Tea farmers earn Kshs 62 Billion bonus

The CS Agriculture, Livestock, Fisheries and Cooperatives Kenya, Hon. Peter Munya has today announced Sh62.89 billion total payments to smallholder tea farmers for the 2021/22 financial year (July 2021-June 2022).

Compared to Sh44.15 billion earned in the 2020/21 financial year, this represents a 42.4% increase (Sh18.74 billion) in earnings.

CS Munya says this amount is the highest ever paid out to KTDA smallholder tea farmers and surpasses the Sh62.35 billion paid out in 2018 and effectively halts a three-year decline in farmers’ earnings.

 Unlike in previous years where the farmers were paid their final pay in the month of October, this year, tea farmers will receive their dues in the month of July. The average total earnings per kilo of green leaf in the financial year is Sh50.9 compared to Sh34.71 in the previous year to June 2021, representing a 44.6% growth.

Part of this amount has already been paid out to tea growers as monthly and interim payment with the balance set to be paid out this month as the final payment.

The CS attributes this performance to the minimum reserve price introduced by the government in July 2021 to arrest the continuous decline in tea prices at the auction. Other factors mentioned include “favourable exchange rates and improved management of tea factories, reduction in production costs through efficiencies in production and improvement in the quality of tea”.

Price of teas from smallholder tea factories at the auction averaged USD 2.76 in the 2021/22 financial year, up from an average of USD 2.18 in the 2020/21 year, a 26.4% increase. This was despite economic challenges experienced in key markets like Sudan and Pakistan as well as the impact of the Russia-Ukraine war. The weakening of the Kenyan shilling against the US dollar also boosted farmers’ earnings as tea exports are paid for in US dollars. Kenya exports more than 95% of its made tea. The average exchange rate of the Kenyan Shilling to the US dollar during the financial year was Sh112.7 compared to Sh108.7 in the year 2021.

Factories in the west of Rift had the highest improvement in payment with an average increase of more than 55.1% (per cent) while those in the east recorded a 38.1% growth.

Factories which recorded the highest increment in total payments this year include Sanganyi (100%), Kiamokama 84% and Kapsara (81%). This year Sanganyi will pay its tea farmers Kes 48 per kilogram of green leaf tea compared to last year when they were paid Sh 24.

Kericho/Bomet (region 5) recorded the highest earnings with the farmers in the region earning 15.27 billion shillings. They were closely followed by the farmers in region 2 (Muranga/Nyeri) who will pocket, 13.19 billion shillings.

The Government introduced a reserve price of USD2.43 per kilo of made tea in July 2021, informed by a deteriorating market that had seen selling prices nearly slip below the cost of production. Averages prices of made tea had declined by 30% between 2017/2018 and 2020/21 financial year. Total payment to the farmers within the same period had dropped by 29% while payment rate dropped by 33%. The tread was on a downwards spiral and the prices had hit a low of USD 1.9 before the introduction of reserve price. Other changes introduced during the year include early monthly Greenleaf payments for their green leaf on the first week of the month from the traditional third week; and an increase in monthly payment to Ksh20 for 6 region five (up from Ksh18 in region five and Ksh17 in region six and seven) and Ksh21 for regions one to four.

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