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AGRICULTURE-KENYA: Finally, a Windfall for Tea Farmers

Suleiman Mbatiah

NAIROBI, Oct 30 2009 (IPS) - Despite the sweltering sun and with a heavy load on her back Mary Muthoni strides to the tea buying centre with joy and pride painted on her face. "This is a different year," she smiles, hurriedly greeting other women farmers at the centre. For them, the story is the same: blessings in times of calamity.

The Kenya Tea Development Agency (KTDA) has announced a major increase of 28 percent in farmers’ earnings. Kenya is the world's largest exporter of black tea. It produced 345 million kg in 2008.

In what is a record year for small-scale tea farmers in the country, the average rate payable per kg of green leaf delivered to factories has increased significantly. "Last year, we could only go home with a total of 0.33 dollars per kilogram but today everyone is leaving with 0.47 dollars in most factories in the country," explains the overjoyed Muthoni.

Income from tea reached an unprecedented 332 million dollars for the 2008-2009 financial year, up from about 265 million dollars for the previous year.

"We are now able to pay our casual tea pickers and be left with something to feed and educate our children," Muthoni adds.

Previously, farmers got a negligible fraction of the overall income. After paying the tea pickers at 0.07 dollars per kg, the rest of the cash had to cover overhead costs like fertilisers, pruning, transport, weeding and other costs.

Of the 332 million dollars, about 106 million dollars has already been paid out to farmers. During this month the balance was to be paid out. In all, this represents a major increase over the 146 million dollars earned the previous year.

The second payment will be paid at an average rate of 0.33 dollars per kg of green leaf, as opposed to the 2007-2008 average rate of 0.19 dollars per kg of green leaf.

KTDA’s managing director, Lerionka Tiampati, says the record earnings by KTDA’s 500,000 small-scale farmers are the rewards of efficient factory processes; improved auction prices caused by high global demand that has been driven by the prolonged drought; and favourable exchange rates.

"As the drought persisted over the year, production fell by as much as 30 percent, helping to push up prices at the auction," Tiampati explains.

He adds that the reduced global production of green leaf tea saw demand for Kenyan tea surge at the auction and prices improve fractionally. Prices have increased by up to 30 percent in the last year.

While, on the one hand, the drought brought good tidings to farmers, on the other its severity soon became a cause of great concern as the drastic fall in volumes and persistence of the dry spell denied them an opportunity to take full advantage of the improved prices. "My harvest has gone down drastically," says a farmer. "I am almost delivering half of what I used to a few years ago although I am getting much more money than I used to."

The hot and dry weather conditions that prevailed in tea growing areas east of the Rift Valley led to reduced production. Tea output in the region dropped from 40 million kg, recorded in Jan last year, to 23.3 million kg.

However, according to Tiampati, despite the prolonged drought farmers were enjoying record earnings because the exchange rate had also been favourable to exporters, averaging Ksh76 to the US dollar.

Tea factories in the country have also had reasons to celebrate amid the drought pangs. Of all 60 factories under the KTDA management, 18 top performing factories have managed to attain an average net return to the farmers of 73 percent. According to Tiampati this has reflected an overall improvement in efficiency and cost management at the factory level.

Farmers in Kenya are paid in quantity of green leaf delivered. It takes on average four kg of green leaf to produce one kg of tea.

One year ago, farmers were uprooting their tea bushes citing low returns. Most of this happened in the tea farming areas of Othaya, Muthithi, Kirinyaga and and Murang’a in central Kenya. Experts in the agriculture sector argue that the current tea shortage in the market could also be attributed to this massive uprooting of tea bushes in key production areas.

Despite challenges, comparative country figures show that Kenya’s small-scale farmers are the highest paid in the world, at 0.47 per kg of green leaf in the year under review. Sri Lanka is at an 0.30 dollars, Nepal at 0.23 dollars, India at 0.20 dollars and Vietnam at 0.16 dollars.

Among other African producers, Rwanda pays its farmers at a rate of 0.15 dollars per kg, followed by Uganda at 0.11 dollars, Malawi at 0.10 dollars, Tanzania at 0.09 dollars and Burundi at 0.08 dollars. Tiampati outlines significant steps the agency has taken this year to diversify its operations, apart from tea processing and marketing, in order to face the challenges of a constantly changing market and to add value.

In June, a power purchasing agreement was signed with the Kenya Power and Lighting Company to enable Imenti Tea Factory, which it manages, to sell surplus power from its mini-hydro project to the national grid.

Farmers have for a long time requested KTDA to provide financial services to help them cope with the high cost of borrowing and the rising cost of farm inputs.

The profits from these initiatives, if any, will be paid out as dividends to the small-scale tea farmers, who own KTDA through their factories.

Farmers point out that the profits translate into better living standards and improved morale about their venture.

Operations in the factories have also been automated to further reduce costs and improve efficiency in tea processing. Continuous fermentation units (CFUs), a revolutionary addition to the tea processing chain, have been installed in virtually all factories across the country.