Tea prices at the Mombasa auction have remained depressed at 13 percent below the first sale of 2018.
A kilo on average fetched 236 shillings this week, down from 271 shillings in the first auction of the year.
“We are looking at the dynamics leading to the low price of tea at the auction and we should be able to come up with an answer in the next few days,” said Anthony Muriithi, head of Tea Directorate.
In this week’s trading, the prices rallied from 231 shillings per kilo the previous week to 236 shillings, reversing the falling trend witnessed in the last five auctions.
East African Tea Traders Association (Eatta), which manages the auction, says the price of the commodity is expected to improve on account of low supply.
“We expect the price to pick in the coming days as the shortage of tea resulting from cold weather is likely to push up the cost,” said managing director Edward Mudibo.
The volume offered for sale this week dropped by over half a million kilos from 9.7 million to 9.25 million in Tuesday trading.
Poor prices witnessed in the financial year ended June point to low earnings for farmers in second payment that is normally paid toward the end of the calendar year.
Growers affiliated to Kenya Tea Development Agency earned 42 billion shillings as the second payment last year. This was lower by 2 billion shillings than a record high of 44 billion shillings they earned in 2016.
In May, an increase of tea production was said to have pushed volumes beyond what the auction could absorb, resulting in low prices.
The auction has a limit of eight million kilos a week but the volumes went up to 9.5 million kilos in the sale held last week.
The bulk of the tea from small-scale farmers is sold at the Mombasa auction before it is exported overseas to Egypt, the UK, Pakistan, Afghanistan, Iran, Sudan, Yemen and the United Arab Emirates.