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Economy

Bonus shock as drought cuts tea earnings by Sh24bn

Drought cut farmers’ tea earnings by Sh24.2 billion in the year to June, hurting bonus payments set for coming weeks. FILE PHOTO | NMG
Drought cut farmers’ tea earnings by Sh24.2 billion in the year to June, hurting bonus payments set for coming weeks. FILE PHOTO | NMG 

Drought cut farmers’ tea earnings by Sh24.2 billion in the year to June, hurting bonus payments set for coming weeks.

Kenya Tea Development Agency (KTDA), which manages small scale farmers, yesterday said payments to farmers will drop to Sh59.7 billion in the period to June, down from Sh84 billion reported in the similar period a year earlier.

This means that farmers in 15 counties in Rift Valley, Western, Nyanza, Central and Eastern Kenya should expect less bonus compared to what they received last year.

KTDA blames decline on erratic weather that saw production of green leaf drop by 20 per cent.

“As a result of the drought, green leaf production dropped to 976.3 million kilogrammes from 1.2 billion kilogrammes in 2016,” says the agency’s managing director Lerionka Tiampati.

Mr Tiampati said the reduction in crop caused a substantial increase in unit production cost as most factories were forced to operate below their installed processing capacities.

The 67 tea factories under KTDA earned Sh78.3 billion, meaning they retained 20.7 billion for operations.

Food aid

The drought, which left 2.7 million people in need of food aid, also drove up prices of basic food commodities such as milk and vegetables, hitting consumers hard.

Kenya is the leading exporter of black tea in the world and the commodity is one of the top foreign exchange earners for the country.

Last year, farmers earned a record high of Sh84.2 billion from the sale of made tea mainly due to increased sales volume that stood at 272 million kilogrammes compared with 233 million kilos registered in the current financial year.

“The drought that ravaged most tea growing counties between the months of January to April this year left little for the farmers to supply to factories. 

Nyeri and Kirinyaga counties were the worst hit, with production falling by 30.6 per cent and 32.6 per cent respectively,” he said.

Low volumes

Mr Tiampati said despite the low volumes most of the factories paid more per kilogramme of green leaf compared with 2016, on higher prices.

The bulk of the tea from the small scale sub-sector is sold through the Mombasa auction, where a kilo fetched an average price of Sh314 in the period under review, up from Sh300 realised last year.

Pakistan, Egypt, Britain are among the top buyers of Kenyan tea.

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