Sh1bn tea unsold at auction on market uncertainty, quality

Tea packages worth Sh1 billion went unsold during last week’s auction on sustained uncertainty over State-imposed reserve prices and lower quality produce on offer.

Data from the East African Tea Traders Association (Eatta) indicates that out of 12.4 million kilogrammes, which were offered for sale, 5.4 million kilos remained unsold.

The auction, however, saw a marginal price increase, which jumped to Sh170 a kilo from Sh168 in the previous sales.

“There was reduced demand for the auction offerings of 189,120 packages (12.43 million kilogrammes) with irregular quality and uncertainties in the market due to KTDA reserve prices resulting in many more teas remaining unsold (50.37 percent),” said Eatta.

KTDA said the absorption rate of its teas offered improved to 19 percent, while the average price appreciated by 22 percent from $1.99 to $2.4 per kilo, a growth of $0.44 compared with auction 27 when the reserve price had not been introduced.

A fortnight ago, Agriculture Cabinet secretary Peter Munya issued a directive that would require traders to pay a minimum of Sh183 for a kilo of KTDA teas at the auction following a sharp decline in prices that he said subjected farmers to losses.

The move saw buyers snub the KTDA teas in the first auction since the announcement was made, leaving smallholder farmers with beverages worth Sh1 billion as traders opted to buy cheaper teas from multinational and private producers.

Mr Munya reiterated he would not reverse the reserve price.

He said the government had secured enough warehouses to store the produce until the price is favourable to the farmers.

Mr Munya said the agency had put in place measures to ensure farmers are not affected by disruption at the market as the KTDA has enough resources to guarantee growers monthly income and other needs to support their farming.

Independent Tea Producers Association chairperson Collins Koech said the lobby group supports the minister’s decision.