Tea prices at the Mombasa Auction have improved by about 30 percent in a span of two trading months since July 2020, gaining favourably from the worst prices last recorded since 2007.
The average price per kilo of made tea for KTDA-managed factories rose from USD1.87 to 2.49 (Sh202.7 to Sh270) during the last nine tea sales at the auction, between July 1 and September 1, 2020.
The lows of USD1.87 (Sh202.7) were last seen in 2007 when the tea market performed poorly due to the global economic downturn that hit most of the tea importing countries. The impact then turned into cascading losses that affected tea markets.
“There are several market dynamics responsible for the increase in tea prices at the Mombasa auction. The most crucial is demand and supply. Since June 2020, the auction has received decreasing volumes of tea that have resulted in improved tea prices for Kenya and non-Kenya teas,” said John Bett, KTDA General Manager Sales and Marketing.
He further said that in June, KTDA managed tea factories produced 27 million kg of made tea. In the subsequent months of July and August, the factories produced 17 million kgs respectively; a reduction of quantities by 34 percent.
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As a result of continuous drop in tea volumes at the auction, tea prices have risen gradually. This is expected to sustain especially if the forecasted depressed rainfall holds.
The decline in tea volumes was also witnessed by other tea producers in the region. The Tea Directorate reported that tea production for July declined significantly to 35.55 million kgs from 46.37 million kgs in June and 47 million kgs recorded in May.
The significant reduction in tea output in the country is said to have been driven by cold weather, reduced rainfall levels and tea pruning that is predominantly done in July and August.
Increase in average tea prices at the Mombasa auction has also been contributed by low tea production especially in India, Assam region, where the effects of Covid-19 pandemic and the rampant floods have devastated tea operations.
“Going forward, the market is expected to remain buoyant driven by the interplay of local and global demand and supply dynamics and the speed of recovery from Covid-19 pandemic in key consuming markets,” Bett said.