Tea farmers told to brace for low earnings again due to global glut

A Karatina University College worker picks tea at the institution’s farm in Mathira. The Kenya Tea Development Agency, which manages production and sale of the produce for over 600,000 small-scale farmers, told the Nation in an interview that next year’s earnings could fall below what was paid out this year. PHOTO | JOSEPH KANYI | NATION MEDIA GROUP 

In Summary

• The Kenya Tea Development Agency, which manages production and sale of the produce for over 600,000 small-scale farmers, told the Nation in an interview that next year’s earnings could fall below what was paid out this year.
• Last week, a kilogram of KTDA-made tea at the Mombasa auction sold at an average price of Sh201, compared with Sh221.40 in the same period last year.
• The problem is not affecting the small-scale farmers only. Last week, Kapchorua Tea said its half-year profit fell by 38 per cent to Sh47 million.

By CHARLES WOKABI
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Tea farmers should brace themselves for yet another year of financial hardships as oversupply in the global market continues to depress the commodity’s prices.

The Kenya Tea Development Agency, which manages production and sale of the produce for over 600,000 small-scale farmers, told the Nation in an interview that next year’s earnings could fall below what was paid out this year.

The agency added that there are no indications of the global tea market picking up in the near future.

BIG BLOW TO FARMERS

The situation could deal a big blow to farmers who are already cash-strapped after receiving the lowest bonus pay-out in over four years in October.

No interim bonus was paid mid-year, as is the industry norm.

“The situation is not better than last year, given the crop levels we are seeing. We encourage our farmers to exercise prudence and not over commit themselves financially. This is because, looking at market price trends at the Mombasa Tea Auction and elsewhere on the globe, small-scale tea farmers will likely get lower payouts than what they received this year,” KTDA chief executive officer Lerionka Tiampati said.

MOMBASA AUCTION

Last week, a kilogram of KTDA-made tea at the Mombasa auction sold at an average price of Sh201, compared with Sh221.40 in the same period last year.

“It is thus evident that prices this year are slightly lower than those of last year. This will definitely affect earnings for the 2014/2015 financial year. The weather has continued to be favourable in tea growing areas. Tea prices are 8 per cent lower, as of October 2014, but production is 10.5 per cent higher,” KTDA said.

This year, farmers earned as low as Sh8 per kilo in the annual bonus, making it one of the darkest seasons in the sector’s history.

In some factories, farmers’ pay was nearly 100 per cent lower than last year.

The problem is not affecting the small-scale farmers only. Last week, Kapchorua Tea said its half-year profit fell by 38 per cent to Sh47 million.

GRIM PROJECTION

It has projected that its full year earnings would be at least a quarter lower than last year.

“There are no indications of the global tea market picking up in the near future. As the weather continues to be favourable, we expect that the crop and stock levels will continue to rise, depressing the tea prices further.

“County governments have prepared their budgets, which appear to impose more taxes on firms operating within their jurisdictions.

“Labour unions are pressing for higher wages despite the economic conditions currently prevailing in the tea sector,” the company’s management said.

Tea is the country’s biggest foreign exchange earner and a source of livelihood to millions of Kenyans.