Business Daily (Nairobi)
Allan Odhiambo
5 June 2008
Prices of tea are expected to stabilise at the weekly auction in Mombasa amid projections of gradual decline in production of the commodity across the region.
A forecast by tea traders said increasingly dry weather conditions were suppressing production hence expectations of tighter market situation in the short term.
Signs of a tightening market were witnessed during this week's auction where traders registered a generally improved demand of their commodities as buyers scrambled for the receding offers.
"Improved general demand prevailed for the 128,804 packages on offer," Tea Brokers East Africa Limited said in a market report. The offers to the next auction will be about 8,000 packages less than this week's, capturing the downturn in production of leaf across the region.
According to the forecasts, producing areas in western, eastern and central Kenya are however expected to receive showers in the coming weeks which could help reduce the pressures on production.
Most parts of the country have in the past few months experienced dry spells resulting in reduction of offers to the auction. Some factories especially around Nyeri area could barely maintain preferred levels of in-takes even though a similar trend has been recorded in Uganda.
"Factory intakes are being maintained at their previous low levels," the tea brokers said in a forecast of the Ugandan industry. In Tanzania the crop levels have slightly improved even though the warm weather is expected to carry on.
According to the Tea Board of Kenya (TBK), production for the month of April 2008 registered improved production to stand at 27.4 million kg compared to 16.9 million kg in March, thanks to the onset of the long rains season.
"Despite recovery from the downward production trend, output for the month of April was 10 per cent lower compared to 30.6 million kg registered during the same month of last year, due to depressed and poorly distributed amount of rainfall that was experienced in most parts of the country.," the board said.
As a result of lower amount of rainfall in April and dry weather conditions experienced during the January-March period, cumulative production for the January-April period dropped by 29 per cent from 139.3 million kg registered during the same period of last year to 98.1 million kg.
Analysts said frustrations by growers due to depressed earning was also likely to affect production. In Central Kenya several growers have since resorted to uprooting their crop citing low returns amid skyrocketing of prices of inputs and highly fluctuating currency rates.
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