18 Jul

What you need to know:

  • Auction tea prices shall not fall below Sh268 (US$2.43) per kilo, while the cost of producing a kilo of made tea has been capped at Sh84.17.

The Kenya Tea Development Agency (KTDA) has set the minimum reserve price for processed tea at the Mombasa auction in an unprecedented move aimed at cushioning smallholder farmers.

As a result, auction tea prices shall not fall below Sh268 (US$2.43) per kilo, while the cost of producing a kilo of made tea has been capped at Sh84.17. 

The move comes after Agriculture Cabinet Secretary Peter Munya raised the alarm over declining tea prices at the auction, which hit an all-time low of Sh194 (US$1.80) this week. 

According to the Agriculture CS, the price decline is lower compared to previous years and was almost at par with the cost of production of Sh183 (USD1.70) per kilo. 

“The low tea prices are a threat to the livelihoods of over 620,000 smallholder farmers and the country’s socio-economic growth. If this worrying trend is not urgently addressed, there is a high risk that farmers may abandon tea farming and shift to other economic activities, thus affecting the over 6.5 million Kenyans who depend on the crop,” Mr Munya said in a statement at Serena Hotel in Nairobi.

“Bold step”

KTDA chairman David Ichoho termed the decision a “bold step” while committing to ensure consistent production of quality tea. “Over the years, we have observed that when total green leaves payment is about Sh50 per kilo, there is relative comfort among farmers…” he stated. 

The prices to be regulated by Mr Munya are for processed tea, which is sold at the auction while green tea prices are paid for by KTDA. The KTDA board also called for cooperation among players towards implementation of the measures. 

Mr Munya argued that while tea glut was being blamed for the price slump, the production of the first five months of this year was much lower compared to last year. He noted that 230 million kilos were produced in the first five months compared to 254 million kilos in the same period last year hence making it possible to absorb the excess stock from 2020.

Key measures

While terming the trend worrying, Mr Munya recommended four measures aimed at ensuring sustainability of the tea industry. Among the measures are the setting of a reserve price, diversification into orthodox tea, lowering of production costs and elimination of malpractices in the production process. 

“The government is willing to partner with the smallholder producers to facilitate diversification into orthodox manufacture as well as in its marketing and promotion...” 

“The government will facilitate support for reduction of farm input cost and costs associated with storage, transportation logistics and port handling. Specifically, my ministry is exploring the possibility of the use of SGR as an affordable alternative for transporting tea to the port of Mombasa,” the CS said. 

Mr Munya further said that the government would make storage facilities available around tea factories in efforts to help cut costs. The new KTDA board took office two weeks ago with Mr Ichocho elected as chairman and Dr Wesley Koech as vice-chairman. However, the ousted directors have contested the takeover in court where they want CS Munya cited for contempt. 

Source: Nation Media