Tea prices at the Mombasa auction have hit a two-and-a-half-year low on increased supply, setting the stage for reduced farmer earnings in the current financial year.
In the latest trading held last week, a kilogramme of processed tea fetched Sh218 on average down from Sh220 in the previous week and the lowest level since June 2016.
The prices have been on a steady drop since June when it stood at Sh230 per kilogramme.
This look set to hurt farmers’ income given that the decline in prices has been steeper than the rise in production on improved rainfall.
In comparison to the same period last year, the beverage has dropped 18 per cent from a high of Sh266.
East African Tea Traders Association managing director Edward Mudibo said though prices had been dropping, they have not reached an alarming stage.
“Generally prices have been coming down but we anticipate they should not be moving to below Sh200, that is when we shall be worried,” said Mr Mudibo.
He said they anticipate the prices to rebound in the first quarter of 2019 as the volumes are expected to drop.
Mr Mudibo said the decline in value of the Kenyan tea is a result of increased production.
According to Tea Directorate, production for the period January-September 2018 rose 14 per cent to stand at 346.23 million kg compared with 303.55 million kilogrammes in a similar period a year earlier.
The value of tea opened the year on a higher note, hitting a high of Sh276 in the first sale of January, before starting to drop in the second half of the year that started in July.
The low prices, however, did not affect farmers’ earnings for the year to June as the poor performance was witnessed after Kenya Tea Development Agency had closed the financial year in June.
Farmers were paid Sh85.74 billion in the year to June, up from Sh78.31 billion a year earlier on the back of increased production. This represented a growth of 9.4 per cent.
A kilogramme of green leaf fetched an average of Sh52.51 in the last season, having dropped from Sh58.61 in 2017.