The Government will continue to withdraw tea from the Auction if the prices do not reflect the minimum set prices, Agriculture Cabinet Secretary (CS), Peter Munya, has said.
Munya said that the Ministry is working together with the Kenya Tea Development Authority (KTDA), to ensure that there is enough storage space for tea that will not have met the set threshold for the minimum prices.
Last week KTDA withdrew tea worth Sh 1 billion, following the CS’s directive that small holder farmers should set a Minimum Reserve Price for their tea.
Speaking when he met Independent Tea producers in Nairobi, CS Munya noted that the Tea industry is important to the country and to the millions of Kenyans who depend on it.
“We cannot ignore and just look the other way and since the government set out on the reform agenda for the tea industry, we cannot expect that the tea industry will remain sustainable, if tea farmers continue producing tea at a loss,” he said.
He explained that key players at the Auction last week may have thought that the move by the government was too radical and disruptive for the industry but this, he said, was not so.
“While the new requirement may have slowed down the sale of tea at the Auction, I do want to believe that the players, particularly brokers and buyers have taken the requisite steps to align their requirement and business transactions accordingly,” Munya said.
He confirmed that the tea not sold in last week Auction will remain ready to be moved to the markets at the right price since there is now adequate storage capacity for the commodity as it awaits shipping to international markets.
The CS urged all stakeholders in the value chain to work together to ensure everyone gets commensurate earnings and guaranteed returns on their investment.
Munya went further and called upon Auction organizer to facilitate a smooth transition in view of the new changes.
He was contented that the independent tea producers, some of whom are processing green leaf from smallholder tea farmers, have come on board to support the setting of the Minimum Reserve Price at the Auction.
“We have come together to speak in one voice and to deliberate, on how we will execute this initiative, for the collective benefit of tea producers. As you are aware, Kenyan tea has always been presented to the market on the platform of quality,” he said.
However, the CS noted that there seemed to have been the lowering of Kenya’s quality standards and focusing more on delivering volumes to the Auction and this had been pinned on the independent tea producers, but said he was happy they were on board and urged them to fully embrace the reforms being rolled-on out towards making the tea industry sustainable and profitable.
Chairman, Independent Tea Producers Association, Collins Cheruiyot, said over the last year, there has been concern on drastic decline in market pricing of tea at the Auction and of concern has been that buyers bidding at prices going below the cost of production.
“This has put considerable strain on producers which in turn has reduced returns to farmers and to this end as independent producers, we support the steps set forth by the government to increase the minimum pricing at the Auction”, he said.
Cheruiyot said as an Association they have embarked on an analysis exercise within their membership, to determine what would be the ideal minimum pricing and will communicate to the brokers and Auction once the exercise is complete.
He, however, appealed to the government to step-in to curb the ever-increasing cost of production, influenced by the cost of electricity, fuel wood and labour, as well as aggressive marketing of Kenyan teas.
Peris Mudida, Ag. Director, Tea Board of Kenya (TBK), said the Board is committed to ensure the government sponsored reforms are fully implemented for the benefit of the small-scale farmers.
“Actualization of the reforms is being carried out by all the value chains. Over and above the implementation of the changes TBK is also focusing on, scouting for new markets, especially on specialized tea, as an alternative to the oversupply of black CTCs.
In the last five years tea prices have been on a steady decline with the price dropping to an all-time low of Sh195 (USD 1.80) in the last few weeks.
The industry supports over 650,000 farmers and over 6.5 million people and also earns the country over Sh120 billion annually.
By Wangari Ndirangu