Buyers reject Sh1bn KTDA tea on Munya pricing cap

Mombasa auction rejected smallholder teas worth Sh1 billion this week after Agriculture Cabinet secretary Peter Munya set a minimum price for all Kenya Tea Development Agency (KTDA) produce.

Tea brokers’ data show 53 percent of the teas from KTDA was withdrawn from the auction floor as buyers went for those that traded at less than Sh181, the minimum price Mr Munya set for smallholders’ commodity.

Mr Munya set the minimum price last week following a sharp decline of the tea prices at a weekly Mombasa auction, forcing the government to intervene. However, the directive did not offer a reprieve on falling costs as the prices further plunged to Sh166 on Tuesday from Sh179 in the previous sale.

“The majority of KTDA teas offered remained unsold due to the reserve prices placed on all their teas,” said the brokers.

According to the report, out of 13.4 million kilogrammes offered, seven million kilos were struck out of the auction floor.

The teas, which were not sold, will be offered to the market next week. This could lead to a high supply in the market due to low demand for the beverage in the global market, depressing the prices further.

The current low price of the beverage at the auction implies that farmers’ losses have increased sharply to Sh16 a kilogramme.

According to the ministry, the cost of producing a kilo of the beverage is Sh183. However, tea is now fetching an average of Sh167 a kilogramme at the tea auction.

Tea price at the auction —which determines farmers’ payouts — has dropped from a high of Sh216 in January following a low demand in the global market amid a glut from top producing countries.

The price has been below Sh183 a kilo for the past month.