•This is after stalling at an overall auction average of $1.8 in 2020/21.
•High prices to be driven by the minimum reserve price at the Mombasa auction.
Tea farmers in the country are poised for better returns this year as government reforms enter the second half of the 2021/22 financial year.
This is after the reforms, being led by the Kenya Tea Kenya Tea Development Agency Holdings, started paying off in the second quarter of the financial year which ended December, as auction prices closed at a high.
KTDA which is a provider of comprehensive services to more than 600,000 small tea farmers such as agri-extension, transportation, processing, and marketing, is keen to continue with the reforms aimed at bettering farmers' earnings and drive the government's targets of improving the country's tea sector.
The introduction of a minimum reserve price at the Mombasa auction saw prices which had stalled at an average $1.80 (Sh 203.83) for the better part of 2020/21, increase by more than 50 per cent.
According to the agency, the trend is expected to be witnessed this year, a move that will increase farmers' earnings for the current financial year ending June 30.
The minimum reserve price was set at $2.43 (Sh275.17) per kilo with KTDA teas hitting a high of $3 (Sh339.72) last year.
“We are hopeful that this trend will continue in the second half of the financial year (January to June 2022), when the full impact of the minimum price will be felt,” KTDA Holdings Limited Group CEO, Wilson Muthaura, It has been well received by the market. Since it's introduction, tea prices have improved which is a good thing for farmers.”
While it is too early to give definite figures until the current financial year closes, it is expected sustained demand and price movements will offer farmers better returns when they receive their second payments (bonuses) later in the calendar year.
This comes as KTDA moves to make the second payment under the early payment plan introduced in December.
Piloted in December for the November leaf suplied to factories, smallholder tea farmers under KTDA will going forward be receiving monies for their deliveries in the first week of the following month, translating to faster access to cash by farmers.
The change was a respeonse to farmers requests for faster remittance.
Payment for deliveries has previously been made on the third week of the subsequent month.
“ We are on course to pay farmers this week for leaf delivered in December,” Muthaura told the Star in an interview.
The move is expected to curb curb the tea hawking menace which has been threatening the industry.
“Our farmers needed immediate returns for their tea deliveries and we responded to that need by reducing the payment turnaround time from almost one month to one week. This will ensure farmers get money faster for their daily needs,” Muthaura explained.
Tea farmers have also benefited from a Sh1 billion government fertilizer subsidy announced by President Uhuru Kenyatta during his last year's Mashujaa Day celebrations, which has helped reduce the cost of a bag of fertilizer by Sh600, a big boost to farmers.
This comes after an earlier move by KTDA to procure 400,000 bags of fertilizer from local manufacturers to cover the deficit.
Farmers have already received and applied the fertilizer on their farms, the agency notes.
The shortfall was occasioned by global supply chain disruptions due to the Covid-19 pandemic, where global suppliers of the raw materials used to make the fertilizer were unable to get the initial required quantities to meet the demand.
KTDA also supplies fertilizer to third part tea companies all over East Africa. Currently, there is no deficit, it says.
The agency has also reduced interest rates on loans for farmers ( Greenland Fedha) interest rates from 21 to eight per cent.
Greenland Fedha exists to offer farmers small loans using their tea as collateral.
During the agitation for reforms, KTDA had promised farmers that it would reduce interest on these loans.
“We have fulfilled this promise which will make access to credit easier for our farmers to meet their personal financial obligations,” Muthaura said.
Meanwhile, KTDA is pushing to expand the country's tea export markets. Currently, Pakistan absorbs up to 40 per cent of Kenyan tea exports.
This comes amid a pick in the global market after a 14 per cent drop in the local green leaf production in the 2020/2021 financial year. The trend has continued in the current financial year.
“The global market has been picking up in the period to December 2021 and as we start 2022, we hope the market continues to respond positively. We have been pushing tea to more markets globally where we hope to offload more teas,” said Muthaura.
Kenyan farmers produce among the best quality of teas in the world, which according to governent, there is need to fetch the highest possible price.
“We would like to encourage farmers to continue growing tea as we push for more reforms in the sector. Our main goal is to ensure more money in farmers pockets. The board urges farmers to enhance tea production and improve on tea quality to sustain the high tea prices currently being enjoyed in the market,” said Muthaura.