week low since the beginning of the year.
The price of tea at the Mombasa auction has dropped for two consecutive months, with major buyers especially showing less interest in the last three sales as volumes grew.
A kilogramme of made tea on average traded at Sh283 last week, down from Sh301 in the previous sale, as the volumes of commodity continue to grow at the auction.
The quantities offered for sale last week grew by 300,000 kilogrammes to six million kilogrammes from the previous 5.69 million kilogrammes. The current drop in prices represents an 18-week low since the beginning of the year.
Head of tea directorate Elizabeth Kaimenyi said that major buying nations such as Pakistan and Egypt and other Middle East buyers did not show much interest during the auction.
“Some of our key buyers such as Pakistan, Iran and Yemen did not show a lot of interest in the past three auctions, thus reducing the demand for the commodity in the market, a move that has affected the price,” said Ms Kaimenyi.
She said the major buyers might have bought huge stocks in the previous auctions and are still holding tea in their warehouses.
Ms Kaimenyi is optimistic the prices will rebound starting October when the winter season starts in the key Kenyan markets for the black tea. It also coincides with the peak production season this year reported likely to be accompanied by El Nino rains.
Higher bonus
Compared to 2014, the average price of tea is still higher by 83 cents over similar period last year.
Ms Kaimenyi noted farmers will earn slightly higher bonus this year compared to last year, following a string of good prices witnessed in the last six months.
She said the bonus would be determined by the prices that prevailed during the whole year. Growers enjoyed improved prices for the first six months of the year.
However, the Kenya Tea Development Agency (KTDA) has warned the good prices might not necessarily translate into rise in earnings for farmers this year as other aspects of production would have to be incorporated in deciding the bonus.
Total earnings for the 66,000 farmers affiliated to the KTDA fell from Sh69.2 billion in 2013 to Sh52.9 billion in 2014, a 23 per cent decline.
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