In my last Op-ed Article, I tried to bring out how the tea industry finds itself at crossroads with the concerns and opportunities especially with the supply side of the tea value chain affecting smallholder farmers. I feel a lot inclined digging deeper into what should be next.
Many tea farmers keep asking when shall they ever go back to their lost glory. The days when bonus would be paid and their fortunes would change overnight. With the cost of living hitting the roof, this can only happen if they earn more per kg of green leaf, enough to cover for the inflationary pressures. All actors along the value chain need to do everything possible to cut costs while also improving on the export prices.
In the just released Tea Industry Performance Report 2023, export unit price dropped to $2.47 per Kg compared to $2.62 per kg in 2022. Luckily the exchange rate was favourable at 139.85 in 2023 compared to 117.87 in 2022, making the unit price per kg Kshs.345.32 compared to Kshs.306.64 in 2022. The drop in average export prices in dollar terms should be a worry to the tea industry with appropriate explanations on why this happened and the measure being put in place to prevent further drop. The bumper harvest of 570 million kgs following very favourable weather calls for even higher concerted efforts to ensure all these teas get a market. Encouragingly, these production levels have been achieved in the past with good success offloading the same into the market.
We all know price follows quality, especially in tea. There has been claims that quality of teas being offered in the market has dropped. There is need for the Tea Board of Kenya, the Ministry and other relevant public institutions to drive a national tea quality improvement programme using measurable values with clear quality targets and roadmaps. Modern science confirms this is doable.
The industry must not lose any opportunity to cut costs by creating efficiencies and improving on productivity. Sadly, it takes over 60 days to convert tea into money after production, yet nothing else is done to that tea part from putting it on a trading platform for Buyers to bid. Modern science can be used to cut this time cycle to under 20 days, saving tea farmers from unnecessary heavy commercial borrowing to meet cashflow needs. The cost price for this at the current interest rates is so high and, in my view, avoidable.
The 2023 tea production figures confirm the government initiatives in lowering fertilizer prices and effective distribution to farmers paid off with improved productivity. This should continue, in addition to extension services so optimal productivity levels are attained. Labour costs still remain a killer at the farm. Others include replacing old tea bushes with more productive varieties.
Factory production approach must be aligned to market expectations in pursuit of value especially the quality perspective as it translates to value and prices. Modern science makes this easy to do with measurable values to set targets against each parameter of importance. Further, making a profit is important which leads to the need for optimizing capacity utilization, labor deployment and wages, and transportation. The regulator, as a matter of policy need to establish acceptable leaf quality standards and enforce compliance. The same should also apply for machinery and equipment used in leaf-processing.
The trade must embrace more transparent approaches that promote competition and efficiency in price discovery. The current price volatility brings a lot of uncertainty for tea farmers. Conflict among trade actors must be eliminated in law and practice by ensuring the trading floor organizer is not a player in the selling process to avoid compromises.
The ambitions of the tea industry are clear and valid. But may never be realized without taking the bull by the horns and addressing in totality the challenges noted by the regulator at the launch of the Tea Industry Performance Report 2023. These include strategic tea quality improvement program, reducing the tea outlots quantities at the auction, addressing governance challenges facing the tea industry institutions, incentivizing tea value addition and product diversification, enhancing market access to new and emerging markets and reducing the costs of production borne by the tea farmers. Addressing governance and visioning in the key institutions will be key.