Tea prices continue to decline at the auction as volumes increase

A tea auction in Mombasa: Tea prices have been dipping since January. PHOTO | FILE
A tea auction in Mombasa: Tea prices have been dipping since January. PHOTO | FILE 

The price of tea at the Mombasa weekly auction fell marginally in last week’s trading as the volume of the commodity continued to surge. 

On average, a kilogramme of the beverage fetched Sh201 compared to Sh209 at the previous sale.

The volumes offered for sale grew from 8.7 million kilogrammes to 9.1 million kilos last week, piling pressure on the price.

Stakeholders have blamed the low prices on the high supply in the market resulting from the good crop witnessed at the end of last year due to El-Nino rains.

In the corresponding period last year, the volume of tea at the auction was five million kilogrammes, with a kilo of the commodity trading at Sh267.

The price of tea has been declining since the beginning of the year, failing to rebound to a high of Sh273 that was witnessed in the first auction of 2016.

Kenya is the world’s biggest exporter of black tea and an oversupply of the commodity in 2014 led to a sharp drop in global prices. The glut also lowered farmers’ bonuses to levels last seen seven years ago.

Kenya Tea Development Agency (KTDA), the small holder management agency, is leading the country in diversifying from the black tea to specialty ones such as the purple and green teas that are expected to help Kenya reduce its over-reliance on black tea.

The tea agency has installed the specialty tea processing machines in one of the factories in Meru and Itumbe in Kisii. At Kangaita in Embu, the factory has started processing though in low volumes.

The agency is expected to produce five million kilogrammes from the three factories where the special processing lines for this tea will be installed.

The move seeks to expand Kenya’s reach beyond the traditional markets of Egypt, Sudan, Pakistan and Afghanistan who are the major buyers of black tea.

Kenya 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 as a way of protecting farmers from low earnings.

Kenya’s tea exports to Pakistan — the country’s leading market for the beverage — grew by 10 per cent in 2015, controlling more than a quarter of the total commodity that traded at the Mombasa auction.