Cold temperatures across the country have reduced tea supplies at the weekly auction in Mombasa, signalling firm earnings for growers linked to high demand.

The volume of crop offered for sale at the market has been slumping since last week with the trend expected to continue into August.

During last week's sale, some 6.11 million kg of Kenyan tea was put up for sale compared to this week's 5.16 million kg while 4.71 million kg is expected next week - representing a 23 per cent drop in just three sale sessions.

"Crop continues to decline in most tea growing districts," African Tea Brokers (ATB) said in a market report on Tuesday.

Cold temperatures inhibit the development of tea leaves and have condemned farmers to lower harvests since June.

"A drop in temperatures is expected over most parts of the country within the season," the Kenya Meteorological Department said in its latest forecast for June-August.

Agriculture permanent secretary Romano Kiome, in June, said tea production was expected to increase between five and 10 per cent above 2009 levels, rather than the 15 per cent previously projected.

He linked the revised projection to the cold spell.

Other producers

Traders said despite the slump in production, Kenya tea still attracted the best prices at the auction compared to other producers in the region.

"Other producers such as Uganda and Tanzania are having a good run in terms of volume of crop offered for sale at the auction but Kenyan tea still reigns in terms of prices attracted," Peter Mwangi, a dealer in Nairobi said.

Data from the auction showed that as at Tuesday's sale, the cumulative average price of Kenyan tea stood at $2.74 per kg, the highest in the region compared to Malawi's $1.25 per kg.

Rwanda and Burundi have also given a good account of themselves landing cumulative average prices of $2.58 and $2.45 per kg respectively.

Players said despite weather-driven variations in production volumes, Kenya's strength has been consistent in quality production and processing, a combination of factors most rival producers lacked.

Mr Peter Kimanga, a tea trader in Mombasa said Kenyan processors based their operations on the prevailing demand of individual grades of the commodity.

"What happens is that the processing mix is determined by the demand in target main markets. For instance, if the demand for BP1s is higher, then the grade is given a bigger portion in the processing slot so as to capitalise on the demand," he told Business Daily.

Specific grades

"Most processors in the region do not practice this strategy hence the tendency to land fluctuating prices. They instead process packages as they come through from farmers without regarding the prevailing demand of specific grades in the target markets,"

Players said expected good rains after the current cold season could help boost the bottom line for growers as witnessed over the first quarter of this year.