Tea prices increased slightly this week at the weekly Mombasa auction due to strong demand from key export markets.
The dollar gained ground against the Kenyan shilling, which fell to a historic low of 120 units to the dollar this week.
As the US dollar is the currency of trade at the auction, a stronger dollar means higher tea export earnings.
A kilo of tea cost an average of $2.26 (Sh 271.54) this week, up from $2.22 (Sh 266.73) the previous week, according to data from the East African Tea Trade Association (EATTA).
Prices have remained above the preferred two-dollar mark since the beginning of the year, compared to last year’s average of $1.80 (Sh 216.27).
“There was a fairly good demand that prevailed for the packages available for sale,” EAATA managing director Edward Mudibo said.
Despite the Pakistan government’s recent call to the country’s population to reduce consumption in order to reduce the country’s import bill, market trends show that demand has remained strong.
In mid-June, Pakistani senior minister Ahsan Iqbal asked the country to cut back on tea consumption in order to keep the country’s economy afloat.
It is one of the world’s largest tea importers, purchasing more than $600 million (Sh72.1 billion) in the commodity last year.
Foreign exchange reserves in the South Asian country fell from around $16 billion (Sh1.9 trillion) in February to less than $10 billion (Sh1.2 trillion) in the first week of June, barely enough to cover the cost of two months’ worth of imports.
The East African Tea Trade Association (EATTA) reports that Pakistan is the largest buyer at the Mombasa Tea Auction, accounting for 38% of total weekly sales.
Egypt (18%), the United Kingdom (9%), the United Arab Emirates, Russia, and Sudan each account for 5%, Yemen (3%), and Afghanistan and Poland each account for 2% of total exports.
Iran ranks last with 1%, with the rest of the world accounting for the remainder.
“We were afraid that the move would have affected export of teas from Kenya to Pakistan but as of now, there hasn’t been any significant indication that the purchases or the demand has gone down,” Mudibo said.
This week, Kazakhstan, other CIS states, Yemen, and other Middle Eastern countries showed increased interest, with Egyptian Packers providing useful but low-level enquiries.
“Pakistan Packers and Afghanistan maintained activity,” Mudibo said.
Sudan and the United Kingdom provided additional support, while Russia expressed some interest while Iran remained silent, he added.
In terms of price, local Packers were more active. Somalia was present at the low end of the market.
Kenya’s main cash crop remains tea.
Last year, it accounted for about 19.6 percent of total domestic exports worth Sh130.9 billion, making it the second highest export earner after horticultural exports worth Sh165.7 billion.
According to the Kenya National Bureau of Statistics’ (KNBS) Economic Survey 2022, this is an increase from Sh130.3 billion the previous year.
Despite lower production, export volumes fell from 5.76 million metric tonnes in 2020 to 5.57 million metric tonnes in 2021, resulting in higher earnings.
