Tea prices uptick offers hope for farmers after poor 2014 bonus

The price of tea at the Mombasa auction improved marginally last week after a two-month decline providing hope for a good bonus payment for farmers.

A kilogramme of made tea on average traded at Sh293, up from Sh283 in the previous sale, even as the volumes of commodity continue to grow at the auction.

The quantities offered for sale last week grew by 1.16 million kilogrammes to 6.85 kilogrammes from the previous 5.69 million kilogrammes.

“Average price increased by Sh9 and the volume too increased by 1.16 million kilogrammes from last week’s sales,” said Edward Mudibo, the managing director of East Africa Tea Traders.

A market report from African Tea Brokers shows that major buyers such as Egypt and Afghanistan were active during the auction but at reduced levels.

In the week’s sale, Egypt and Pakistan buyers were less active, pushing down the demand for the commodity and depressing prices. A kilogramme of tea on average traded at Sh283 the previous week, down from Sh303 during the preceding sale.

High demand

The tea directorate says the price of the beverage is expected to go up in the coming auctions with demand expected to rise in most parts of Europe, which is a major buyer of Kenyan tea.

“We are about to start seeing good prices in the coming days resulting from anticipated high demand of the commodity once the winter season starts in October,” said Elizabeth Kaimenyi, the head of tea directorate.

Ms Kaimenyi said farmers will earn slightly higher bonus this year compared to last year, following a trend of good prices witnessed in the last six months.

Kenya Tea Development Agency (KTDA), which represents 66,000 small-scale holders, is currently compiling the financial report before announcing the amount that growers will earn in bonus next month.

Tea farmers are expecting increased earnings after the price of the commodity at the auction improved in most sales since January. A kilogramme of the beverage fetched Sh314 mid last month, the highest recorded this year.

However, KTDA has warned the good prices might not necessarily translate into rise in earnings for farmers in the year that ended June as other aspects of production would have to be incorporated in deciding the bonus.

A section of farmers, through their co-operatives, have warned they will not accept anything for a bonus below Sh50 a kilogramme.

Total earnings for the farmers affiliated to the KTDA fell from Sh69.2 billion in 2013 to Sh52.9 billion in 2014, a 23 per cent decline.

The weak shilling has also helped raise demand by making the beverage relatively cheaper. Kenya exports close to 95 per cent of its tea, making it a leading global exporter. The currency has been weakening against the dollar since January and stood at Sh104 on Friday.