Tea farmers set for record Sh44bn bonus

Smallholder farmers are set to get a record Sh44.15 billion final payout from next week for tea delivered in the financial year ended June 30.

The Kenya Tea Development Agency is expected to release the bonus payment to an estimated 600,000 farmers affiliated with its 54 factories over the next two weeks starting Monday. This will be paid alongside payments for green leaf supplied this month.

The bonus payout is expected to lift farmers’ total earnings for the year by 7.6 per cent to an all-time high of Sh67.7 billion from Sh62.89 billion last year.

The growth in earnings is attributed to improved tea prices in the international market where the average selling price was recorded at Sh341 per kilogramme from Sh311 previously.

Tea farmers are expected to earn an average of Sh59.02 for every kilo of green leaf sold from Sh50.18 last year, marking a 17.6 per cent increase in the average total earnings per kilo.

“This year’s total payout to smallholder farmers is attributed to increased sales volume, prudent cost management, and a favourable foreign exchange regime. Further, increased sales of orthodox tea this year have contributed to higher earnings for farmers with 10 million kilogrammes of orthodox tea having been sold from 11 factories that are processing the tea up from three million kilos last year,” KTDA Head of Corporate Affairs Ndiga Kithae told Nation.

The improved earnings for the sector have been achieved against a nine per cent decline in green leaf production. Green leaf production in the year ended June eased to 1.145 billion kilogrammes from 1.254 billion kilogrammes in 2022, marking the lowest output since 2019.

Drought conditions and depressed rainfall resulted in the contraction of the agricultural sector last year by 1.6 per cent.

Agricultural output was affected by the drought in 2022, with tea production falling to 535,000 tonnes from 537.800 tonnes in 2021 according to data from the Kenya National Bureau of Statistics. Production was hardest hit in Kiambu County, which has factories in Kambaa, Kagwe, Gacharage, and Nduti as output declined by 15.2 per cent.

Equally, output in the Kericho and Bomet counties contracted by 14.3 per cent, while production in Kisii and Nyamira fell by 8.5 per cent.

Farmers in the Kericho/Bomet region will pocket the bulk of the green leaf payout, or Sh16.1 billion, after supplying 305.4 million kilogrammes in the cycle.

Smallholder farmers served by factories in Kapkoros, Tirgaga, Olenguruone, and Motigo will split some Sh4.9 billion from the total payout marking the highest payment by sub-region.

Growers in the Kiambu region have, meanwhile, earned a total of Sh12.8 billion to rank in second place ahead of Kirinyaga-Embu (Sh10.4 billion), Meru (Sh9.6 billion), Muranga-Nyeri (Sh8.9 billion, Kisii-Nyamira (Sh7.5 billion and Vihiga-Kakamega-Nandi (Sh2 billion).

The improved pricing of green leaf comes against the backdrop of ongoing reforms in the sector which, for instance, saw the introduction of a minimum tea price/ reserve price at the Mombasa auction in July 2021.

“The reserve price at the auction has provided a cushion for farmers by ensuring their teas are not sold below a certain price point. This, in turn, has translated to higher earnings per kilo of sold tea compared to the period when a similar arrangement did not exist,” added Mr. Kithae.

Equally, tea earnings have been favoured by a weaker shilling, where the green leaf, sold in the international market in dollar terms, has fetched more relative to local currency terms.