Next week, smallholder tea farmers are set to receive a historic final payment of Sh44.15 billion for their supplies in the financial year ending June 30. The Kenya Tea Development Agency (Holdings) Limited (KTDA) will disburse this bonus, also known as a bonus, to approximately 600,000 farmers associated with its 54 factories over the next two weeks, starting from Monday. This bonus will be distributed alongside payments for the green leaf supplied this month.
This payout is expected to raise farmers’ total earnings for the year by 7.6 percent, reaching a record high of Sh67.7 billion, compared to Sh62.89 billion at the same period last year. The increase in farmers’ earnings is primarily due to improved tea prices in the international market, where the average selling price of tea rose to Sh341 per kilogram from the previous Sh311 per kilogram.
“This year’s total payout to smallholder farmers is attributed to increased sales volume, prudent cost management, and a favorable foreign exchange regime. Further, increased sales of orthodox tea this year have contributed to higher earnings for farmers with 10 million kilogrammes of orthodox tea having been sold this year from 11 factories that are processing the tea up from three million kilograms last year,” KTDA Holdings Limited Group Head of Corporate Affairs Ndiga Kithae told the Business Daily.
As a result, tea farmers are projected to earn an average of Sh59.02 for every kilo of green leaf sold, marking a significant 17.6 percent increase in their average total earnings per kilo compared to last year’s Sh50.18.
However, the sector’s increased earnings come despite a notable nine percent decline in green leaf production. In the fiscal year ending June, green leaf production dipped to 1.145 billion kilograms from 1.254 billion kilograms in 2022, marking the sector’s lowest output since 2019.
This drop in tea production can be attributed partially to adverse weather conditions, including drought and reduced rainfall, which significantly impacted farm output. Consequently, the agriculture sector contracted by 1.6 percent last year. Drought conditions in 2022 had a substantial impact on agricultural production, with tea production falling from 537,800 tonnes in 2021 to 535,000 tonnes, as reported by the Kenya National Bureau of Statistics.
The Kiambu region, housing factories in Kambaa, Kagwe, Gacharage, and Nduti, experienced the most substantial decline in production, with output decreasing by 15.2 percent. Similarly, the Kericho and Bomet region saw a contraction of 14.3 percent in output, while production in the Kisii and Nyamira region dropped by 8.5 percent.
Despite these challenges, farmers in the Kericho/Bomet region will receive the majority of the green leaf payout, totaling Sh16.1 billion, owing to their contribution of 305.4 million kilograms of tea in the cycle.