Tea farmers beat severe drought to earn Sh78.3 billion in revenue

Smallholder tea farmers under the Kenya Tea Development Agency (KTDA) have earned a total Sh78.3 billion in revenue from the sale of tea during the 2016/17 financial year. This is despite the severe drought which hit the country earlier in the year. Of the Sh78.3 billion, farmers in the 15 tea growing counties will receive Sh59.7 billion in total payments.

Of the Sh59.7 billion, farmers will receive second payments (bonus) of Sh42.5 billion, with the balance having already been paid out as initial (monthly) payment.

In the previous financial year, farmers were paid a total (initial + second payments) of Sh61.9 billion, with second payment totalling Sh44.6 billion.

As a result of the drought, green leaf production dropped to 976.3 million kilogrammes from 1.235 billion kilogrammes in 2016. The reduction in crop realised caused a substantial increase in unit production cost since most factories were forced to operate below their installed processing capacities.

This drop in tea production led to an improvement in tea prices in the second half of the financial year ending June this year.

However at the global level, other leading producers registered increased volumes, led by China, India, Uganda and Rwanda. Tea prices, like all commodity prices, are affected by the demand and supply.

Last year, farmers earned a total of Sh84.2billion from the sale of made tea mainly due to increased sales volume that stood at 272m kgs compared to 233m kgs in the current year. The 17 per cent sales volume decline is attributable to the severe drought within the year.

“The drought that ravaged most tea growing counties between 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. Despite the low volumes, majority of the factories paid more per kilogram of green leaf compared to last year, which was driven by fairly good prices for the second half of the year at the international markets, as well as improved efficiency in our managed factories,” KTDA CEO Lerionka Tiampati said.

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 during the year, up from Sh300 fetched last year. It takes an average of 4.5 kgs of green leaf to process a kilo of made tea.

Kenya is the leading exporter of black CTC teas in the world accounting for about 24 percent of the global exports.