Panic-buying at the Mombasa auction last week marginally lifted tea prices as traders rushed to purchase more of the commodity in anticipation of a shortage in supplies in the coming days as a result of the ongoing drought.
Tea traders at the auction have anticipated prices at the weekly auction will be firming in the coming days as buyers purchase more stocks for future exports.
Peter Kimanga, a director with the Global Tea and Commodities, expects a reversal in the prices that have been falling since mid-last year owing to huge supply.
“There is now panic buying at the auction and this is going to boost the price as the demand goes up with buyers wanting to stock more tea,” said Mr Kimanga at the auction.
The prices have already shown some recovery with last week trading registering a marginal increase after a streak of poor performances.
During the auction, a kilogramme of tea traded at Sh210 up from Sh200 fetched the previous sale.
The ongoing drought is expected to reduce green leaf supplied to factories as most parts of the tea-growing zones are hit by drought.
High tea volumes have overwhelmed warehouses in Mombasa, with low prices at the auction and high production on farms leaving the stores full.
Chai Trading, a subsidiary of the Kenya Tea Development Agency, has had full warehouses in the last couple of months as a result of high output from farmers.
The average price of KTDA tea in the first half of the review period sharply dropped to Sh271 per kilogramme from Sh327 for the corresponding first half of 2017/18 occasioned by high volumes.
Greenleaf production at the KTDA managed factories rose 4.4 per cent to 611 million kilos between July and December 2018 on account of good weather.
In the previous half of 2017/2018, the company realised 585 million kilos of green leaf.