Kenya Tea Seen Falling Further as Top Importers’ Demand Weakens

Prices of tea from Kenya, the biggest exporter of the black variety, may fall further as political turmoil in some of the five largest importing nations curbs demand, an industry official said.

The average price for Kenyan leaves has dropped 29 percent this year, according to data from Tea Brokers East Africa Ltd. Egypt is the biggest buyer, followed by Pakistan, the U.K., Afghanistan and Sudan. A crackdown by Islamists on supporters of Mohamed Mursi, who was ousted as president of Egypt in July, has left 1,000 people dead. India and Pakistan have been trading fire and counter-accusations since the deaths of five Indian soldiers on the Kashmir border, and the U.S. has been using drones against suspected militants in Pakistan.

“Egyptian buyers have taken a cautious approach because of the political situation in their country,” Peter Kimanga, chairman of the East African Tea Traders Association, which manages the weekly auctions in Mombasa, said by phone from the port city.

Prices have also declined because of the introduction in January last year of a levy on tea imports and exports that’s equal to 1 percent of the customs value, he said.

Some buyers have “opted to buy tea from other countries that is offered at the auction because of the” tax, he said.

The dispute between the government and traders over the levy halted auctions in Mombasa at the start of last year. Last November, growers demanded that the tax be reduced to 0.25 percent, the East Africa Tea Trade Association said. The levy replaced a flat rate of 46 cents a kilogram (2.2 pounds).

Price Drop

The average price for Kenyan tea was $2.34 per kilogram at auction last week, Tea Brokers East Africa said in an e-mailed statement on Aug. 20. That compares with $3.31 at the first sale of the year and $3.49 at the corresponding sale in 2012. About 4.9 million kilograms were sold, compared with 4.3 kilograms a year earlier.

“Since the start of the year, an average of 27 percent Kenyan tea offered at the auction is not sold,” Kimanga said.

Tea is Kenya’s top foreign-currency source, generating $1.2 billion last year, according to the central bank.

Before it's here, it's on the Bloomberg Terminal.