Average tea prices at the weekly Mombasa auction dropped to the lowest mark so far this year, with a kilo averaging $1.81 (Sh194.21).
This is down from last week’s $1.83 (Sh196.36), East African Tea Trade Association (EATTA) data shows.
The price drop came amid an increase in volumes traded this week which totaled 10.5 million kilos, up from 10.4 million kilos last week.
The commodity fetched $1.96 (Sh210.31) in a similar sale last year when the Covid-19 pandemic had hit the country.
The highest price this year remains $2 (Sh214.60) recorded five weeks ago.
It has averaged $1.91 (Sh204.94) since January when it opened the year at $1.94 (Sh208.16).
Out of 190,559 packages (12,577,098.50 kilogrammes) available for sale, 160,519 packages (10,569,567 kilos) were sold. 15.76 per cent packages remained unsold, EATTA notes in its weekly report.
“There was more and strong support from Kazakhstan, other CIS states and Sudan with increased and strong inquiry from Egyptian Packers while UK were more active,””EATTA managing director Edward Mudibo said.
Pakistan Packers reduced support while Bazaar and Afghanistan showed more interest but the latter were more selective with Russia active.
“There was less activity from Yemen and other Middle Eastern countries while Iran were quieter with Local Packers active on account of price. Somalia were active at the lower end of the market,” said Mudibo.
An asking price of below two dollars a kilo is not good, according to Mudibo.
The low prices so far signal low earnings for farmers, who last year were cushioned by a stronger dollar against the shillings as prices remained low.
Oversupply of tea at the auction affected prices in the second half of last year, according to the Kenya Tea Development Agency.
This is despite a slight drop on the volume of green leaf produced by small-holder tea farmers under KTDA management during the six months ending December.
The volumes dropped marginally by 0.7 per cent to 615 million kilos , compared to 619.5 million kilos recorded during the same period in 2019.
There was however high supply from the region, in addition to the global oversupply which affected the prices.
“High volumes of tea produced in the East African region and elsewhere on the globe have contributed to the continued price decline in the global market,” KTDA management services managing director, Alfred Njagi, notes.
The Mombasa Tea Auction is one of the largest in the world where teas from Kenya, Uganda, Rwanda, Tanzania, Malawi, Ethiopia and the Democratic Republic of Congo are traded.
Last year, average tea auction prices fell by six per cent compared to the previous year, blamed on the high production and a depressed market occasioned by the pandemic.
2020’s full-year average price was $1.80 (Sh194.14 ), which was lower compared to 2019, when it fetched an average $2.05 (Sh219.97) at the Mombasa auction.
The government is currently pushing for reforms in the sector, which it believes will improve farmers’ earnings.