Kenyan Tea farmers’ earnings drop by 18.6% as sector grapples with glut

KENYA – Kenyan small-scale tea farmers across the country are set to earn a lower bonus compared to last year by 18.6% as the sector grapples with oversupply in the global market.

“There was a huge increase in production leading to a supply of about 200 million kilogrammes. This had an impact on the global prices and has resulted in reduced income for our factories,” said Lerionka Tiampati, Kenya Tea Development Agency (KTDA) managing director.

During the year, global tea production stood at 5.8 billion kilogrammes against a demand of 5.6 billion kilogrammes, resulting in a 200 million kilogrammes surplus.

According to the report for the financial year ended June 2019, income for the year stood at Sh69.7 billion (US$7.1 billion) down from Sh85.7 billion (US$8.8 billion) earned the previous year.

Farmers will therefore get paid US$0.41 per kilogramme of delivered green leaf, down from US$52.8 per kilogramme last year.

The KTDA plans to pay farmers 67 percent of the earnings or Sh46.45 billion (US$443m) while the remaining Sh23 billion (US$221m) will cover the agency’s fees and costs of running the factories.

“Out of the Sh69.77 billion (US$7.1 billion) revenue, farmers earned Sh46.45 billion (US$443m) being the sum total of Sh17.69 billion (US$163m) in the initial monthly payments and Sh28.76 billion (US$269m) as second and final payment, which is referred to as bonus,’’ said Lerionka.

Last year, farmers earned a Sh44.33 billion (US$424m) bonus. He attributed the drop-in earnings to currency devaluation in export destinations, overproduction and poor tea quality.

“Pakistan, Egypt, UK, UAE and Sudan remain Kenya’s key export destinations for the black CTC tea type but have had significant currency devaluation because of political /economic challenges,” Tiampati said.

The decline in earnings was felt across the region and prices averaged US$0.2 per kilogramme for the five EAC countries at the Mombasa tea auction. This represented a significant decline from US$0.3 per kilogramme last year.

In Rwanda, farmers are set to earn US$0.25 per kilogramme down from US$0.26; in Burundi US$0.15 from US$0.16 and in Uganda US$0.11 down from US$0.13. It is only in Tanzania where farmers will see an increase in earnings to US$0.14 per kilogramme up from US$0.13 per kilogramme in 2018.

During the year, small-scale farmers in Kenya led in tea production at 481.3 million kilogrammes followed by Uganda at 61.4 million, Tanzania at 36.8 million, Rwanda at 30.4 million and Burundi at 9.1 million.

Tiampati expressed concern that over dependency on international market was a challenge indicating that the country export 96 per cent of its tea.

However, the agency, factories and other key stakeholders should come up with sound strategies to mitigate the challenges in production and marketing of the commodity and also find new revenue streams to ensure that farmers are cushioned whenever tea prices take a hit.