REBOUND

Relief for tea farmers as auction prices recover

Traded at $2.04 a kilo this week

In Summary

•This week’s price jump comes after 16 weeks of trading below the two-dollar mark, where prices averaged between $1.73 and $1.94 a kilo.

•The rebound is a relief to tea farmers whose final earnings are tied to the price.

A worker picking tea/FILE
A worker picking tea/FILE

Tea prices at the Mombasa weekly auction have rebounded to the traditional two-dollar mark amid a fall on volumes, with buyers returning to the market after clearing warehouse stocks.

The commodity this week traded at $2.04(Sh220.73) a kilo, signaling better returns for farmers after about four months of low rates.

This week’s price jump comes after 16 weeks of trading below the two-dollar mark, where prices averaged between $1.73 (Sh187.19) and $1.94(Sh209.91), a kilo.

 

Last week, a kilo at the secondary market fetched $1.95 (Sh210.99), which was an increase for the straight fourth week.

“Anything below two dollars is not good,” the East African Tea Trade Association (EATTA) managing director Edward Mudibo told the Star.

EATTA hosts and manages the Mombasa Tea Auction, one of the largest in the world where tea from Kenya, Uganda, Rwanda, Tanzania, Malawi, Ethiopia, and DR Congo is traded.

The return to above two dollars a kilo is an indicator the commodity is shaking off effects of Covid-19, which saw mass buying by packers when the pandemic hit the country in March.

According to Mudibo, buyers stocked their warehouses for fear of a supply cut, a move that slowed buying of new stocks, hence the low price margins.

“Some thought maybe there would be a supply disruption and they would not meet their contract obligations so people were stocking up,” Mudibo explained.

The increase in price however comes as traded volumes drop where this week, a total of 6.6 million kilos were traded, about 1.4 million kilos from last weeks 7.2 million kilos.

 
 

The volumes were at eight million and 9.3 million kilos in the two preceding weeks, respectively.

“Out of 135,583 packages (8,929,677 kilos) available for sale, 100,161 packages (6,631,499 kilos) were sold. 26.13 per cent packages remained unsold, Mudibo said in the weekly report.

“Kazakhstan and other CIS nations were dominant and showed more interest with increased and strong support from Pakistan packers, Yemen and other Middle Eastern countries,” he said.

According to Mudibo, this week also recorded strong activity from Afghanistan, Sudan and Russia with more and useful inquiry from Bazaar while Egyptian Packers and UK lent good but selective interest.

Iran showed selective activity. Local packers were less active with Somalia active at the lower end of the market.

Low tea prices in recent months has also been pegged on over-production and supply of green leaf in the wake of favourable weather conditions, with depressed export market affecting buyer decisions.

Last month, the Kenya Tea Development Agency (KTDA) Holdings announced green leaf production by its affiliate factories grew by 28.5 per cent for the year ended June 30, 2020.

This is a record high total production of 1.448 billion kilograms, up from  1.127 billion kilos the previous year.

The growth is attributed to continued favourable weather across tea-growing regions, improved crop husbandry practices among tea farmers and resumption of crop by farmers who had moved to privately owned tea factories.