Although the gains are marginal, the fact that the trend in price is upward should bring some consolation to Kenya’s over 560,000 smallholder farmers who suffered a major erosion in their earnings last year, following a sharp price drop in the global price of the commodity.

 

In the last two months, tea prices at the Mombasa Tea Auction have increased from Sh181 ($2.02) – in the first week of January – to Sh225 ($2.50) at the beginning of March, which is a 23 per cent increase.

 

Industry players attribute the increase to the dry spell being experienced across the tea growing areas, which has seen a drop in supply of the crop.

 

Smallholder tea production dropped by 9.21 per cent this January (106.4 million kgs) compared to 117.3 million kgs produced in January 2014. The crop for February was projected to be even lower, by about 38 per cent, than the same period last year.

 

“Tea prices at the Mombasa Tea Auction have not stabilised as they oscillate between lows of Sh180 ($2) to highs of Sh225 ($2.5). However, the price is likely to rise further in the coming weeks if the current weather patterns persist,” said Lerionka Tiampati, Kenya Tea Development Agency (KTDA) CEO.

 

The East African Tea Trade Association (EATTA), that brings together tea industry players – producers, buyers (exporters), brokers, packers and warehouses – says the situation is changing from the grim one experienced for most of the past year.

 

EATTA managing director Edward Mudibo says there are promising signs of price recovery but noted that the upward trend will be influenced by production trends in other tea growing countries and global demand. Kenya is the world’s leading exporter of black tea and, therefore, a major influencer of the amount of tea available in the global market, which in turn impacts the price.

Between 2013 and 2014 tea prices at the Mombasa tea auction tumbled by more than 25 per cent from Sh293.40 ($3.26) in 2013 to Sh218.70 ($2.43) in 2014.

 

The price drop was attributed to oversupply due to high rainfall in tea growing areas. “Since January this year we have witnessed increase in price at the Mombasa Tea Auction. We are confident the upward trend will continue,” said Mr Mudibo.

 

Early this week, KTDA, which manages 66 smallholder factories, predicted that tea earnings for the 2014/15 financial year would remain s teady.

 

With auction prices remaining largely unchanged for the first half of the financial year, Mr Tiampati said the impact of improved prices will be felt largely in the new financial year starting July 2015, if the dry spell continues.

 

Tiampati said between July and December 2014, a kilogramme of processed tea traded at an average price of Sh200.70 ($2.23) against Sh217.80 ($2.42) during the same period in 2013, representing a decline of 8 per cent.

Source : IN 2 EAST AFRICA