KENYA – Kenya is considering lowering the minimum price for tea sold at the Mombasa auction in response to concerns about an excesses of unsold tea consignments.
The established minimum price of US$2.43 per kilogram was introduced in 2021 for tea sold by the Kenya Tea Development Agency (KTDA), holding a production market share of approximately 65 percentage.
Abubakar Hassan Abubakar, the Trade and Industry Permanent Secretary, revealed plans to engage with stakeholders in the tea sector to initiate the process of repealing the regulations that introduced the reserve price.
The government aims to address the unintended consequences of the reserve price through ‘price liberalization’ to unlock auctions, vital for the country’s second-highest foreign exchange earner.
Abubakar acknowledged the unintentional impacts of the reserve price, stating, “In terms of the stock, which is yet to be sold, it is because of the pricing control that was introduced to solve a problem, but it looks like it has brought unintended consequences. We are now going to have a conversation on how we will liberalize that.”
The founder and CEO of Melvin Marsh International Ltd, Flora Mutahi, expressed concerns about the worsening surplus at the Mombasa auction, leading to financial losses.
Mutahi emphasized the need for a strategic approach, noting that teas from different regions did not command the same market value, and the reserve price did not account for these variations.
The Mombasa auction operates on a two-day-a-week format, selling secondary-grade quality tea on Mondays and premium-grade on Tuesdays.
Unsold tea from scheduled auction days is reintroduced after two weeks, with a limit of two auction trials. If not sold, the tea is relegated to a ‘passive window,’ fetching lower prices due to perceived poor quality.
A World Bank Report in October forecasted challenging times for Kenyan tea producers, anticipating a two percent decline in global tea prices this year.
This projection reflected robust leaf supplies from Indian and East African producers. Global tea prices declined by eight percent last year, with Kenyan produce benefiting from increased volumes and a weakened Kenyan Shilling.
In October, data from the Tea Board of Kenya (TBK) indicated a third consecutive monthly rise in green leaf production, attributed to favorable wet conditions in tea-growing areas.
The government’s reconsideration of the minimum tea price aims to address the challenges faced by tea producers and facilitate a more dynamic and responsive market.
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