Agriculture, Fisheries and Food Authority
Tea Directorate
PRESENTATION ON KENYA TEA INDUSTRY
PRESENTATION OUTLINE
INTRODUCTION
THE PROBLEM STATEMENT
REVIEW OF STATISTICS
DISCUSSION POINTS
INTRODUCTION
Tea Industry Contributes immensely to socio-economic
development of the country :
• It is the leading foreign exchange earner-26% of the total
foreign exchange earnings.
• 7% of the GDP.
• livelihood support to over 5 million Kenyans.
• Contributes to Rural development and employment in 18
Counties .
• 95% of Kenya tea is exported to over 60 market
destinations.
• In 2014, the tea industry earned the country Ksh. 101
Billion in export earnings and Ksh. 22 Billion in local sales.
• Tea Industry is a strategic subsector in the overall economy of
Kenya .
ROLES OF THE TEA DIRECTORATE
Guided by Crops Act 2013, the Directorate conducts:

Regulation and compliance

Industry planning and development

Advocacy

Market and product Research

Trade Promotion

Organizational capacity and service delivery
enhancement
A SUSTAINABLE AND GLOBALLY COMPETITIVE
TEA INDUSTRY
PRODUCTI
ON
PROCESSIN
CONSUMERS
GOVERN
MENT
(NATIONA
L&
COUNTY)
TEA
DIRECTO
RATE
AND
TEA
RESEAR
CH
WHOSALER
S
G
INDUSTRY
REGULATIO
N AND
DEVELOPME
NT
TEA TRADE
/RETILERS
BLENDERS /
BRANDS
INDUSTRY VALUE CHAIN
NATIONAL GOVERNMENT (POLICY FORMULATION)
COUNTY GOVERNMENT (POLICY IMPLEMENTATION)
TEA DIRECTORATE (REGULATION AND DEVELOPMENT )
TEA RESEARCH INSTITUTE (RESEARCH & INNOVATION )
TEA
GROWERS
0VER
700,000)
MANUFAC
TURE (120)
BUYERS
(80)
BLENDES
RS AND
BRANDS
RETAIL
ERS
CONSU
MERS
AUCTION
BROKERS
WHOL
ESALER
S
WHAREHO
USING
PROBELEM STATEMENT
Year 2013 /2014 witnessed a drastic turn of
fortunes with tea prices at the Mombasa
auction, the main outlet for the smallholder
farmers, dropping significantly by 30%
Consequently, (KTDA) failed to declare the
initial lump sum payment to farmers, popularly
referred to as “Mini-bonus, causing a national
outcry by tea growers.
PROBLEM STATEMENT
Government raised concern about the situation
and decided to look into ways to mitigate against
the negative impact of the low prices so as to
ensure that the tea sector remains sustainable and
competitive
The President gives a directive in June 2014,on
the establishment of a Price Stabilization Fund
to cushion farmers in times of low prices
PROBLEM STATEMENT
Overall objectives of this assignment
is to implement the Presidential
Directive by recommending the most
appropriate price stabilization scheme for
the tea growers in Kenya
RISING COST OF PRODUCTION
PRODUCTION DATA
No of Growers
Estates
SmallHolders
Total
32,786
595,152
627,938
Area(ha) Production
65732
150,981,510
124985
190,717
218580414
369,561,924
PRODUCTION DATA
10 YEAR SUMMARY OF GREEN LEAF
PAYMENT (SMALLHOLDERS)
FINANCIAL
YEAR
TOTAL WEIGHT
DELIVERED BY FARMERS
KGS
FIRST
SECOND
TOTAL
1ST & 2ND
AVG. PAYMENT
AVG. PAYMENT
AVG. PAYMENT
PAYMENT
RATE/KG/GL
RATE/KG/GL
RATE/KG/GL
KSHS
2004/2005
753,925,730
9.00
11.75
20.75
15,475,299,489
2005/2006
727,824,118
9.00
15.27
24.27
17,660,692,876
2006/2007
914,708,202
10.50
10.85
21.35
19,187,243,360
2007/2008
813,641,578
10.50
14.13
24.63
19,781,669,971
2008/2009
726,269,270
