Mombasa Tea Auction temporarily suspends operations following the COVID-19 outbreak

KENYA – Kenya’s sole tea auction, the Mombasa Tea Auction has temporarily suspended operations as of Monday 23, over the government’s rule limiting mass gatherings to not more than 15 people in bid to curb the spread of the COVID-19 virus.

This is anticipated to cut 95% of the country’s tea supply to the export market pointing to a hit on farmers’ earnings, reports Business Daily.

East Africa Tea Traders Association (EATTA) said the closure was a precautionary measure in the light of the coronavirus pandemic.

“Further to our circular dated March 20, further developments have come to light in respect to the spread of the COVID-19 virus. It is in this regard that EATTA has taken a decision to postpone Auction-Sale 12, the Secondary auction of Monday, March 23 and the Primary auction of Tuesday, March 24,” said Edward Mudibo, the Eatta managing director.

The auction floor normally comprises brokers, buyers, and officials who add up to more than 50 people.

The impact is likely to be felt by farmers as the move will create a glut in the market, making it difficult for factories to process and store tea supplies from growers.

This will also affect farmers’ earnings. Farmers attached to Kenya Tea Development Agency (KTDA), which controls over 60% of the total tea market in the country, normally earn a monthly payment and a bonus paid at the end of every financial year.

Apollo Kiarii, the chief executive officer of Kenya Tea Growers Association said the closure of the auction is one of the worst hits on the sector in a long time.

“We have been struggling to break even and we thought even with the coronavirus, the trade will continue and we would maintain our workforce, but this seems not to be the case,” said Mr Kiarii.

Tea prices at the auction have slid to a six-month low, to record the worst performance.

A market report by the East African Tea Traders Association showed a kilo of the beverage traded at Sh202 (US$1.90) from average Sh206 (US$1.96) in the previous sale.

Depressed prices saw 14% of the tea offered for sale withdrawn from the market, marking one of the highest quantities to have been taken off the trading floor at the auction in the last three months.

The lobby group said 1.9 million kilogrammes of tea were withdrawn from the market by sellers in anticipation of high prices in the future.

Beginning of March, trading recorded a decrease in volume to settle at 10.8 million kilogrammes from 11.4 million kilogrammes in the previous sale.

“Prices in the run-up to the end of the 2019/20 financial year will be critical in determining farmers’ earnings in the wake of a subdued performance in the 2018/19 financial year,” said KTDA in a statement this month.

The decline in prices has been attributed to increased volumes of green leaf from farmers that have shot up by 4% so far.

KTDA farmers delivered 768.9 million kilos of green leaf to factories between July 2019 and January 2020 up from 733.4 million kilos in the previous period.

Small-scale tea earnings dropped 22% in the year ended June 2019, marking the lowest returns for growers in the last six years.

Mombasa is the second-largest tea trading auction in the world after Colombo but Kenya is the leading exporter of Black CTC globally.

Nairobi Coffee Exchange, another key trading auction has not closed but the officials say that they are in discussion with traders to see the way forward.

“We have not made the decision of closing the market but we are in discussion to see the steps that we shall take going forward,” said Daniel Mbithi, the coffee exchange chief executive officer.

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