KENYA – Africa’s leading tea exporter, Kenya, has continued to experience deteriorating auction prices hitting a three year low on increased production increases.
In the recent trading, a kilo of tea fetched as low as Sh200 per kilo, the price that was witnessed four years compared to Sh280 that the commodity attracted in corresponding period last year.
The low prices have been attributed to increased volumes of the commodity at the auction, reports Business Daily.
Chai Trading, a subsidiary of the Kenya Tea Development Agency and whose core mandate is warehousing, blending, clearing and forwarding, value addition, export and general tea trading, said that its warehouses are already full to capacity.
According to Muema Muindu, head of operations at Chai Trading, the warehouses, with the capacity of about 54 million kilos is now holding over 65 million kilogrammes.
“We have been getting more tea and at the moment the warehouses have been filled beyond the required capacity because of increased volumes,” said Mr Muindu.
The congestion at the warehouse is resulting from decreased demand of the tea at the auction as a result of low prices which has compelled most sellers to withhold their produce.
Additionally, in sale six of this year, about 24% of the total tea that had been offered for trading was not bought and it had to remain in the warehouse.
Subsequently, Chai Trading has therefore been forced to store some of the tea packages along the aisle to ensure that all the consignment fits in the warehouse.
Following the continued decline in prices, KTDA has warned farmers to brace for long earnings this year as the beverage records 17% decline in price during the first half of 2018/2019 financial year.
However, the tea agency, which buys, processes and sells tea of majority smallholder farmers in the country, has increased the advance payment to US$0.16 (Ksh 16) per Kilogramme of green tea delivered by farmers.
According to Peter Kanyago, chairman KTDA, the tea giant is considering changing its payment module to suit farmers more, coming in the face of stiff competition by private processing plants that have cut its market share from 60 to 56%.
Greenleaf production at the KTDA managed factories rose 4.4% to 611 million kilos between July and December 2018 from 585 million kilos posted in the previous year.
Kenyan made tea is normally stored in the warehouse as it awaits to be exported after being sold at the auction.