The Mombasa Auction now limits the re-introduction of tea withdrawn from the trading floor for resale to three times, a significant setback for KTDA teas, which have seen increased withdrawals in recent days.
A fortnight ago, stakeholders at the East African Tea Trade Association (Eatta) limited to three the number of times that unsold tea can be offered again for sale at the auction floor.
There are teas that never get bids during the auction or the owners demand higher prices forcing traders to shun them. Such stocks are withdrawn from the market and brought back for resale in the next auction.
“The auction now limits reprints of tea
s to three and this has helped to cut too much supply at the auction. This was agreed by all stakeholders at the auction,” said Peter Kimanga, a tea trader at the auction.
The new rule has hit KTDA teas which have been witnessing high volumes of unsold tea as traders avoid them due to a minimum price of $2.43 that was set by the government three years ago.
The capping has seen traders go for other quality teas that fetch similar prices at the expense of the KTDA’s produce.
Producers are now forced to sell their teas outside the auction at a relatively lower price to other buyers.
KTDA is the largest supplier of tea at the auction accounting for over 60 percent of the total beverage that is offered for sale at the trade.
The government introduced a minimum price for KTDA teas in order to cushion farmers from lower prices that had fallen below the cost of production.
The factories in the west of the country have been complaining that the minimum price has hit the sales of their tea as buyers prefer beverages from the east of rift and have on some occasions directed their produce to be sold at a lower price other than that recommended by the government.
The new rule at the auction has seen the price of the beverage firm in the recent sales due to reduced volumes.