Tea prices start 2016 on a losing streak as volumes decrease

Tea prices opened the year on a losing streak shedding off five per cent of its value in the first auction of 2016.

On average a kilogramme (kg) fetched Sh278 in last week’s auction compared to Sh294 in the last auction of 2015.

The price of tea has been declining in the last two months even as the volumes offered for sale declined.

The quantities offered for trading last week dropped to 7.7 million kg from 9.1 million kg traded in the last week of December at the weekly Mombasa auction.

“The week’s average price decreased to Sh278 from Sh294 achieved in auction 51. Some 7,745,063 kg were traded as compared to the previous auction where 9,153,733 kg were offered for sale,” said Mr Edward Mudibo, managing director East African Tea Traders Association.

With El Nino rains expected to come to an end, the volume from the factories is projected to drop on the onset of a dry season in most of the tea growing zones.

According to the Kenya National Bureau of Statistics (KNBS), the volumes of tea decreased from 338,943 tonnes to 301,330 in quarter three as harsh weather in major tea producing counties saw the production of the green leaf fall.

Dry weather earlier last year cut output, driving up the average price per kilo to Sh265 in the second half, from Sh245 in the corresponding 2014 period.

The volume of green leaf produced by small-scale farmers dipped to 1.03 billion kg over the period from 1.1 billion kg the previous year, according to Kenya Tea Development Agency (KTDA).

The Agriculture, Fisheries and Food Authority, the farming regulator, said tea output fell to 175.2 million kg between January and June compared with 224.8 million kg in 2014.

Kenya is the leading global black tea exporter, selling over 400 million kg to the global market annually, with only 25 million kg of the beverage consumed locally.

The country exports 95 per cent of the tea produced locally making it the largest exporter of the beverage to the world market. This is unlike China, which is the leading producer of the commodity but consumes all its tea.

Tea consumption in Kenya dropped in the first eight months of 2015 compared to the corresponding period last year.