Billy Muiruri
2 October 2009
Nairobi — Tea farmers will earn about Sh6 billion more this year than they did in 2008, setting the stage for a spending spree across tea belts towards the end of the year. The second payment for tea harvests, popularly known as 'bonus' and set for next month, increased by between 20 and 30 per cent per kilo this year compared to last year, buoyed by a sharp rise in global tea prices.
The windfall could, however, have been greater were it not for the effects of a drought that ravaged the country since the start of the year, leading to a drop in farm production of as much as 30 per cent.
In the first half of this year, the country's earnings from tea exports rose to Sh37.6 billion, up from the Sh31.4 billion recorded over a similar period last year. Figures indicate that prices have increased by up to 30 per cent in the past year, averaging US$2.50 (Sh190) per kilogramme and reaching a high of over US$3.50 (Sh265) for some primary grades at recent auctions in the international market.
Farmers are paid Sh10.50 per kilo of green leaves delivered every month, with the balance being paid at the end of the year as a bonus, which is determined by the value of tea sold by individual factories minus production and administrative costs. The good news will taste bitter for some farmers, however, especially the small-scale producers in the Mt Kenya region.
Experts have predicted a reduction of about 20 million kilogrammes in production this year, a figure that has been corroborated by the Tea Board of Kenya.
The situation is so bad for farmers across the tea belts of Rift Valley, Nyanza and Mt Kenya that some of those that the Saturday Nation talked to reported a 50 per cent slump in production since 2005. "This drought has really affected our production," said the Tea Board of Kenya managing director Sicily Kariuki. "We predict to have about 325 million kilos this year compared to 345 million kilos last year."
The Kenya Tea Development Agency (KTDA) says although earnings from tea have gone up significantly, what individual farmers will get is dependent on the volumes sold. The agency says although the country has been enjoying a favourable exchange rate regime, bad weather will deny some small-scale farmers the full benefits that will come with the improved prices.
"The situation is quite grave and we hope the current conditions will not take long," said KTDA managing director Lerionka Tiampati. Mr Tiampati said future projections would depend on how long the conditions last, adding that even if the short rains were to come in the coming weeks as predicted by the Meteorological Department, it would take about a month for tea bushes to recover from the prolonged stress.
Due to this low production, global tea prices have registered a steady rise in the last three years, and farmers who have not sub-divided their land into small portions will benefit more than those who are farming in less than half an acre.
Economies of scale
"It's all about economies of scale. We are encouraging farmers not to sub-divide land as this has contributed to low yields," said Mr Tiampati. Small-scale farmers constitute about 65 per cent of tea farmers in the country, and it is in areas where they are the majority that the windfall might not reach.
Large-scale farmers have increased production by 10 per cent, meaning multinational plantations will benefit most from the earnings. This, in turn, means that farmers in the western part of the Rift Valley -- Nandi, Bomet and Kericho -- will benefit more while those in the Eastern part of the valley -- Murang'a, Nyeri, Meru, Embu, Thika, Kiambu and Kirinyaga -- may be the greatest casualties as production in their areas fell by 34 per cent.
Many farmers in the Kisii region will also be affected as land under tea in the area has shrunk in the past one year. However, the amount of money that will finally get into farmer's pockets will depend on how good their tea factories have managed to cut production costs since last year.Unfavourable weather has also affected other tea producing countries such as Sri Lanka, India, and China, making demand for Kenyan tea rise. Kenya is the leading tea exporter in the world, even though it is the third largest producer.
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