UK tea buyers are facing rising costs as the price of Kenyan tea starts to move up.

Buyers had been enjoying falling prices until recently. From the second half of last year onwards, ideal weather conditions and high stock levels bolstered Kenyan production and depressed prices.

However, over the past month the tide has turned. Although prices remain 19.5% down year on year, they have climbed 8.9% over the past month to £1,566 a tonne [Mintec].

About half of the tea drunk in the UK comes from Kenya, so rising prices there are likely to put pressure on retail tea prices at home.

Mintec says the big change is on the demand side. Buyers have bought up Kenyan tea - attracted by the historically low prices. “Prices have begun to recover as demand for lower price Kenyan tea increases from consumers including Pakistan, Afghanistan and Egypt,” says analyst James Hutchings.

In Egypt, in particular, demand for Kenyan tea has risen sharply. The political upheaval in Egypt in 2013 meant many buyers stayed out of the market, but now that the situation has stabilised, purchase volumes have recovered. In addition, buyers returning to market after Ramadan have put upward pressure on prices in recent weeks.

The supply situation has also had a bearing on the market. Stocks of tea are now being run down and production levels were relatively low during the cooler months of June and July.

“Stockholdings in certain areas have come down,” says Typhoo CEO Keith Packer. “There was a large production excess at the end of last year and that has taken some time to get through.” He said it was likely that prices would continue to rise - albeit gradually - in the coming months because of lower stock levels and rising global demand.

Topics