Tea prices for KTDA-managed factories hit an average of USD2.91 in the auction held on November 15th and 16th up 27% from USD2.84 the previous week as the market continues to positively respond to the minimum reserve price regime. This is amidst an increase in production and available for sale volumes for the week.
In the four months under review (July – November 2021), prices have significantly improved by 53% from the average USD1.90 in the week before the introduction of the reserve price in July.
The absorption rate has also normalized to 91% in the auction date under review up from 87% the previous week and the low of 8% in the first week after the introduction of the minimum reserve price. Absorption rate refers to the volume of tea bought in the auction as a percentage of the total teas offered.
Production during the same period (July-October) has dipped 10% with factories putting out 77.4 million kilos of made tea in the four months compared to 86.1 million kilos for a similar period last year.
KTDA Board introduced a market reserve price of USD2.43 per kilo of made tea in July, informed by a deteriorating market that had seen selling prices nearly slip below the cost of production.
“We are encouraged by the improved prices at the auction, which means farmers are likely to earn significantly better returns this financial year,” KTDA Holdings chairman David Ichoho said.
“We will continue to put in place measures to ensure farmers get the best possible prices for their tea. We urge factories and farmers to continue the focus on producing quality tea that is the ticket to fetching good prices” he added.
Besides the introduction of the reserve price at the market, factories are also working to manage the increasing cost of production through the use of more efficient machinery, the use of firewood from factory-owned plantations and through managing labour costs.
The introduction of the reserve price is one of many key changes made by the new Board to improve returns and welfare of tea farmers. Others are; increase in monthly pay to Ksh20 for growers in regions five, six and seven; and lobbying for a Sh1 billion fertilizer subsidy.