AUCTION

Tea prices gain amid increased export demand

A kilo sold at an average $1.96 (Sh214.52) this week.

In Summary

•There was increased interest from Pakistan Packers Egyptian Packers and Bazaar.

•Pakistan takes up 38 per cent of Kenya's tea exports.

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

Tea prices at the weekly Mombasa auction nearly hit the two-dollar mark as the commodity's price gained this week, even as volumes traded increased.

A kilo sold at an average $1.96 (Sh214.52) up from last week's $1.93 (Sh211.24 ) and $1.89 (Sh206.86) the previous week, giving farmers hope for better returns this year.

This, even as the Agriculture CS Peter Munya and the Kenya Tea Development Agency(KTDA) continues to lock horns over proposed tea reforms.

As the auction entered the sixth week, there was increased interest from Pakistan which takes up 38 per cent of Kenya's tea exports, auction managers–East African Tea Trade Association (EATTA) notes, as it anticipates stronger prices this year.

Kazakhstan and other CIS states were forceful and lent more support with increased interest from Pakistan Packers, Egyptian Packers and Bazaar
EATTA managing director Edward Mudibo.

The commodity traded at an average $1.94 (Sh212.33) in the first two auctions of the year in January.

This week's price jump comes even as volumes traded increased to 12.3 million kilos 735,968 kilos more than last week's 11.6 million kilos.

Out of 210,409 packages (13,930,343) available for sale, 186,809 packages (12,341,413 kilos)were sold. 11.22 per cent packages remained unsold, EATTA notes in its weekly market report.

“Kazakhstan and other CIS states were forceful and lent more support with increased interest from Pakistan Packers, Egyptian Packers and Bazaar. Sudan was more active with reduced activity from Yemen and other Middle Eastern countries while UK and Russia were selective,”EATTA managing director Edward Mudibo notes.

Afghanistan was active but selective with some interest from Local Packers in line with price. Iran was quiet. Somalia was active at the lower end of the market.

Last year, a kilo of tea averaged $1.80 (Sh197.01) at the auction as Covid-19 lock downs disrupted consumption and export trends in key export markets.

The commodity shed some six per cent on price compared to the previous year amid high production and a depressed market.

In 2019, it fetched an average $2.05 (Sh224.37) with above the two-dollars a kilo being the preferred price mark.

There was also a 9.8 per cent growth on volumes availed for sale last year which closed at a total 486.5 million kilos (486,581,381) compared to 433.3 million kilos (433,336, 303) the previous year, occasioned by overproduction of the green leaf by farmers.

Farmer's earnings were however cushioned by a stronger dollar to the Kenyan Shilling as the commodity trades on the US currency, with the shilling hitting a historic low of an average 111.1 units to the US dollar in December.

It has however gained, trading at 109.4 to the dollar on Friday–Central Bank of Kenya data.

This year's prices will be highly driven by climatic conditions and demand in core markets of Pakistan,Egypt, the UK and Sudan, according to Mudibo.

Over supply of the commodity, in case of favourable weather, will however affect prices in case of low demand.

“We are however optimistic prices on average will be better than what we saw last year,” Mudibo told the Star in a telephone interview, and was optimistic the average price will go above two dollars in the near future.

Meanwhile, Munya and KTDA continue to face off on the Tea Bill of 2018 signed into law by President Uhuru Kenyatta on December 23, a matter that is in court.

The CS has accused KTDA of using the court to frustrate him as he pushes for reforms in the tea sector, among them ensuring farmers gain more from their teas.

Though KTDA is not fully opposing the law, it argues that the bill, if implemented in its current form, it will do more harm than good to farmers and shake the industry to its core.

KTDA is owned by about 600,000 smallholder tea farmers spread across 16 tea growing counties in Kenya, accounting for 60 per cent of the country's annual tea production.

In the last financial year (2019/2020), smallholder farmers under KTDA produced 1.454 billion kilograms of green leaf, up from 1.13 billion kilograms the previous year (2018/2019). This represents a 28.7 per cent increase in production.

Data from the Kenya National Bureau of Statistics (2020) also shows that smallholder farmers across the country, including those delivering to KTDA managed factories, have been increasing acreage under tea, which stood at 163,000 hectares (2019).

This is up from 141,800 hectares (2018) which has contributed to the increase in tea volumes on offer in the market.