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Leading black tea exporter plans specialty auction

Commodities

Nairobi - Kenya plans to offer purple, green and orthodox tea at its weekly auction to create a one-stop-shop for buyers from around the world, according to the East African Tea Traders Association.

Buyers and traders at the auction in the port city of Mombasa want a wider range of products, Managing Director Edward Mudibo said in an interview Thursday in the capital, Nairobi. EATTA, which conducts the sales, plans to start selling the varieties by the end of 2017.

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“Why should a buyer be both in Kenya and Sri Lanka?” Mudibo said. “It makes sense to buy from one auction.”

Kenya is the world’s biggest exporter of black tea and produced a record 473 million kilograms [1.04 million pounds] last year. While specialty teas accounted for less than 1 percent of output, the state-run Tea Directorate expects 5 percent of the overall crop to be orthodox or green within the next three to five years.

Orthodox tea, which is popular in Russia, Iran and Western Europe, is made from leaves that are processed by traditional methods of withering, rolling and oxidization, while non-orthodox brands are manufactured using machines that crush, tear and curl the leaves, known as CTC production.

Mudibo said Kenya should maintain output of black tea at current levels to avoid a glut that may reduce prices, and instead focus on expanding production of the better-priced green and orthodox types.

Higher Prices

Buyers are prepared to offer double the amount for orthodox teas that they pay for CTC leaves, Samuel Ogola, head of the Tea Directorate, said in February. The average black-tea price rose 3.4 percent to $2.74 per kilogram at the latest sale in Mombasa, the world’s biggest auction of the leaves.

Production of black tea fell by about a third to 90.1 million kilograms in the first three months of this year because of a drought. Exports declined 7 percent to 119.7 million kilograms in the same period, according to Tea Directorate statistics.

The Kenya Tea Development Agency, the country’s largest grower of the leaves, has three of its factories processing specialty teas and expects six more to do so in the next three years.

“We will see how the market responds,” KTDA Managing Director Lerionka Tiampati said in an interview.

 BLOOMBERG

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