Traders at the Mombasa auction are sidelining expensive Kenyan tea because of the reserve price of $2.43 (Sh283) per kilogramme set by the government, leading to huge withdrawals of smallholder produce.
Tea buyers have opted for cheaper beverage from Uganda, Tanzania and Burundi that do not have minimum price, giving a wide berth to Kenya Development Agency (KTDA) teas on account of being expensive.
The minimum price is only applicable to tea from KTDA. All the teas from regional countries are traded at the Mombasa auction by the East African Tea Traders Association before they are shipped out of the country for overseas markets.
The demand of tea at the world market has declined owing to the onset of summer in major buying countries, which has cut down consumption of the beverage, forcing traders to go for cheaper teas.
In the latest trading, the amount of tea withdrawn from the auction hit Sh1.1 billion as the price of the beverage plummeted further to $2.23 (Sh260) from $2.25 (Sh262) in the previous sale.
“The demand is now shifting towards cheaper teas that is why non-Kenyan teas and plantations are now selling well when compared with KTDA teas,” said Peter Kimanga, a director with Global Teas.
Prices have remained low at the auction in the last six weeks, a move that is set to continue hurting incomes from one of Kenya’s leading foreign exchange-earners.
In the last 13 weeks, the prices have remained below the minimum $2.43 that the government set last year to safeguard farmer earnings after a series of poor performances that had dropped below production cost.
Export earnings from tea grew by Sh16 billion or 13.3 percent last year, helped by higher volumes and a weaker shilling.
The Tea Board of Kenya put the earnings at Sh136 billion last year against Sh120 billion that was recorded in 2020.
The earnings improved despite the Covid-19 shock that disrupted export of the beverage to various markets across the world.