Kenya: Rise in Fertiliser Prices Could Hit Tea Production

Small scale tea farmers must brace for higher fertiliser prices after supplier tonnage costs for the year went up by Sh2, 900.

Mr Lerionka Tiampati , Kenya Tea Development Authority's managing director, attributed the rise to an increase in global oil prices and freight charges.

The price of standard crude oil, the major component in fertiliser making, went up from Sh 4,020 a barrel in 2005 to the current Sh 5,000 a barrel .

Freight charges have also gone up from an average of Sh 3,300 three years ago to the current average of Sh5 ,700 as a result of greater demand for freight in India and China.

"Although the cost went up by about 10 per cent, the impact has been cushioned by a strong shilling," he said in a statement.

Current supplies are being done by Kemira Grohow of Finland which won the supply tender at Sh18,900 per metric tonne after it beat five other contenders. In 2006, KTDA imported 64,500 tonnes of fertiliser from Azomures Company of Romania at a cost of Sh 16,000 per metric tonne .

"Fertiliser procured by KTDA for farmers is still the cheapest in the market since we obtain it at a very competitive price," said Tiampati.

In recent days, exporters, feeling the heat of a strong shilling have warned that two way risks were inherent if the shilling depreciated further. The effects are felt more by an industry like ours dealing with small scale growers," he said.

Over the past six months, small scale tea production hit its highest level in recent years but value for the majority growers was projected to diminish.

At a record 125 million kilogrammes for January and December, this year, the estimated 460 000 small growers accounted for 63 per cent of total production, according to the Tea Board of Kenya . TBK meteorologists, have however, forecast unfavourable crop conditions that could undermine production in the current quarter.

"Progressive reduction in tea production is expected to continue up to September, says TBK in the June monthly reports. Although, tea volumes offered at the auction increased by 46 per cent to 158 million kilogrammes, the average auction price for Kenyan tea dropped by 17 per cent from $2.09 a kg to $1.72/ a kilogrammes.

The weakening of the dollar coupled with falling international prices, however, means that this may not translate to higher earnings for farmers.

Mr Tiampati put at Sh1 billion total losses by the agency since December when the dollar lost ground. The agency's tea was selling for $1.43 per kilogramme, down from $1.98 last year.

"Despite recording higher volumes of tea, revenues have dropped. We are losing between six and seven shillings for every kilogramme of tea, " he told Business Daily in an interview.

Currently, KTDA which operates the largest single private fertiliser credit programme to farmers is to supply them with Sh 1.2 billion worth of the product. The tea agency is importing 62,284 tonnes of fertiliser valued at Sh1.2 billion this year.

The first consignment of 27,000 tonnes has arrived at the port of Mombasa.

Already, the company has invited transporters to help ferry it from Mombasa to each of the KTDA-managed factories at Sh4.25 -exclusive of Value Added Tax per tonne per kilometre, meaning factories further from Mombasa will end up paying more.

Fertiliser procurement and supply is one of the most critical functions of the agency as it seeks to improve tea quality and output.

contracted farmers throughout the country.

KTDA has streamlined process of procuring such inputs directly from manufacturers to minimize costs. KTDA operates an annual fertilizer credit scheme that provides fertilizer to the farmers on credit and at reasonable prices.

The agency distributes its fertilizers through the tea factories which have acted as their distribution outlets to the farmer members. The mode of procurement is by an organized order arrangement for farmers through their respective Tea factories.

Source: allafrica.com