Tea farmers set for windfall earnings as industry income hits Sh84 billion

Tea farmers were yesterday set for a massive windfall after it was announced that Kenya raked in a record Sh84 billion from leaves delivered in the past season, marking the second year of improved earnings.

At Sh84 billion, the earnings are Sh21 billion more than last season’s income that stood at Sh63 billion, according to the Kenya Tea Development Agency (KTDA).

The growth in earnings has been attributed to a stable exchange rate and high pricing of the tea in the global market arising from depressed output from major tea growing nations such as Sri Lanka.

“Our performance this year has improved compared to last year mainly because of the strong dollar and good market prices, marking the highest figure that we have ever registered in terms of revenue,” KTDA managing director Lerionka Tiampati said.

The outstanding performance means that growers affiliated to the KTDA are set to share Sh44.72 billion in the second round of the payments, popularly known as bonuses -- a major increase compared to the Sh28 billion they earned in a similar period the previous year.

Growers have so far been paid Sh17 billion in preliminary disbursements priced at Sh14 per kilo every month, while the final payment is due next month.

With the just announced total income, a farmer will on average earn Sh36 per kilo of tea on the second payment compared to Sh27 the previous year.

The highest paid farmer will earn a net of Sh165,639 per acre in the year under review. An average grower will get Sh123,324 while the lowest paid will take home a net of Sh73,414.

This season’s record earnings have placed Kenya in the top position with regard to payments to farmers among the major tea growing nations.

The country’s average payment to farmers stands at Sh50 per kilogramme, followed by Sri-Lanka at Sh48.

In 2015 ranking, Sri-Lanka paid top dollars to its farmers at an average of Sh49 per kilogramme compared to Kenya’s Sh41 for the same quantity.

Sri-Lanka is the world’s leading producer of tea followed by Kenya, but the two nations have more recently been exchanging positions with regard to quality of produce.

Kenya is, however, the leading exporter of tea in the world and sells 95 per cent of its tea leaves in the world market.

The Kenyan shilling has been weakening against the US dollar since January last year and is currently trading at Sh101 against the greenback, offering relief to the country’s exporters.

Mr Tiampati noted that the price of a kilogramme of tea in the 2015/2016 financial year rose by 29 per cent to Sh300 per kilogramme from Sh233 in the previous year.

Production improved from 241 million kilogrammes of tea in the previous financial year to 291 million kilogrammes in 2015/2016.

“Tea sales increased by five per cent to 272 million kilogrammes in 2016 from 259 million kilos in 2015,” Mr Tiampati said.

In 2013, tea farmers suffered a big blow as a heavy market glut pulled down international prices, leaving Kenya with the lowest earnings in six years.

KTDA is paying 75 per cent of total earnings to the farmers compared to the 71 per cent they paid last year.

The agency said Central Kenya farmers were poised to earn better bonus payments compared to other regions. Farmers in region one, which comprises Kiambu and Thika, will earn a total of Sh12 billion -- an increase from the Sh8 billion they earned in the previous season -- while those in region seven that covers Kitale and Nandi will get Sh2.2 billion up from Sh1.3 billion the previous year.

A section of farmers in the North Rift are not happy with their earnings, noting that they are too low compared to the other regions.

KTDA has warned that the outcome for the current financial year is not good as a result of the low prices at the auction and the prevailing cold season that is to be followed by a dry spell.

During last week’s auction, a kilogramme of tea traded at Sh215 compared to Sh286 in the same period last year.

“The current weather is not favourable for tea production. When it is too cold the yields are affected. This, combined with the current low prices will definitely affect our earnings in the current financial year,” he said.

The weatherman has said in his latest forecast that the current cold weather is expected to persist till December.
A forecast by the Kenya Meteorological Department indicates that most parts of the country will experience less rainfall, which will be poorly distributed, both in space and time.

“It will highly interfere with agricultural activities in most areas. Farmers are, therefore, advised to liaise with the Ministry of Agriculture through extension officers to make use of the rains to plant appropriate crops,” said Peter Ambenje, acting director.

Even with the improved revenues, KTDA said increasing cost of production is eating deeply into the farmers’ profit margins and stalling growth of earnings.

This has compelled the agency to invest in small hydro-electric power stations that are expected to lower energy costs by up to 50 per cent to tame soaring production costs.

KTDA is also diversifying to orthodox tea in order to improve the revenue that is majorly driven by black CTC tea that it has been making for years.

“We have established production lines for purple tea as we want to enhance our revenue through diversification,’ Mr Tiampati said.