The frustration by small-scale tea farmers in Mt Kenya region over low bonus payouts rekindles a long-running debate on the cost of agricultural production in this country. The farmers are disillusioned with the bonus payout of between Sh35 and Sh40 per kilogramme that was recently announced for their supplies this year.
Although the rates are an improvement on last year’s, the growers say they had expected at least Sh90 per kilogramme of green leaf delivered this year, based on hopes over reforms initiated by Agriculture Cabinet Secretary Peter Munya.
A payment schedule by processing factories shows that, in Meru County, for example, farmers supplying Imenti Tea Factory are likely to get the highest payout, at Sh41 per kilogramme, followed by Kinoro (Sh37.10) and Kionyo (Sh36.30).
In central Kenya, the rates range between Sh31 and Sh35. Last year, Weru Tea Factory parted with Sh20 per kilo and Sh23 in 2020, signalling a positive trajectory.
The processing factories have attributed the lower-than-expected payout to farmers to increased cost of production and market disruptions due to the Russia-Ukraine war.
This feud reflects the dark side of the unpredictability of the agriculture sector. Like any commodity in the market, forecasting pricing and earnings is rather an act of ping-pong, as the CS seems to have done, leading to the high expectations by farmers.
But the market forces of demand and supply are non-static and shift all the time, depending on various dynamics that influence pricing. With that in mind, the safest way to maximise returns from an agricultural venture would be cost control, whereby parties will identify and reduce avoidable expenses that eat into profits.
In a competitive marketplace globally, it is the low-cost producers who earn the highest profits or returns. Reducing costs is important because it comes with the dual benefit of increased efficiency and profitability.