STiR coffee and tea magazine

16 STiR coffee and tea | 2024 Issue 5 (October / November) Kenya's Tea Bonus Crisis Kenya's small tea growers rejoiced two years ago after receiv- ing record green-leaf bonuses averaging KSh 50.2 per kilo, a sharp increase compared to the previous year's KSh 35 average payouts. Good fortune followed in 2023 when tea growers received an increase in monthly payments from KSh 21 to KSh 25 per kilo for green leaf. Favorable weather and ample fertilizer led to a 570 million kilo bounty of tea in 2023. In 2024, instead of splurging for the holidays, the 680,000 Kenya Tea Development Authority (KTDA) smallholders relying on the year-end payout now share a widespread concern that the bountiful harvest on which the bonuses are based will not have been sold before the October end of the fiscal year. KTDA controls 48.8% of the combined export and domestic tea market. The year-end bonus KTDA farmers received for the past two years was paid with borrowed money. China Warns Medicinal and Pu'er Tea Market Investors to Halt Speculation China's Administration for Market Regulation recently published anti-monopoly guidelines for the pharmaceutical sector, including teas and herbs used in Chinese Traditional Medicine (TCM). According to Reuters, the guidelines suggest closer scrutiny of unregulated tea and herbal ingredient markets. The Kangmei Chinese Medicinal Material Index, a measure of investment activity in tea and herbs, hit a record high in July as some medicinal leaves, roots, and bark tripled in price. The spike is attributed to speculators and prompted official warnings for speculators to stop pumping up the market and to the public "not to get consumed by the fever of fast-rising prices." Reuters writes, "The speculative frenzy comes at a time when the economy is struggling to grow as it grapples with deflationary pressures and weak consumer demand." Trading has been brisk in the premium Pu'er sector of the tea market. Experts say Pu'er, typically sold in 137g "cakes," improves in quality as it ages. Pu'er cakes are traded and Amateur Pu'er speculators lost millions trading tea in 2006-07. The Nation writes, "Indications suggest that farmers might see a reduction in their bonuses compared to the previous year." In addition, the year-end bonus KTDA farmers received for the past two years was paid with borrowed money, increasing operating costs. The precise amount of the surplus is unknown, but Kenya's Principal Secretary of Agriculture Paul Ronoh estimates that KSh 32 billion worth of tea remains unsold. Estimates range from 100 to 200 million kilos. He said some KTDA teas have been returned to the auction floor as many as 32 times. The Tea Act of 2020 requires KTDA to sell its tea at auction. Rates of absorption remain low in Mombasa. Follow- ing a court decision setting aside the requirement, most of the surplus is being sold direct and at a discount. "We have sold over 45,000 metric tons of the outstanding stock and expect the remainder to be cleared soon," said Ronoh. Deputy President Rigathi Gachagua has asked KTDA to clear ware- housed stocks in Mombasa before the end of the year. KTDA said it will borrow as much as required to make the annual payout due in October. Officials warned that KTDA debts would make additional borrowing expensive and likely require a consortium of banks to share risk. In 2022, KTDA mortgaged its shares for KSh 18.2 billion (about $140.5 million) to pay an early bonus to farmers before the national election. In 2023, KTDA borrowed an additional KSh 4 billion through an inter-factory lending program to shore up underperforming factories. The board also obtained KSh 50 million from banks, according to a report in Business Day Africa. KTDA's final 2022 bonus totaled KSh 37.11 billion. Combined with monthly payments of KSh 26 billion, the fiscal year 2021/22 payout was a record KSh 63 billion – an increase of 42.4%, amounting to nearly KSh 20 billion—the highest ever paid farmers in a year. By Dan Bolton Tea Report

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