KENYA – Tea farmers in Kenya may continue to earn less from their produce as tea worth Sh1.6 billion (US$12.6m) has been taken out of the trading floor in the latest trading at the Mombasa auctions as demand for the beverage continues to plunge at the auction.
Market report from the Mombasa auction shows that 6.3 million kilograms representing 39 percent of the total teas offered for sale were withdrawn from the market in the latest sale on the back of a lower price that cannot be considered.
A kilogram of the beverage traded at US$2.02 from US$2.07 previously, marking the lowest price to have been recorded at the auction. The price of auctioned tea for over one year now has remained below the government-set minimum price of US$2.43 for all the Kenya Tea Development Agency (KTDA) produce.
The low pricing is attributed to the economic woes facing the two top destinations of Kenyan produce, accounting for 55% of the total tea exports.
Pakistan, which is a top buyer of Kenyan tea is facing a serious shortage of foreign currency and so is Egypt, the second largest buyer that is currently grappling with a weakening pound that has so far declined by 35 percent against the US dollar since October.
In November 2022, the volumes of purchases made by Pakistan and Egypt fell by 13% and 40%, respectively, according to data from the authorities.
With an increase in volumes at the auction occasioned by low demand, traders are worried that the price of the beverage is likely to drop to below $2 in the subsequent auctions.
“Purchases from Pakistan and Egypt have remained low because of a shortage of dollars from these countries, and this is impacting negatively on local prices,” said Peter Kimanga, a tea trader at the Mombasa auction.
Owing to the price volatility of tea and coffee at the auction in recent years that have tentatively balanced on the lowest trading bar, Kenya’s Parliamentary Caucus on Coffee and Tea, has vowed to go back and re-track on a Tea Policy, that was abandoned in 2014 and make sure they implement it and guide in the process of making the law.
Led by the Chairperson of the Caucus, Githunguri Member of Parliament (MP), Gathoni Wamuchomba, they said they have agreed to collectively lobby the Executive and the Presidency and come up with a better-taxing regime that is going to accommodate more local value addition and more players.
According to Wamuchomba, the tea policy will create more jobs and improve the competitiveness of tea.
MP Kipkelion West Constituency, Hillary Kiplangat, said that tea was the highest source of income to the country in 2021 than tourism, calling for the tea sector to also have a stand on its ministry, which will help in alleviating tea production, marketing, and selling problems.
Furthermore, EATTA Trade Development Manager, Brian Ngwiri, asked for the removal of VAT in packaging materials, since traders are forced to package the tea in other countries where it’s cheaper and then import it back to Kenya.
He also asked the government to support bilateral trade agreements, as a way to increase the market of tea, noting that some trading block trades among themselves and do not allow trade from other countries that are outside that trading bloc.
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