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Tea Prices Set to go Up Despite Low Production

The government is working on modalities to stabilize and improve the price of Tea prices even as the country posted a slight fall in production compared to last season.

Agriculture Cabinet Secretary Peter Munya expressed fears that production of Tea in the current year will significantly come down going by production figures in the first five months of the year.

“Production stood at 230 million kilograms against 254 million kilos the same period last year thus the country already has a deficit of 24 million kilos,” Munya said.

Speaking to the press on tea prices at a Nairobi hotel, Munya said smallholder tea producers shall now set a reserve minimum average price at the Auction based on the cost of production, the grade of the tea and a reasonable return to the tea farmer.

The CS said in the last few weeks a sharp decline in tea prices at the Mombasa Tea Auction has occurred with the average prices recorded having dropped to an all-time low of USD1.80.

“This is much lower compared to an average price of USD2.09 recorded during the same period last year and USD2.23 for the same period in the year 2019,” Munya said

He said the price is not only lower compared to the previous years but is also almost at par with the cost production which currently stands at approximately USD1.70 and therefore not sustainable as farmers are now operating at a loss.

Munya noted that parties in the auction system are expected to give support to the smallholder tea farmers to ensure sustainability of the tea sub-sector and continuous supply of high-quality tea to the auction and our export markets.

He said projections show that there will be significant reduction in production for the remainder of the year to a level that will make it impossible for the produce to be readily absorbed by the market.

“This is the time we should now be realizing fairly improved tea prices than what is currently being recorded at the auction”, Munya said.

Smallholder producers, the CS also explained are expected to strategically manage their supplies of black CTC to the Auction and this will include diversification into Orthodox tea production which should be enhanced especially during the flash periods.

“The Government is willing to partner with the smallholder producers to facilitate diversification into Orthodox tea manufacture as well as in its marketing and promotion,” Munya said.

The CS further said that the smallholder producers will be required to reengineer their processes in order to cut down on operational inefficiencies and wastage.

Government through the Ministry and in collaboration with other state agencies will facilitate support for reduction of farm inputs costs 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 and with regard to storage, exploring the use of existing Government storage facilities around the smallholder tea factories.

He reiterated that smallholder producers must explore competitive rates for transportation of the tea to the storage facilities as the “first mile” as this will lead to significant savings and consequently enhanced growers’ earnings.

Meanwhile, The CS said tea factories management together with the Tea Board of Kenya and other relevant government agencies will be expected to urgently address the malpractices surrounding the falsification and manipulation of weighing of green leaf at tea buying centers with a view to ensuring that farmers derive maximum benefit from their produce.

On the new leadership in the smallholder sub-sector that takes charge in the factories and at the KTDA Holdings, Munya said he expects that they will immediately commence the implementation of the reforms contained in the Tea Act, 2020 and which are geared towards facilitating improved farmers’ earnings as well as a competitive and sustainable tea sub-sector.

The Tea smallholder sub-sector accounts for 56 percent of the national production is the most affected by production and also in pricing and this is a threat to the livelihoods of over 620,000 smallholder farmers and the country’s socio-economic growth.

According to CS Munya, 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 tea value directly and indirectly.

The Tea reforms agenda engineered by government is geared towards transforming the pricing mechanism through automation of the Auction trading platform and whose system has already been implemented

By Wangari Ndirangu

 

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