COMMODITY

Smallholder tea farmers set to receive second payment bonuses

They are set to receive the payments at the end of October 2021

In Summary
  • This follows meetings by factory directors from the 54 KTDA-managed factories that were held between September 20 and October 1.
  • The second payment declarations come against a backdrop of a 8.3 per cent drop in CTC tea prices at the Mombasa Tea Auction.
Farmers pick tea leaves in Othaya in Nyeri County
Farmers pick tea leaves in Othaya in Nyeri County
Image: EUTYCAS MUCHIRI

Smallholder tea farmers can now smile to the bank after KTDA factories announced the second payment for bonuses for the year ended June 2021.

This follows meetings by factory directors from the 54 KTDA-managed factories that were held between September 20 and October 1.

In the meeting, they reviewed the audited 12 months accounts, covering July 1 2020 to June 30 2021,of their factories and declared the second payment rate

Factory directors have fulfilled their mandate to review the performance of their companies over the 12 months and declare the second payment rates,” said David Ichoho, KTDA Holdings Chairman.

Farmers will receive this payment in their accounts at the end of October 2021,” he added

Ichoho noted that the rate per kilo does not vary much from those of the previous financial year

The second payment declarations come against a backdrop of a 8.3 per cent drop in CTC tea prices at the Mombasa Tea Auction.

The prices dropped from an average of $ 2.38(Sh262.99) in the last financial year(2019-2020) to $ 2.18(Sh240.89) in the 2020-2021 financial year ending June 30 2021.

During the financial year under review farmers delivered 1.25 billion kilos of green leaf to factories during the year, a 14 per cent drop from 1.45 billion kilos delivered in the same period last year

The relatively favourable exchange rate of the Kenya Shilling to the US dollar however helped shore up earnings from the sale of tea, which is generally dollar-denominated.

The drop in prices in the period under review was a continuation of a downward trend witnessed since 2018 as high production over the years saw supply outstrip demand and tea processors carrying forward unsold stocks.

Business was also disrupted by the Covid-19 pandemic that not only caused worldwide shipping and logistics challenges but also reduced demand for tea in key consuming countries.

Factory companies pay a different second payment (bonus) rate per kilogram of tea to farmers.

This rate depends on the factory income for the year based on the average price of tea fetched at the auction, costs of production, labour and other related costs.

The costs are deducted from the factory income and the balance paid to farmers as a second payment (bonus).

Factories also make a monthly payment to farmers.

To mitigate Kenya's market concentration risk on black teas as well as overreliance on four main markets which account for 70 per cent of our tea exports, KTDA-managed factories have embarked on production of orthodox teas that are gaining global popularity and fetching better prices.

To further reduce ballooning energy costs, KTDA-managed factories are implementing energy efficiency changes that have seen the amount of energy used to produce a kilo of tea drop by 15 per cent over the last three years.

Factories in some tea growing regions are also developing small hydropower stations to produce cheaper and more stable power supply.

The newly inaugurated Board has put in place a number of measures to improve the welfare of farmers under the tea reforms agenda.

These include setting a minimum $2 reserve price for KTDA teas, a move that has led to improved tea prices at the market.

We have embarked on various reforms and initiatives aimed at increasing money to farmers. The reforms are already bearing fruit and farmers should look forward to higher returns in the coming months,” said Ichocho

Already, prices of teas under the reserve price have improved significantly, heralding better incomes for farmers at the end of the current financial year, ending June 2022.

For instance the value of tea at the Mombasa auction last week rallied to the highest mark this year on the back of the reserve price set by the government.

The commodity hit Sh240 ($2.18) per kilo on average from Sh232 ($2.10) in the previous week.

The Board has also spearheaded the supply of fertilizer to farmers and considerations are at an advanced stage for a Sh1billion subsidy from the government to cushion farmers from the high cost of the input.