Commodities

Sh1.6bn teas withdrawn at auction as demand plunges

tea

Workers pick tea leaves at a farm. FILE PHOTO | JOSEPH KANYI | NMG

Tea worth Sh1.6 billion was taken out of the trading floor in the latest trading as demand for the beverage continues to plummet at the auction.

Market report from the Mombasa auction shows that 6.3 million kilogrammes representing 39 percent of the total teas offered for sale were withdrawn from the market in the latest sale on the back of a lower price.

A kilogramme of the beverage traded at $2.02 from $2.07 previously, marking the lowest price to have been recorded at the auction in the last year.

There have been fears at the auction that the economic woes facing the two top buyers of the Kenyan produce are having a negative impact on the prices locally with the situation expected to worsen in the coming days.

Pakistan, which is a top buyer of Kenyan tea is facing a serious shortage of foreign currency and so is Egypt, the second largest buyer that is currently grappling with a weakening pound that has so far declined by 35 percent against the US dollar since October

The two countries account for 55 percent of the total tea exports that Kenya sells to the world market.

Read: Tea price falls to 10-week low at Mombasa auction

“Purchases from Pakistan and Egypt have remained low because of a shortage of dollars from these countries and this is impacting negatively on local prices,” said Peter Kimanga, a tea trader at the Mombasa auction.

The price of tea at the auction has over the last one year remained low to sell at below $2.43, which is the government-set minimum price for all the Kenya Tea Development Agency (KTDA) produce.

With an increase in volumes at the auction occasioned by low demand, traders are worried that the price of the beverage is likely to drop to below $2 in the subsequent auctions.

Read: Tea prices at Mombasa auction holding steady

Lower prices mean that farmers attached to KTDA are staring at low earnings in bonus at the end of this financial year should the trend of poor returns continue to be witnessed at the auction.

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