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Commodities

Tea prices may fall after border closed

Peter Kimanga
East Africa Tea Traders Association chair Peter Kimanga. PHOTO | KEVIN ODIT 

Tea prices at the auction improved marginally during this week's trading but remain vulnerable to external forces and could decline in the coming sales following closure of Pakistan and Afghanistan border.

Stakeholders blame the decline on both external and internal factors that have seen prices tumble to levels last witnessed in 2014.

The factors include diminishing purchasing power from traditional markets.

An auction report indicates a kilo of the beverage on average increased to Sh202 from Sh190 last week.

The border between Pakistan and Afghanistan countries has been closed to address the issue of tea smuggling as buyers purchasing tea meant for Pakistan take the commodity to Afghanistan and return it to Karachi to evade duty.

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“The price was doing well during the auction this week but when the news on closure of the boarder got to the auction, the prices declined,” said Peter Kimanga, director of Global Tea.

According to Pakistani media, the federal government has formed a committee to curb smuggling. East Africa Tea Traders Association (Eatta) managing director Edward Mudibo says declining purchases by Kenya’s major buyers has increased the available commodity in the market hence cutting the price.

“The depressed prices have been occasioned by the external and internal factors. The internal factors include high volumes locally, which has seen the supply surpass demand,” said Mr Mudibo.

The stakeholders warned this week that the value of Kenya’s tea will decline further following the economic and political turmoil in major markets that the country exports to, which has seen the demand of the beverage drop.

Pakistan, Iran and Sudan are witnessing political and economic turmoil, which has seen volumes bought go down in recent months.

Tea exports to Pakistan, which is the leading buyer, declined by 37 percent in the first quarter of this year compared with the previous period. A market report by the Tea Directorate indicates the volumes exported to Pakistan dropped from Sh15 billion in the first three months of last year to Sh10 billion.

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