Tea prices are headed for a record high following a historical drop in Kenya's production, reduced supplies at the Mombasa tea auction and a rise in international market prices.

Kenya tea is internationally used for blending with other teas and is always in high demand.

According to the Tea Board of Kenya, the country's tea has suffered its steepest drop in production, falling 35 per cent for the first quarter of 2008, defying the board's prediction in February that production would rise with the onset of the long rains.

Although the drop has been linked to the post-election violence that hit the country early in the year, the board's managing director, Sicily Kariuki, has consistently said that the clashes made no insignificant contribution to the decline, blaming it instead on harsh weather.

According to a report published in the Sunday Times of London in March, 30, export earnings from tea and rubber have significantly increased at the global level.

"In 2007 agricultural export earnings were a record $1,507 million, a 16.6 per cent growth, owing to the increased export earnings from these two crops.

Tea, the main agricultural export that accounted for over two thirds of agricultural exports, exceeded the $1 billion mark.

The report indicates a lower volume of exports from Kenya due to a decline in tea production is an important contributory factor in increasing international tea prices.

The demand for tea from oil-producing Middle East countries, Russia and East Europe is another significant factor in the increase in tea prices.

Tea production for the first quarter of 2008 dropped from the 108 million kg recorded in January-March 2007 to stand at 70 million kg. The highest drop in production was recorded in tea growing regions west of the Rift Valley, where production fell by 50 per cent, from 62 million kg registered during the same period last year to 31 million kg.

East of the Rift Valley there was a less steep decline of 14 per cent, from 46 million kg to 40 million kg. The plantation sub-sector, which is predominant in the west of Rift Valley, was the most affected by the decline, with its production dropping by 46 per cent from 40 million kg compared with 21 million kg recorded in the first quarter of 2007.

The smallholder sub-sector in the east of Rift registered a lower production drop of 28 per cent, from 67 million kg to 48 million kg.

During the period, the lowest output of 16.9 million kg was recorded in February and 29.7 million kg recorded in January.

The Tea Board says that the low production during the quarter is attributable to hot and dry weather conditions that were prevalent in most tea growing areas as well as the frost that affected parts of the west Rift, particularly in Nandi, Kericho and the surrounding districts, in the month of February.

The board is optimistic that with the onset of the long rains - expected from March to June - and the recovery of greenleaf from frost attack within the affected areas, production for the second quarter of the year will improve.

During the period under review, a total of 62.6 million kg of tea was offered for sale at the Mombasa auction against 75.9 million kg offered during the same period in 2007. The drop in the tea auction offering is largely attributed to lower supplies which resulted in a 17 per cent decline total export volumes for the first quarter of 2008, from 100 million kg recorded during the same period last year to 82 million kg.