Tea prices at the Mombasa auction hit 20-month low last week, bucking expectations as volumes fell due to the prevailing cold weather.
The lower prices threaten to lower the earnings for farmers in the second payment that is normally made towards the end of the calendar year.
A kilo of tea fetched Sh221 last week, down from Sh226 in the previous week at the auction.
The Tea Directorate said last week that the current dynamics at the auction had made it difficult to immediately establish the cause of the diminishing value of the commodity.
“It is unusual for the price and volumes to go down at the same time. This defeats the basic law of supply and demand,” said the directorate.
The directorate had anticipated that the price of the commodity would improve on account of low supply in future sales.
The volume offered for sale in the week dropped by 167,819 kilos to mark the 10th week in a row that the volumes had dipped.
Tea earnings in the first half of the year have, however, registered a growth of Sh2 billion compared with the same period in 2017 on higher volumes offered for sale, taking into account the drought that ravaged the country in the first half of 2017.
Better weather in the second half of last year saw the prices recover, before the current decline set in towards the end of the first quarter of this year.
Data from the Tea Directorate indicates commodity valued Sh41.70 billion was sold through the Mombasa auction between January and June against Sh39.745 billion realised in the same period last year.
The cumulative price per kilo of tea in 2017 was also lower at Sh276 compared with Sh300 for the same quantity in 2018, which coupled with the higher volumes traded this year has pushed up the value of the beverage.