HIGH RETURNS

Tea prices stable as strong dollar earns farmers more

A kilo traded at Sh275 at this week’s auction.

In Summary

•Prices started picking in September last year after the government introduced a reserve price.

•KTDA says reforms in the sector will be much felt this year with farmers being among the biggest winners.

A farmer picks tea leaves in Othaya, Nyeri county
A farmer picks tea leaves in Othaya, Nyeri county
Image: FILE/

Tea prices have continued on a stable run into the second week of the year with a strong dollar against the shilling promising local farmers high returns.

This is after a poor performance in the first half of 2021, which saw the government move in to introduce a minimum reserve at the weekly auction.

The reserve price was set at $2. 43 per kilo, which is Sh275.51 as at Friday exchange rate, in a move aimed at cushioning smallholder farmers who were affected by the deteriorating market that had seen selling prices nearly slip below the cost of production.

The commodity had averaged $1.80 (Sh 203) for the better part of 2020/21.

This week, a kilo at the Mombasa auction went for an average $2.43 (Sh275.56), despite being a slight drop from last week’s $2.45 (Sh277.83).

According to the auction managers– East African Tea Trade Association (EATTA), total volume traded for was 3,779 kilos more than last week’s sale.

“There was a good general demand for the 193,696 packages (12,796,974 kilos) available for sale with 160,718 packages (10,723,047 Kilos) being sold. 17.03 per cent packages remained unsold,” EATTA managing director  Edward Mudibo notes.

Pakistan Packers lent strong support and were dominant while Egyptian Packers showed more and useful interest with improved activity from Yemen, other Middle Eastern countries and Russia.

“UK maintained enquiry with Kazakhstan, other CIS states and Afghanistan less active while Bazaar maintained interest at lower levels. Sudan lent more but selective support with Iran subdued. Local Packers were active based on price. Somalia showed more activity at the lower end of the market,” Mudibo says in the weekly report. 

The strong dollar against the Kenyan shilling means farmers are getting more, as the commodity is traded on the dollar denomination at the auction.

The shilling weakened to a new all-time low on Friday, exchanging at 113.36- Central Bank of Kenya data.

Kenya Tea Kenya Tea Development Agency (KTDA) Holdings, which is leading reforms in the tea sector, is confident ongoing reforms will change the landscape and better farmers’ earnings.

We are hopeful that this trend will continue in the second half of the financial year  when the full impact of the minimum price will be felt
KTDA Holdings Limited Group CEO, Wilson Muthaura

High prices are expected to be witnessed this year, a move that will increase farmers' earnings for the current financial year ending June 30.

“We are hopeful that this trend will continue in the second half of the financial year (January to June 2022), when the full impact of the minimum price will be felt,” KTDA Holdings Limited Group CEO, Wilson Muthaura, said.

Since its introduction, tea prices have increased by more than 50 per cent.

There are more than 600,000 small tea farmers affiliated with KTDA.

The agency is pushing to expand the country's tea export markets including in Pakistan, which absorbs up to 40 per cent of Kenyan tea exports. 

This comes amid a pick in the global market after a 14 per cent drop in the local green leaf production in the 2020/2021 financial year. The trend has continued in the current financial year.

“The global market has been picking up in the period to December 2021 and as we start 2022, we hope the market continues to respond positively. We have been pushing tea to more markets globally where we hope to offload more teas,” Muthaura said.

Kenyan farmers produce among the best quality of teas in the world, which according to the government, there is a need to fetch the highest possible price.

The country is among the top 10 tea exporting countries which include China, India, Sri Lanka, Turkey, Indonesia, Vietnam, Japan, Iran, and Argentina.