Tea farmers set for record Sh44 billion bonus

Smallholder tea farmers are set for a record Sh44.15 billion final payout from next week for their supplies for the financial year ended June 30.

The Kenya Tea Development Agency (Holdings) Limited (KTDA) is expected to release the amount popularly known as a bonus to an estimated 600,000 farmers affiliated with its 54 factories over the next two weeks beginning on Monday. This will bonus 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 percent to an all-time high of Sh67.7 billion from Sh62.89 billion at the same time last year.

Read: KTDA to pay tea farmers Sh3bn in mini bonus

The growth in earnings to farmers is largely attributable to improved tea prices in the international market where the average tea selling price was recorded at Sh341 per kilogramme(kg) in the period 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 percent 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 this year from 11 factories that are processing the tea up from three million kilograms last year,” KTDA Holdings Limited Group Head of Corporate Affairs Ndiga Kithae told the Business Daily.

Nevertheless, the improved earnings for the sector have been achieved against a nine percent decline in green leaf production.

Green leaf production in the year ended June for instance eased to 1.145 billion kilogrammes from 1.254 billion kilogrammes in 2022, marking the lowest output for the sector since 2019.

Lower tea production is partly attributable to drought conditions and depressed rainfall which dominated farm output resulting in the contraction of the agriculture sector last year by 1.6 percent.

Agricultural production was affected by the drought conditions in 2022 with tea production for instance 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 the Kiambu region which features factories in Kambaa, Kagwe, Gacharage, and Nduti as output declined by 15.2 percent.

Equally output in the Kericho and Bomet region contracted by 14.3 percent while production in the Kisii and Nyamira region fell by 8.5 percent.

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

Small-holder 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 is in 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.

Read: Ministry probes Sh18bn KTDA bonus for farmers

“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, whereas the green leaf, sold in the international market in dollars has fetched more in local currency terms.

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