A futures exchange is expected to be launched in Kenya in order to help farmers hedge against volatility of prices of such commodities. Representatives from the Kenyan tea industry, Nairobi Securities Exchange, The Kenyan Wallstreet team & other market players attended a Commodity Trading & Risk Management Seminar in Nairobi last week which was facilitated by INTL FCStone Inc,a Fortune 500 financial services advisory firm based in New York.
The derivative instruments for tea buyers and sellers will likely to be traded at an international exchange. Kenya is the leading exporter of tea (by weight – not value), with sales to over 50 countries. Tea is one of the main source of Kenya’s foreign exchange. The bulk of production comes from small holder farmers, with multinational and local estates making up the remainder.
In 2015, while production declined by 10.3%y/y to 399.1 thousand tonnes, crop earnings increased 39.5%y/y to KES 118.4billion. Currently, tea is sold at the Mombasa Tea Auction Centre based on grades, although some is exported directly for processing. Unilever and Cargill play large roles in the Kenyan tea sector.
INTL FCStone has been commissioned by industry players to carry out a study on the establishment of a futures trading platform for tea in Kenya.The Kenyan Seminar was part of a series of similar events conducted in Lagos and Abuja in Nigeria, Ghana, and Uganda.
Related; NSE Kenya attains full membership of Association of Futures Markets
