Capital Markets

Kenyan tea farmers in record earnings of Sh50 per kilogramme

Tea picking. The outlook for 2017 is not impressive because of low prices at the Mombasa auction. PHOTO | FILE
Tea picking. The outlook for 2017 is not impressive because of low prices at the Mombasa auction. PHOTO | FILE 

The year 2016 was good for tea farmers thanks to high prices the produce fetched amidst a weaker dollar.

Growers affiliated to Kenya Tea Development Agency (KTDA) earned a record-high bonus compared to any other year in the history of the crop.

Farmers earned Sh84 billion from leaves delivered in the 2015/2016 season, marking the second year of improved earnings helped by a stable exchange rate and high pricing of the commodity in the world market.

However, 2017 may not be a good year given the low prices that the commodity has been fetching in the market.

Unlike last year, the price of tea did not reach Sh300 a kilogramme with the highest being Sh260.

When announcing the bonus in September, KTDA managing director Lerionka Tiampati said the outlook for 2017 was not impressive due to low prices at the Mombasa auction.

The price of a kilogramme of tea at the auction was Sh258 in last week’s auction, which is lower than what it attracted in the same period last year at Sh280.

Hand-picked KTDA teas fetch better prices with the cost of a kilogramme in the 2015/2016 financial year rising by 29 per cent to Sh300 per kilogramme from Sh233 the previous year.

The tea agency attracts higher prices than other producers due to high quality. Tea production improved from 241 million kilogrammes in the 2014/2015 financial year to 291 million kilogrammes in 2015/2016.

The 2016 record earnings placed Kenya at position one on payment to farmers among major growing nations, having paid the growers an overall average of Sh50 per kilogramme, followed by Sri-Lanka at Sh48.

In the 2015 ranking, Sri-Lanka was placed top having paid its farmers Sh49 per kilogramme compared to Kenya’s Sh41 for the same quantity, placing the country in position two.

Kenya is the leading exporter of the commodity in the world, selling 95 per cent of its tea in the global market.
Kenya is trying to open up new markets and expand the existing ones such as China, which has potential to buy more of the local tea. 

Tea Directorate officials were in Russia this year for talks on how to boost export after sales to the country dropped by 10 per cent last year.

The country is a major buyer of Kenyan tea but last year the volumes dropped to 25 million kilogrammes from 28 million kilos in 2014.

The officials noted that low prices at the auction are normally a result of dependency on a few traditional markets, which buy almost the same volumes annually.