NAIROBI (Reuters) - Kenyan tea prices are expected to fall steadily in coming auctions should the unrest in leading buyer Egypt persist, traders said on Friday.
Regulator Tea Board of Kenya said last week output leapt 27 percent to a record 399 million kgs and export earnings by 40 percent to 97 billion shillings, surging past horticulture which brought in 78 billion.
Egypt bought over 93 million kgs in 2010, or 21 percent of all the tea sold by the world's leading exporter of black tea.
Brokers buying for Egyptian clients stayed away from this week's auction and are expected to sit out next week's sale should the protests in Egypt drag on.
"They (Egyptians) did not buy this week ... and last week they bought about five percent out of the total 25 percent they ordinarily buy," said a trader who asked not to be named.
The weekly auction saw 43 percent of offered teas left unsold, according to Mombasa-based Africa Tea Brokers.
Thousands of Egyptian protesters have gathered for days in central Cairo to demand the immediate resignation of President Hosni Mubarak. Scores have been injured and several people killed during the protests.
Good Medium PDS fetched $3.18-$3.22 per kg from $3.40-$3.52 per kg last week, one of the tea varieties bought by Egyptian buyers as well as Dust grades.
Buyers for Egypt say their pockets are being hit hard.
"Most of the tea was purchased in December when the prices were high, now they are low. What will happen is a lot of defaults. So they (Egyptian buyers) may buy low to average the prices," Peter Kimanga, a tea manager at Global Tea and Commodities Kenya Ltd, told Reuters.
Egyptians consume specially-blended Kenyan tea, mostly made up of Dusts, which traders said narrows possible sales to other markets due to different buyer specifications.
NEW BUYERS
The prevailing low prices for Dusts had attracted new tea buyers from countries such as Kazakhstan, but their demand was still not making up for the low volumes bought by Egypt.
"The Dust grade is suitable for tea bags so traders are likely to move away from the good grades which are more expensive," Kimanga said.
Kenya may lose as much as 30 percent in auctions over the next month should the Egyptian situation remain unresolved, he said.
A leading producer said warehouse space capacity was a challenge since a bulk of the stock was Egyptian tea.
"It (Dust) is not moving. We are holding about 50-60 percent of our total capacity of 24,000 packages ... it has an impact on our finances," an official of the producing firm, who did not want to be named, said.
Fears of drought in east Africa's biggest economy has seen some buyers stock up on tea, which they said may counteract the downward pressure on prices caused by Egypt.
source - af.reuters.com
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