Low earnings loom for tea farmers as auction prices fall

Tea prices at the Mombasa auction have fallen by Sh19 a kilo in the last one week as buyers rush to release their stocks for fear of a decline in value in future, signalling low earnings for the farmers.

A kilogramme of tea sold at $2.58 (Sh237) in the latest auction compared to $2.79 (Sh256) previously, coming as bad news to farmers who may have to contend with low bonus payment for a second year in a row.

The ongoing rains are increasing the production, mainly in western Kenya, reversing the streak of good prices witnessed in the past three months.

Harsh weather that had been witnessed from December last year affected tea production across the country, raising the price of the beverage to a one-year high of $2.85 (Sh262) last month.

Buyers argue that the rains that have started and the onset of summer this month in major export markets will increase volumes and suppress the demand of tea at the auction, driving down the price.

“Prices are likely to come down in the coming days as the demand of tea is likely to go down with the expected increase in volumes,” said Mr Peter Kimanga of the Global Tea and Commodities.

Mr Kimanga noted that tea consumption is normally high during winter but the demand drops when summer starts as the intake of the beverage declines.

READ: Tea prices drop at Mombasa auction as buyers rush to dispose of excess stocks

Bad weather in tea growing zones had forced farmers to prune their crop at this time of the year even though the exercise is normally done in June. They had pruned in readiness for the rainy season.

The low prices is coming at a time when statistics from the tea regulator indicates that the exports grew marginally last year compared to the previous years.

The government is in the process of establishing a commodity fund that will cushion tea farmers from fluctuating prices.

The State has contracted Jomo Kenyatta University of Agriculture and Technology to undertake a study and develop a model to guide the minimum price payable to smallholder farmers for green leaf delivered and also recommend a sustainable model and modalities for establishing a price stabilisation fund.

The Ministry of Agriculture has said the study will take four months and the report is expected by the end of May.

Tea farmers’ earnings dropped to Sh15.8 billion in bonus payment last year, which was the lowest in the past five years.

Total earnings for the Kenya Tea Development Agency also decreased from Sh69.2 billion in 2013 to Sh52.9 billion in 2014, representing a 23 per cent decline.

Kenya is the world’s leading exporter of black tea and the commodity is a major foreign exchange earner.