Tea prices slide below two-dollar on high volumes

Tea prices at the Mombasa weekly auction have slightly dropped below the traditional two-dollar mark this week, amid an increase in volumes traded and moderate demand on the commodity.

At this week's auctions-Monday, Tuesday and Wednesday, a kilo averaged $1.98 (Sh214.57), a drop compared to last week's $2.04 (Sh221.07) a kilo, the East African Tea Trade Association (EATTA) data shows.

This came amid an increase in volumes traded, which increased to 1.94 million kilos compared to last week's 1.63 million kilos.

The total volume traded for was 317,942 kilos more than last week.

Out of 138,438 packages (9,070,975 kilos) available for sale, 106,920 packages (6,949441 kilogrammes)were sold. 22.77 per cent packages remained unsold, EATTA notes in its report released yesterday.

EATTA managing director Edward Mudibo has however termed the price slide as a minor variance occasioned by high volumes, expressing confidence the prices remain on an upward trajectory.

“It is normal for week-on-week prices to vary. We expect an upward trend in the coming weeks. They have been growing in recent weeks, something we expect to continue,” Mudibo told the Star in a telephone interview yesterday.

During this week's sales, Yemen and other Middle Eastern countries lent more and strong support with strong inquiry from Pakistan Packers while Egyptian Packers were active but at lower levels.

Kazakhstan, other CIS states, Afghanistan, Sudan, Russia and Bazaar reduced interest while UK were less active and selective with Iran quieter, EATTA notes.

“Local Packers showed reduced support in line with price. Somalia were active at the lower end of the market,” Mudibo noted.

Last week, the prices rebounded from 16-weeks of fetching below $2, which is considered the average fair price for the commodity, a key foreign exchange earner for the country.

A kilo of tea has averaged between $1.73 (Sh187.48) and $1.94(Sh210.24), for the last four months.

A rebound to above $2 means better earnings for farmers whose returns are influenced by auction prices and the US dollar exchange rate to the Kenya Shilling.

“Anything below two dollars is not good,”Mudibo notes, “ but what we are seeing is a rebound. We expect a two-dollar upward trend to continue.”

The low prices in preceding weeks were pegged on low buyer activities as exporters moved to clear warehouse stocks, where most had bought huge volumes to ensure they met their contract obligations in case Covid-19 was to disrupt the auction.

There has also been an 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.