REBOUND

Mombasa tea auction prices rising after reserve price rule

Minimum tea price at the auction will consider cost of production, the grade and return to the farmer

In Summary

• According to the Mombasa Tea Auction Market Report, in the auction number 28, which took place on July 12, 2021, the volumes of tea sold by KTDA managed factories dropped by 89 percent compared to auction 27, which attained an absorption rate of eight percent of offered teas.

• The report indicated that the average price improved by 25 percent from Sh221.31 per kg to Sh278.81 per kg for the specific gardens that sold. This is a growth of Sh56 per kg.

Sacks of tea for Export at one of the warehouses in Shimanzi,Mombasa. Kenya is one of the leading exporters of Tea/FILE
Sacks of tea for Export at one of the warehouses in Shimanzi,Mombasa. Kenya is one of the leading exporters of Tea/FILE
Independent tea producers chairman Collins Koech, Agriculture CS Peter Munya and Tea Board of Kenya acting CEO Peris Mudida during a consultative meeting with the Independent Tea Producers on discussion interventions for tea prices at Serena Hotel, Nairobi on July 19th 2021./DOUGLAS OKIDDY
Independent tea producers chairman Collins Koech, Agriculture CS Peter Munya and Tea Board of Kenya acting CEO Peris Mudida during a consultative meeting with the Independent Tea Producers on discussion interventions for tea prices at Serena Hotel, Nairobi on July 19th 2021./DOUGLAS OKIDDY

Tea at the Mombasa auction will be selling at a minimum price of Sh286.

Agriculture CS Peter Munya said due to current trend of dipping prices, smallholder tea producers have set a reserve minimum price at the auction.

He said this is based on the cost of production, the grade of the tea and a reasonable return to the tea farmer.  

“This will ensure sustainability of the tea sub-sector and continuous supply of high quality tea to the auction and our export markets,”  said the Cabinet Secretary.

Data from the Ministry of Agriculture shows the average prices recorded in the auction by end of June had dropped to an all-time low of Sh195 per kilo

This is much lower compared to an average price of Sh227 recorded during the same period in 2020 and Sh242 for the same period in the year 2019.

This price, Munya said, is not only lower compared to the previous years but is also almost at par with the cost of production that currently stands at an average price of Sh184. per kilo

“The low tea price is a threat to the livelihoods of over 620,000 smallholder farmers and the country’s socio-economic growth,"he said.

He said unless the trend is urgently addressed, farmers may abandon growing of tea and shift to other economic activities, thus affecting the more than 6.5 million Kenyans who directly and indirectly benefit from the sector.  

According to the Mombasa Tea Auction Market Report, in auction number 28 on July 12 saw the volumes of tea sold by KTDA managed factories drop by 89 percent compared to auction 27, which attained an absorption rate of eight percent of offered teas.

The report indicates that the average price improved by 25 percent from Sh221.31 per kg to Sh278.81 per kg for the specific gardens that sold. This is a growth of Sh56 per kg.

In auction number 29, which took place on July 19, the absorption rate of offered teas improved to 19 percent while the average price appreciated by 22 percent from Sh215.89 to Sh263.62 per kg for the specific gardens that sold.

This is an increase of Sh47 per kg compared to auction 27 when the reserve price had not been introduced.

"The total volume traded for Sale 29 was 166,541 Kilos more than sale 28.  Out of 189,120 packages (12,431,140 kilos) available for sale, 93,860 packages (6,002,393 kilos) were sold.

At the auction, 50.37 percent packages remained unsold due to irregular quality and KTDA reserve prices resulting in many more teas remaining unsold.

In an interview with the Star on Monday, KTDA chairman David Ichoho said the positive response from the market is an indication that the market is on the right track.

“The board is working with the government and other stakeholders, including tea buyers and brokers, to ensure the farmer gets the full benefit from the tea investment, he said.

Ichocho said the absorption in upcoming auctions is further expected to improve as the market aligns itself to the new prices.

He said the minimum price considers the cost of production and other logistics such as transport which should not go beyond Sh286 per kilo of dry tea.

He said they are  exploring the option of transporting tea through the SGR to ensure efficiency and cut costs.

Ichocho said KTDA had disbursed a mini bonus of Sh1.31 billion which will be paid together with the June green leaf monthly delivery.