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Kenyan tea prices come under renewed pressure from firm supply amid weak demand

January 8, 2021

1 mins read

Mintec’s average weekly price of Kenyan tea at the Mombasa auction fell by KES 8.35/kg (-3.8%) from a peak of KES 218.68/kg during November 2020, to KES 210.33/kg during the last week of December 2020. The downward pressure came amid 12.3% year-on-year (y-o-y) growth in annual supply of Kenyan tea during the 2020 calendar year. Indeed, Kenyan tea production totalled 486.5 million tonnes in 2020 compared to 433.3 million tonnes the previous year, according to the Kenyan Tea Board. Kenya is the world’s top black tea exporter, endowed with weather conducive to year-round production and harvesting, accounting for approximately 25% of global export volumes in a typical year.

Demand and logistical issues attributable to the pandemic contributed to supply gluts and supply scarcity of Kenyan tea inventories through 2020. The Mombasa auction price peaked at KES 234/kg during January 2020, when stocks were at the lowest levels, while the price trough of KES 189/kg was recorded in July 2020, when the impact of Covid-19 weighed on global consumption, resulting in high Kenyan inventories. A sustained price rally was noted through Q3 2020, attributable to flood damage to the Indian tea crop, fuelling a spike in demand for Kenyan tea.

The global pandemic effects are reflected in approximately 17.2% unsold Kenyan tea in 2020, compared to 16.5% the previous year. However, the weakening KES against the USD provides some price relief for Kenyan farmers, given that tea sold from the auction is typically USD-denominated. The KES, which averaged 101.9 against the USD in 2020, plunged to a historic low in December, trading at an average KES 111.11 per USD through the month.Slide1-Jan-08-2021-04-12-38-50-PM

 

Topics: Beverages

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