SLUMP

Tea prices fall to the lowest this year at Mombasa Auction

A kilo averaged $1.78

In Summary

•A total of 10,039,385(more than 10 million) kilogrammes of tea were traded this week, 533,584 kilos more than the previous sale, which had 9,505,801 kilos.

•The tea sector is grappling with oversupply owing to prolonged rainfalls in tea growing areas, which affects auction prices and final pay-out to farmers.

Chai Trading Company general manager in charge of trading Francis Muthamia testing tea samples at the company's Miritini facility/MARTIN MWITA
Chai Trading Company general manager in charge of trading Francis Muthamia testing tea samples at the company's Miritini facility/MARTIN MWITA

Tea prices at the Mombasa auction fell to the lowest this week amid high supply, as brokers sought to move volumes accumulated during the Covid-19 period.

A kilo averaged $1.78 (Sh189.84 ), the lowest price this year, down from $1.82 (Sh194.10 )last week and $1.86 (Sh198.37 ) in the previous sale, signalling a drop in farmers' future bonus payments.

This is equally lower compared to the average $2.05 (Sh218.63 ) a kilo went for in a similar sale last year.

 

A total of 10,039,385(more than 10 million) kilogrammes of tea was traded this week, 533,584 kilos more than the previous sale, which traded 9,505,801 kilos.

Out of 190,058 packages (12,500,000 kilos) available for sale, 151,638 packages (10,039,385 kgs) were sold. 20.21 per cent packages remained unsold,” the East African Tea Trade Association (EATTA), which overseas the auction, notes in its report.

The high value export commodity opened with a $2.23 (Sh 237.83) a kilo in the first sale of January, which remains the highest.

During this week's secondary auction,Egyptian packers lent strong inquiry and were dominant with increased support from Bazaar while UK and Russia were active.

Yemen and other middle eastern countries were active but selective with reduced interest from Pakistan packers, Kazakhstan and other CIS states,” EATTA said.

Sudan packers were active but selective with Afghanistan selective. Iran were barely active while Somalia were active at the lower end of the market.

Speaking to the Star yesterday, EATTA Managing Director Edward Mudibo pegged the price drop to demand and supply, which has seen out loss going up.

 

“Volumes are high and some (traders) had taken stock under the current circumstances,” Mudibo said. 

He said prices will correct themselves as the auction moves to the next phase of the season.

During the week, the Kenya Shilling traded between 106.10 and 106.80 against the dollar, and reached 107.00 at its lowest mid week. The US auction is conducted in dollars.

Kenya benefited from reduced competition when a number of key markets such as India went under lock-down to mitigate the coronavirus.

“Exports by other countries went down something that played in our favour. India is however resuming slowly. General demand however is still there,” Mudibo said.

The tea sector is grappling with oversupply owing to prolonged rainfalls in tea growing areas in the country, which affects auction prices and final pay-out to farmers.

Small  scale farmers are currently enjoying dividends from the financial year ending June 30, 2019, where last week, Kenya Tea Development Agency announced a Sh649 million pay-out for their full-year crop delivery to its 54 managed factories.

The Mombasa Tea Auction is one of the largest in the world where tea from Kenya, Uganda, Rwanda, Tanzania, Malawi, Ethiopia and the Democratic Republic of Congo is traded.