Tea prices stable at Mombasa auction, Pakistan exports strong

There were fears a cut on imports by the South Asian country would hit Kenya.

In Summary

•This week, a kilo went for an average $2.26 (Sh 271.54 ) up from $2.22 (Sh 266.73) last week.

•The stronger dollar against the shilling also means more earnings for farmers as the crop is traded on the US currency at the auction.

Packaged tea for export at warehouses in Shimanzi, Mombasa/FILE
Packaged tea for export at warehouses in Shimanzi, Mombasa/FILE

Tea prices at the weekly Mombasa auction slightly edged up this week with strong demand from key export markets.

This came as the dollar strengthened further against the Kenyan shilling which fell to a historic low of 120 units to a dollar this week.

A stronger dollar means higher tea export earnings as the US dollar is the currency of trade at the auction.

This week, a kilo traded at an average of $2.26 (Sh 271.54 ) up from $2.22 (Sh 266.73) last week, data by the East African Tea Trade Association (EATTA) shows.

Prices have remained above the preferred two-dollar mark since the beginning of the year, compared to the $1.80 (Sh 216.27 ) it averaged last year.

“There was a fairly good demand that prevailed for the packages available for sale,” EAATA managing director Edward Mudibo said.

Despite a recent call by the Pakistan government to the country’s population, to reduce consumption as a way of cutting its import bill, demand has remained strong, market trends indicate.

In mid-June, Pakistan senior minister Ahsan Iqbal asked the country reduce the amount of tea they drink to keep the country's economy afloat.

It is one of the world's largest importer of tea, buying in more than $600million (Sh72.1 billion ) worth of the commodity last year.

The South Asian country’s foreign exchange reserves dropped from around $16 billion (Sh1.9 trillion) in February, to less than $10 billion (Sh1.2 trillion) in the first week of June, which was barely enough to cover the cost of two months of all its imports.

According to the East African Tea Trade Association (EATTA), Pakistan is the biggest buyer at the Mombasa Tea Auction, taking up 38 per cent of the total weekly sales.

It is followed by Egypt (18%), the UK(9%), UAE, Russia and Sudan each five percent, Yemen (3%) while Afghanistan and Poland each take up two per cent share of the exports. 

Iran is at the lower end with one per cent with the rest of the world taking up the remaining. 

“We were afraid that the move would have affected export of teas from Kenya to Pakistan but as of now, there hasn’t been any significant indication that the purchases or the demand has gone down,” Mudibo told the Star.

This week, Kazakhstan, other CIS states, Yemen and other Middle Eastern countries showed improved interest with Egyptian Packers lending useful enquiry but at lower levels.

“Pakistan Packers and Afghanistan maintained activity,” Mudibo said.

Sudan and UK lent more support while Russia showed some interest with Iran remaining quiet, he added.

Local Packers were more active in line with price. Somalia were active at the lower end of the market.

Tea remains a major cash crop for Kenya.

Last year, it accounted for about 19.6 per cent of the total domestic exports valued at Sh130.9 billion, the second highest export earner after domestic exports of horticultural products which were valued at Sh165.7 billion.

This was up from Sh130.3 billion the previous year, the Economic Survey 2022 by the Kenya National Bureau of Statistics(KNBS) indicates.

The higher earnings came despite exported volumes declining from 5.76 million metric tonnes in 2020 to 5.57 million metric tonnes in 2021, on account of reduced production.

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