The reserve price for tea set by the government last year helped the value of the beverage to remain relatively high within the last quarter of the year, boosting the earnings of small-scale farmers and multinational firms.
Before August last year, the price of tea had dipped to the levels that were last seen a decade ago, subjecting farmers to massive losses as the price at which they were selling their teas was below the cost of production.
The declining value of the beverage, which made the farmers jittery, saw the Ministry of Agriculture move in with speed to safeguard growers’ earnings in the wake of low prices at the Mombasa auction.
“The tea reforms and especially the minimum price that we set have helped to increase money in the pocket of farmers,” said Mr Munya.
The government set $2.43 (Sh275) per kilogramme as the minimum price for all teas belonging to Kenya Tea Development (KTDA) to reverse the declining price trend of the commodity.
KTDA teas account for more than 60 percent of the total beverage offered for sale at the auction and the minimum price would have an impact on all other teas that are sold through this trading platform.
For instance, multinational firms such as Kakuzi recorded an increase in tea earnings last year as a result of the minimum price.
“In Kenya, despite the continued high levels of countrywide crop previously reported, the introduction in the summer of the new tea regulations has resulted in a significant uplift to the tea prices at auction,” Kakuzi’s parent company Camellia Plc said in a report.
Mombasa auction trades KTDA teas and those from multinational companies as well. It also sells tea from 12 African countries.
Before the minimum price was set, the price per kilo of the beverage had declined to a low of $1.69 (Sh191), the lowest to have been witnessed in a decade. However, with the introduction of the reserve price, prices climbed to a high of $2.59 (Sh293) before closing the year at $2.39 (Sh271).
Though the prices have been moving up and down at the auction, they have not dropped below $2 (Sh226) in the weekly sales.The oscillating prices were attributed to an increase in the supply of tea at the auction as a result of good weather that favoured production.Normally buyers prefer purchasing KTDA teas to others because of their high quality brought about by a strict rule of two leaves and […]