10.50
24.66
35.16
25,411,417,801
2009/2010
888,704,028
11.50
31.52
43.02
38,228,154,316
2010/2011
837,370,088
12.00
36.40
48.40
40,525,847,694
2011/2012
906,274,568
12.50
37.51
50.01
45,317,098,263
2012/2013
1,123,909,348
14.00
31.65
45.65
51,303,667,428
2013/2014
1,124,328,441
14.00
17.61
31.61
35,543,621,836
PRODUCTION DATA
PRODUCTION DATA
PRODUCTION DATA
PRODUCTION DATA
PRODUCTION DATA
PRODUCTION DATA
(i) Manufacturing/Processing
Costs
Labour
Furnace Oil
Electricity
Fuelwood
Leaf Collection
Packing Expenses
Administrative Costs
Management fees
Financial Costs
Selling Expenses
Sub-total (K.sh)
Sub-total (USD)
2009/1 2010/ 2011/ 2012/ 2013/
0
11
12
13
14
12.97 11.17 12.54 12.24 13.00
4.08
0.92
1.18
0.40
0.09
9.27
9.23 11.70
9.66 10.40
3.89
5.91
7.12
7.68
7.84
4.26
3.30
3.92
3.66
3.54
5.56
5.87
6.63
6.49
6.23
11.12
8.81 10.40
9.42 10.21
6.34
6.70
6.39
4.91
9.27 10.24 11.04
9.43 10.27
5.03
5.66
5.43
6.62
60.42 66.82 76.89 70.8 73.11
0.78 0.84 0.87 0.79 0.85
25% 27% 27% 24% 35%
PRODUCTION DATA
(ii) Farm gate Costs
Fertilizer
Plucking Labour
Miscelleneous -weeding & other
costs
Sub-total
COP Grand-total (K.sh/Made
Tea)
COP Grand-total (USD/Made
Tea)
AUCTION PRICE AVERAGEsmallholder
2009/1 2010/ 2011/ 2012/ 2013/1
0
11
12
13
4
5.67
32.00
4.78
25.50
6.96
32.00
6.35
39.90
5.64
34.00
17.00
17.00
17.00
16.53
14.88
54.67 47.28 55.96 62.78
54.52
115.09 114.10 132.85 133.58 127.63
1.49
1.44
1.50
1.50
1.48
3.11
3.07
3.20
3.26
2.43
PRODUCTION DATA
MARGIN/KG OF MADE TEA
Smallholder average area under tea-ha
1.62
0.5
1.63
0.5
1.70
0.5
1.76
0.5
0.95
0.5
Smallholder productivity/ha
1,609
1,956
1,771
1,749
1,962
Smallholder average production/Year
804.55
977.98
885.66
874.43
980.88
Smallholder average Net Margin/Year
1304.59 1592.97 1509.26 1541.93
928.53
Smallholder average Net
Margin/Year/K.SH
100,871 126,122 134,038 137,623
79,893
Smallholder average Net
Margin/Month/K.SH
8,406
10,510
11,170
11,469
6,658
Smallholder average Net Margin/Day/USD
3.6
4.4
4.2
4.3
2.6
Working parameters
Exchange Rate
77.32
79.17
88.81
89.25
86.04
Fertilizer Cost per Bag of 50 Kgs
Fertilizer application-Bags/ha
Cost of fertilizer per ha
Productivity-Made Tea/Ha (Kgs)
Cost of fertilizer per Kg of Made Tea
smallholder average area under tea-ha
1,825
1,871
5
9,125.00
1,609
2,466
5
5
2,214
5
5
9,355.00 12,330.00 11,105.00 11,070.00
1,956
5.67
0.5
2,221
1,771
4.78
0.5
1,749
6.96
0.5
1,962
6.35
0.5
5.64
0.5
DISCUSSION POINTS
FAO COMPOSITE PRICES INDICATE A PRICE DROP OF 12% WHILE
KENYA AUCTION PRICES DROPPED BY 30% IN 2013/14
THE NATIONAL TREASURY DOES NOT SUPPORT A PRICE
STABILISATION FUND,CITING THE EXPERIENCE OF THE COFFEE
STABEX FUND (2000),AMONG OTHERS
KTDA COMMENTS ARE THAT WITH REDUCED GROWER EARNINGS
,ITS NOT FAIR TO BURDEN THE TEA GROWER WITH ADDITIONAL
CONTRIBUTIONS TO THE FUND
OPTIONS FOR DELIBERATIONS
A PRICE STABILISATION FUND SUPPORTED BY
GOVERNMENT,INDUSTRY OR A MIX OF BOTH
USE MARKET BASED RISK APPROCHES ,FORWARDS ,OPTIONS
,FUTURES ETC
USE OF SUBSIDIES
INPUT SUBSIDIES ETC
OPTIONS FOR DELIBERATIONS
USE OF CROP INSURANCE APPROCHES
VALUE CHAIN INNOVATIONS
A MIX OF THE ABOVE OPTIONS
BASED ON SHORTTERMAND MEDIUM TERM SOLUTIONS
THANK YOU