A tea auction is the public sale where most of the world's traded tea meets its price. A producer hands made tea to a broker, the broker offers it in a weekly catalogued sale, and licensed buyers bid each lot to the highest offer. The result is a visible, published price for a given grade from a given origin, set against live supply and demand, week after week. For a commodity grown in more than two dozen countries and drunk almost everywhere, the auction is the clearing house that connects the two. This is the reference on how that clearing house works and where it sits; the wider chain it serves is in How the Trade Works, and the producers who feed it are in Who Grows It.

How an auction works

The mechanism is the same in every centre, and it runs on a weekly cycle.

1. Consignment. A producer (an estate, or a factory that buys green leaf from smallholders) sends its made tea to a broker and warehouses it at the auction port.
2. Cataloguing and sampling. The broker grades and lists each lot by garden, grade, and invoice number, draws a sample from every lot, and circulates those samples to the registered buyers ahead of the sale.
3. Tasting. The buyers, who are mostly the agents of the large blending and packing companies, taste every sample they care about and decide what each lot is worth to them. The cup, not the catalogue, sets their bid.
4. The sale. On sale day the lots are offered in order and bid up to the highest offer that meets the seller's reserve. Historically this was an outcry room; increasingly it is an electronic platform.
5. Settlement. The lot is knocked down to the winning buyer, and the broker takes a selling commission from the seller. The tea then moves on to the blender, the packer, and the shelf.

The broker is the hinge of the whole system. Independent of both seller and buyer, paid a commission to value the tea honestly and run a fair sale, the broker is what lets a grower in one country and a blender in another trust a price neither of them set.

The major centres

There is no longer a single world auction. Price discovery happens at the producing ports, and a handful of them dominate.

• Mombasa, Kenya. The Mombasa auction, run by the East African Tea Trade Association, is the largest tea auction in the world. It is held twice a week, draws buyers from more than fifty countries, and is the only auction that trades teas from more than one country: Kenya, Uganda, Tanzania, Rwanda, Burundi, the Democratic Republic of Congo, Malawi, Madagascar, Mozambique, and Ethiopia all sell through it. It is the price-setting floor for African CTC, the black tea that fills the world's tea bags.
• Colombo, Sri Lanka. The Colombo auction has run since 1883 and is the oldest tea auction still operating. It is the heart of the Ceylon tea trade, sells most of Sri Lanka's crop, and is the second-largest centre after Mombasa.
• India. India runs several centres, most of them conducted by J Thomas and Company, the largest and oldest tea auctioneer in the world: Kolkata (at Nilhat House), Guwahati for Assam, Siliguri for the Dooars and Darjeeling, and Cochin, Coonoor, and Coimbatore for the south. India's auctions now run on the Tea Board's national electronic platform.

Between them, these ports set the reference prices that the rest of the trade reads. A large share of each producing country's crop passes through its national auction (in Sri Lanka, the great majority of it), which is what makes the auction average a genuine barometer of the market rather than a sideshow.

From the floor to the screen

For most of its history the auction was a room: a sale-room of buyers, a rostrum, an auctioneer, and the rapid call-and-response of outcry bidding. That has largely gone. India moved to a national electronic auction, Colombo and Mombasa have run digital sales, and the catalogue, the samples, and the bidding increasingly happen on screens. The move trades some of the room's theatre for wider access and a faster, more auditable record. The economics are unchanged: a broker still values the lot, a buyer still tastes the sample, and the price is still whatever a real buyer will pay on the day.

London, the auction that was

The model is old, and it was once centralised in one city. From 1679 until 1998 the London auction on Mincing Lane was where the world bought tea, and by the 1950s about a third of all the world's tea was sold through it. As the producing countries built their own auctions and kept more of the trade at home, the London sale shrank and finally closed on 29 June 1998. Price discovery did not disappear; it moved to Mombasa, Colombo, and the Indian centres, closer to the gardens. The history matters because it explains the shape of the trade today: the auction floor followed the leaf back to where it is grown.

What an auction price means, and what it does not

An auction price is a real, public number, and that is its value: it tells a grower what the market paid this week for that grade from that origin, and it gives the whole trade a reference it can settle contracts against. What it is not is the price the grower keeps. The auction sets the price of made tea at the port; the cost of growing it, and the small share that reaches the people who picked it, sit on the other side of that number, and are the subject of Who Grows It. Read the auction average for what it is: the clearest single signal of what the world's tea is worth, reported honestly, week by week, and the place this publication starts when it wants to know what the market is doing.