More than half of the tea from Kenyan farms presented to the Mombasa auction in May remained unsold as heavy rains increased production of the green leaf, leading to a glut.
Data from Africa Tea Brokers Limited (ATBL) shows the four auctions held in May saw 67,863,107 kilogrammes of Kenyan tea presented to the auction, marking a significant increase from 60,121,444 kilogrammes that were offered in May last year.
But only 31,055,197 kilogrammes attracted buyers, which means that 54.23 percent of the tea failed to get buyers. This is a significant jump from May 2023, when 36,759,151 kilogrammes were sold, translating to 38.85 percent, which did not attract buyers.
Any tea that is not sold on a scheduled auction day is reprinted on a fresh auction catalogue and returned to the auction two weeks later.
However, a seller is only allowed to bring back unsold leaf to the auction twice.
Further, according to the EATTA regulations, “teas unsold during the auction may be subsequently sold by the broker member concerned after the auction, as an outlot, at a price acceptable to the producer member.”
The lower purchases of the green leaf follow reduced demand from the major buyers, especially Pakistan, which reduced purchases during the month, as well as Egypt, Yemen, and other Middle Eastern countries.
“Demand throughout the month was only fair, leading to a large amount of tea, especially from a section of smallholders neglected,” said the tea broker.
“Russia were absent in Sale 19, showing only some activity in the remaining period, with Iran absent in the first sale, remaining quiet, thereafter.”
The green leaf is fetching lower prices at the auction as volumes presented for sale continue to rise.
The average price for Kenyan tea averaged $2.18 per kilogramme (Sh284.49), down from $2.23 (Sh291.02) in May last year.
“Sales 19 and 20 had 50 percent and 51 percent unsold, with the largest percentage of 60.5 percent neglected in Sale 21, while Sale 22 saw improved absorption with only 46.8 percent remaining unsold,” added the broker.
Most tea producers currently choose to sell moderate to substantial volumes of their teas through auctions, which connect them to international buyers.
Tea producers deliver their teas to appointed warehouses in Mombasa, with brokers appointed by the sellers giving buyers a sample from each lot of tea for purchase.
Tea is Kenya’s main cash crop, and the lower sales volumes and drop in prices are set to hit thousands of tea farmers, who will also face eroded earnings following the strengthening of the Kenyan shilling against the US dollar since February.
This raises fresh scrutiny of the government’s reserve price of $2.43 per kilogramme. The price floor was introduced in July 2021 to lift the earnings of farmers.
This has led to buyers shunning low-quality teas, dealing a blow to farmers even as the government mulls interventions to improve the quality of tea presented at the auction.
The lacklustre performance of the tea business this year comes on the back of a stellar performance last year, during which farmers reaped big, especially from a weak shilling.
Exports of the green leaf grew by 16 percent to 522.92 million kilogrammes in 2023, according to data from the Tea Board of Kenya (TBK). The increase in export volumes—as well as a favourable exchange rate—pushed tea earnings by 31 percent to Sh180.57 billion, up from Sh138.09 billion in the previous year.
