Earnings for small-scale tea farmers dropped by 18.6 percent in the financial year ended June 2019 due to excess global supplies and weak demand, marking the lowest returns for growers in the past six years.
Farmers affiliated to the Kenya Tea Development Agency (KTDA) will earn Sh69.7 billion in the review period, down from Sh85.7 billion that they got last year.
KTDA has attributed the decline to low international prices during the review period resulting from a glut in the international market and an increase in the cost of production. The lower prices, coupled with reduced production in the year to June following poor weather, squeezed farmers earnings and bonuses.
Kenya is the leading exporter of black tea in the world and the crop is also one of its top foreign exchange earners, along with tourism, flower exports and cash sent home by the Diaspora.
“This performance has been realised at a time when most of tea-producing countries have registered increased production,” said KTDA Managing Director Lerionka Tiampati in Nairobi Thursday.
Out of the Sh69.77 billion revenue, farmers will receive Sh46.45 billion being the sum total of Sh17.69 billion in initial monthly payments and Sh28.76 billion as second and final payment, commonly referred to as bonus. This means farmers will receive about 67 percent of the earnings with the remaining Sh23.3 billion covering the costs of the factories as well as KTDA management fees.
Farmers will on average receive Sh41.27 per kilogramme of green leaf delivered, down from Sh52 last year. Growers last year earned Sh62 billion with the factories and KTDA management fees taking Sh23 billion.
Mr Tiampati also linked the declining prices to low demand for tea from importing markets, which have experienced political and economic challenges.
“Pakistan, Egypt, the UK and UAE and Sudan remain Kenya’s key export destinations for the black CTC tea. These countries have had significant currency devaluation due to political and economic challenges with Sudan, Pakistan and Egypt and the UK registering 70, 50, 20 and 20 percent respectively,” he said.
During the year, the agency factories processed 1.13 billion kilogrammes of green leaf into 262 million kilogrammes of made black tea, which was sold at an average price of Sh266 compared with Sh323 realised the previous year. Last year, the factories processed 1.18 billion kilogrammes of green leaf. The latest move by the US to slap sanctions on Iran’s Central Bank has negatively affected the sale of tea to one of Kenya’s major markets that buys the most expensive beverage at the Mombasa auction.