Farmers’ pain as tea prices fall

From left- Kenya Tea Development Agency chairman Peter Kanyago, chairman of finance and strategy committee Jeffither Nyaga and managing director Lerionka Tiampati. Tea farmers face a bleak future after prices at the Mombasa auction recorded a further dip in the six months to December. FILE PHOTO | NATION MEDIA GROUP  

In Summary

• The Kenya Tea Development Agency (KTDA) said the price drop was as a result of oversupply in the local and global markets due to increased production.
• The market glut is expected to significantly impact on farmers’ earnings for the year to June 2015, further worsening the financial woes confronting them after receiving the worst payout in eight years in 2014.
• Overproduction, which results in lower prices, usually heralds decreased earnings to farmers since payments are partly pegged on industry returns, which KTDA said had declined by more than 30 per cent, compared to the previous year.

By RAMENYA GIBENDI
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Tea farmers face a bleak future after prices at the Mombasa auction recorded a further dip in the six months to December, dimming hopes for better earnings this year.

A kilogramme of the processed leaf traded at an average of $2.23 (Sh203) in the six-month period, down from $2.42 (Sh220) recorded in the same period in 2013. The prices were also significantly lower than the $3.61 (Sh328.5) per kilogramme posted in 2012.  

The Kenya Tea Development Agency (KTDA) said the price drop was as a result of oversupply in the local and global markets due to increased production.

“Between July and December 2014, small-holder green leaf production rose to 569.7 million kilogrammes up from 523.9 million kilogrammes produced during the same period in 2013,” KTDA Chief Executive Lerionka Tiampati said in a statement yesterday.

The market glut is expected to significantly impact on farmers’ earnings for the year to June 2015, further worsening the financial woes confronting them after receiving the worst payout in eight years in 2014.

Last year, growers took a Sh15.8 billion cut in bonus due to a sharp drop in international prices as well as over-production, which depressed prices.

Mr Tiampati said other tea-producing countries of Rwanda, Burundi, Malawi, Uganda and Tanzania also reported increased production in the period, resulting in low tea prices at the Mombasa tea auction.

DECREASED EARNINGS

Overproduction, which results in lower prices, usually heralds decreased earnings to farmers since payments are partly pegged on industry returns, which KTDA said had declined by more than 30 per cent, compared to the previous year.

The agency is, however, projecting a rebound in tea prices at the auction, with the dry spell expected to hit production volumes this year.

Drought is usually accompanied by drastic reduction in crop volumes and the industry could feel the impact beginning July this year, which could even cut the loss occasioned by overproduction.

“The coming months will experience even lower tea production levels because of the dry spell. The crop for February is projected to be about 38 per cent lower than the same period last year,” said Mr Tiampati.

In January, for instance, KTDA figures show that tea production dropped by 9.2 per cent from 117.3 million kilogrammes the previous year to 106.4 million kilogrammes.

Small-holder farmers affiliated to the agency are usually given an initial payment on a monthly basis at the rate of Sh14 per kilogramme of made tea and the rest, popularly referred to as the bonus, is released in October.