Tea Prices Decline For The Fourth Time On Low Demand

Tea prices at the Weekly Mombasa auction have declined for the fourth time in a row on the back of low demand.

Data from the East African Tea Trade Association (EATTA)shows a kilo of the beverage fetched $2.32 (283 shillings) on average, down from the $2.34 (286 shillings) fetched in the previous sale.

“There was a fair demand for the 220,099 packages (14.8 million kilos) on offer with prices showing irregularly easier tendencies,” said Eatta.

The volumes of tea offered at the auction during the sale significantly increased by 908,136 kilos to reverse a drop witnessed in the last month. About 5.2 million kilos of the total quantities were withdrawn from the auction indicating low demand for the beverage at the auction.

The price of the commodity is now below the government-set minimum price of $2.43 (291 shillings). The government last year set $2.43 (291 shillings) as the minimum price for a kilo of tea for all the Kenya Tea Development Agency KTDA teas in a bid to protect farmers’ revenue and increase their earnings.

KTDA accounts for at least 85 percent of the total tea that is sold through the Mombasa auction. Although the Agency projects an increase in earnings in the remainder of the year, this may not be achieved if the declining trend continues.

The low demand was earlier attributed to low demand from key buyers such as Pakistan and Russia. Pakistan is the top buyer of Kenya’s tea taking up around 38 percent of the total weekly sales at the Mombasa Tea Auction. The country buys an average of up to 70 million kilograms of Kenyan tea annually.

Pakistan has since June cut its tea consumption citing financial uncertainties. The country’s foreign exchange reserves dropped from around $16 billion (1.9 trillion shillings) in February, to less than $10 billion (1.2 trillion shillings) in the first week of June. The South Asian country has also witnessed extreme weather conditions since the start of the year, with recent floods leaving a third of the country underwater and leading to a humanitarian crisis.

Despite the prevailing low demand, this year Kenyan tea has managed to remain above two dollars per kilo as compared to last year when the prices ranged between $1.80 (215.28 shillings) and $1.90 (227.24 shillings).

In the seven months to July, the sector’s earnings grew to 80 billion shillings when compared with the 71 billion shillings recorded in the corresponding period last year.