Markets & Finance

Price of tea hits 3-year high on severe drought


A tea picker: Kenya is the leading exporter of the beverage in the world. PHOTO | FILE

The price of tea rose by 5.6 per cent at the latest sale, hitting a three-year high.

The price of the beverage at the Mombasa auction was Sh318 per kilogramme during this week’s trading, up from Sh301 last week.

This gain builds on the good performance the beverage has continued to enjoy since the beginning of the year.

Edward Mudibo, the managing director of East African Tea Traders Association (EATTA), said the price is expected to maintain the same trend in coming weeks.

“The price of tea at the auction continues to register good performance since the beginning of the year and we expect the same trend to continue in the coming sales,” said Mr Mudibo.

He noted that there has been an increase in demand as buyers scramble to secure future stocks in the wake of rising prices occasioned by fears of a looming shortage which could push the price farther up.

“Traders want to get enough stocks at the lowest price before it goes up due to an anticipated shortage,” he said. Last week EATTA projected that the price of the beverage would cross the Sh300 mark.

According to small scale farmer marketing agency Kenya Tea Development Agency (KTDA), production of the commodity in the country decreased by 30 per cent in the last five months due to the prolonged dry spell.

READ: Tea prices hit a two-year high after rising 6.3pc in last week’s auction

The current drought is expected to cut tea production by 12 per cent to 416 million kilogrammes from 473 million registered in 2016.

Consequently, export volumes are expected to drop by the same margin to reach 422 million kilos while export earnings are projected to hit a record high of Sh133 billion in 2017.

The weatherman says the ongoing drought may persist until April, a fact that is likely to cut production and raise demand for tea hence impacting positively on the price.

Kenya is the leading exporter of the beverage, selling 95 per cent of its tea in the global market.

The country is trying to open up new markets and expand the existing ones such as China, which has potential to buy more of the local beverage.