Tea prices hit 7-month high as demand at auction rises

Money Markets

 

An investor at the Nairobi Securities Exchange (NSE). PHOTO | FILE 

By GERALD ANDAE

In Summary

• On Tuesday auction, a kilo sold at Sh305 ($3.12) compared to Sh197 ($2.02) it fetched in January this year.

Tea prices have hit to a new high at the Mombasa weekly auction with a kilogramme of made-tea up 54.8 per cent compared to January as demand rises.

On Tuesday auction, a kilo sold at Sh305 ($3.12) compared to Sh197 ($2.02) it fetched in January this year.

The prices have been driven by high demand as volumes at the auction dwindle, shrinking 25 per cent in the last six months.

In January, the auction registered eight million kilos against six million offered for auction this week. The drop in volume has partly been attributed to a severe drought that started late last year to April this year.

The onset of the cold season mid-last month has also seen reduced volumes of the green leaf.

“This is the highest price so far that tea has registered this year,” said Edward Mudibo, the managing director of East African Tea Traders Association (EATTA).

Mr Mudibo said the volumes of tea offered for sale this week declined to 5.9 million kilos from 7.1 million kilos last week.

A weak shilling has also helped raise demand. Kenya exports close to 95 per cent of its tea, making it a leading global exporter.

The prices at the auction have been rising for the last five months, signalling good fortunes for tea farmers who were hit by low bonus earnings last year as a result of depressed global prices.

However, the Kenya Tea Development Authority (KTDA) has warned the good prices might not necessarily translate to rise in earnings for farmers this year as other aspects of production would have to be incorporated in deciding the bonus.