Prices at tea auctions crash in meltdown

The tea industry has entered a meltdown after auction prices dropped by nearly 60 per cent since September.

Industry players especially fear monthly payments to small-scale farmers might be drastically whittled down as a result and the rest of the economy seriously damaged.

Over the past three weeks, an unprecedented 35 per cent of tea offered at the weekly auction has been withdrawn as the global financial meltdown has ravaged consumer demand.

Tea is Kenya’s top currency earner — after tourism lost its brief leadership — and the implications are dire for both poverty eradication and forex inflows.

Tea industry players are seeking an urgent meeting with the government which would hopefully culminate in a massive mopping up of the black teas by the state.

Sri Lanka has taken this route after currencies of major markets, including Russia and Middle East, slipped against the dollar. The greenback has strengthened against all currencies as frightened investors rush to lock money in “safe” long-term US Treasury bonds.

Tea Board chief executive Sicily Kariuki confirmed to Sunday Nation the industry was “requisitioning” an urgent meeting with the Agriculture minister this week.

Pakistan, a major market for Kenya, has slipped into financial doldrums and has sought intervention of the International Monetary Fund as it battles to contain a security threat posed by militant Islamists.

Tea orders are taking a hard knock as the country teeters on the brink of national default.

A letter in our possession shows that the tea industry umbrella body, East African Tea Trade Association (EATTA), raised the alarm last Monday ahead of the regular Tuesday/Wednesday weekly auctions at Mombasa.

“A major crisis is looming in the horizon with the plunge in tea prices at the auction, accompanied by unprecedented volumes withdrawn at the recent auction sales,” said EATTA in the distress letter to Agriculture PS Dr Romano Kiome signed by association administrative secretary Hadija Shakombo.

Concern gathered momentum following a slide of the mean price from $2.68 per kilo peak on September 1 and 2 auctions to $1.79 in auctions held over a week ago. This means more than a halving of farmers’ earnings. Further, at both auctions some 35.23 per cent of the tea stacking up to 40,497 packages attracted no buyers.

“This is a historical high since the establishment of the Mombasa Auction,” said EATTA. It heralds shock for farmers producing in this flush season as institutions like Kenya Tea Development Agency might not make enough to meet regular monthly payments for long.

There has been a surge in repeat (reprinted) volumes at the auctions since mid-September as buyers stay away. The total re-offering has topped 175,853 packages, compared to 107,000 over the same period last year.

Fresh teas, however, have been moderate in supply at 107,000 packages, which is roughly the same as last year. Fears of declining quality loom large.