Factories managed by Kenya Tea Development Agency (KTDA) are now operating below average following a sharp drop in the amount of green leaf delivered by farmers, with the worst hit areas being Kirinyaga, Nyeri and Embu counties.
Green leaf delivery by farmers has dropped by 25 per cent to 705.2 million kilogrammes in the nine months to March compared to 936.6 million kgs in a similar period last year.
The production dip and lower prices at the Mombasa Tea Auction mean that KTDA is unlikely to match the Ksh84 billion generated last year translating to lower earnings for the 560,000 smallholder farmers.
The sharp drop in green leaf production has been attributed to the acute prolonged dry spell. February was the worst hit month with green leaf delivered by farmers dropping 52 per cent to 54.3 million kilogrammes compared to 114 million kilogrammes in February 2016. March saw a drop of 35.8 per cent to 77.9 million kilogrammes.
KTDA chief executive Lerionka Tiampati said factories in the worst hit areas are operating for only two days per week to reduce operating expenses among other cost-cutting measures that have been put in place.
The sharp drop in production has been heightened by the stark differences in weather over the two years. The El Nino rains in the 2015/16 year led to a bumper crop while the prolonged dry spell in the current 2016/17 has depressed output.
Rainfall recorded in the small holder tea growing areas decreased to 761.5 mm in the nine months from 1360.2mm with January registering the least amount at 23.5mm compared to 134.7mm in January 2016.
This year’s production is however largely in line with the average annual green leaf delivery bar exceptional years that see above normal rainfall. In 2014/15 for example, farmers had delivered 770 million kilogrammes to KTDA factories in the nine months to March.
Prices at the Mombasa Tea Auction have also been lower at an average USD2.5 per kilogramme of tea in the nine months to March. This compares poorly to the USD2.74 average for a similar period last year.
The depressed prices are mainly attributed to the surplus tea in the market carried over from last year. Data shows that in the year ending June 2016, the global tea market had a surplus of 179 million kilogrammes. This extra tea has kept prices low in the current year despite the depressed production.
More recently, the closure of the Pakistan/Afghanistan border in late February depressed tea prices at the Mombasa Auction. Pakistan is Kenya’s biggest tea buyer with a significant portion of it re-exported to neighbouring Afghanistan.
KTDA is Kenya’s largest tea producer responsible for 60 per cent of Kenya’s tea production and exports. The remaining 40 per cent is produced mainly by multinationals in Kericho, Kiambu and Nandi.
KTDA has in the past ten years introduced reforms and investments to lower cost of production and enable farmers manage their businesses prudently in a bid to boost earnings. These include management of energy consumption and currently, mini-hydros are being established to provide stable and reliable power.
Gitugi Tea Factory recently won Best Energy Management Award in the tea sector as well as Best Energy Management Award Small Consumer highlighting the aggressive drive by Kenya Tea Development Agency Management Services (KTDA MS) for energy efficiency in its factories.
KTDA has also introduced a major financial literacy initiative in partnership with IFC to equip farmers with business management skills and enable them diversify their operations beyond tea.
The initiative further has a component for sustainable agriculture where farmers are trained to manage their tea farms professionally for increased yields.