Dealers at the Mombasa auction are sidelining expensive Kenyan tea because of the government-imposed floor price of $2.43 (Shh 283) per kilogram, prompting huge withdrawals of smallholder produce.
Tea buyers have opted for cheaper drinks from Uganda, Tanzania and Burundi, which have no reserve price, and give the Kenya Development Agency (KTDA) teas a wide berth as they are expensive.
The minimum price is for tea from KTDA only. All teas from regional countries are traded at the Mombasa Auction by the East African Tea Traders Association before being shipped out of the country for overseas markets.
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The demand for tea on the world market has decreased due to the onset of summer in the main recipient countries, which has reduced the consumption of the drink and forced traders to opt for cheaper teas.
At the last trade, the amount of tea withdrawn from the auction reached Sh1.1 billion as the drink’s price fell further to $2.23 (Sh260) from $2.25 (Sh262) at the previous sale.
“Demand is now shifting to cheaper teas, so non-Kenyan teas and plantations are now selling well compared to KTDA teas,” said Peter Kimanga, director at Global Teas.
Prices at the auction have remained low for the past six weeks, a move that will further hurt earnings at one of Kenya’s top foreign exchange earners.
Over the past 13 weeks, prices have stayed below the $2.43 floor set by the government last year to protect farmers’ incomes after a series of poor performances plunged below production costs.
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Tea export earnings rose Sh16bn or 13.3 per cent last year, helped by higher volumes and a weaker shilling.
The Tea Board of Kenya put revenue at Sh136 billion last year compared to Sh120 billion recorded in 2020.
The result improved despite the Covid-19 shock that disrupted the drink’s export to various markets around the world.