Kenya tea bonuses fall despite rising auction prices: The real reasons behind the shortfall
Higher prices at the Mombasa auction failed to protect farmers’ bonuses in 2025/26, as lower leaf volumes, soaring fuel costs, and earlier monthly payouts reshaped the final figures.
By Grace Wanja
When Kenyan tea fetched better prices at auction last year, many smallholder farmers expected fatter bonus cheques at the end of the season. What they received instead was considerably less. The disconnect between rising auction prices and shrinking bonuses has left growers confused and, in many cases, frustrated — and the explanation offered by the Kenya Tea Development Agency has not fully satisfied those asking the harder questions.
EBC Financial Group, which monitors commodity and currency markets, has taken a closer look at the 2025/26 bonus year — covering July 2025 to June 2026 — and its findings point to a more complex picture than the exchange rate narrative that has previously dominated the conversation. Average auction prices at the Mombasa Tea Auction rose approximately 3% in US dollar terms to USD 2.23 per kilogramme, up from USD 2.16 the previous year. Buyers took a significantly larger share of tea on offer, with 73% of tea sold in 2025 compared with 55% in 2024. The Kenya shilling, meanwhile, barely moved, fluctuating within 1% of its seasonal average. By the KTDA’s own previous reasoning — that lower prices and a weaker shilling caused the 2024/25 bonus decline — this year’s numbers should have told a different story. They did not.
David Precious, Senior Market Analyst at EBC Financial Group, put it plainly. “On KTDA’s formula, a bonus is what remains after costs and monthly payments, so when sales hold, every extra shilling paid out during the year comes off the bonus,” he said. “Part of this year’s fall may have reached farmers earlier through monthly payments.” That observation reframes the issue in an important way. A smaller bonus does not necessarily mean less total income — but it does mean the money arrived through a different channel, and at a time when farmers were watching the final payout, many felt the impact acutely.
Three factors emerge from EBC’s analysis as the most credible contributors to the bonus shortfall. The first is leaf volume. KTDA farmers delivered 4.34% less green leaf in the first eleven months of the financial year. National tea output fell 5.76% in January and a steep 16.27% in February, figures the Tea Board of Kenya attributed directly to dry weather conditions. The recovery came, but it came late — output ran above the previous year’s levels each month from March to June. For factories whose revenue depends entirely on the volume of leaf they can process and sell, that early-season drought carried a cost that better auction prices alone could not fully offset.
The second factor is fuel. The war in the Middle East reached Kenyan pump prices with a lag, and the impact landed squarely within the 2025/26 bonus period. The Energy and Petroleum Regulatory Authority held Nairobi diesel at KSh166.54 per litre until 14 April. From that point, the cost climbed sharply, peaking at KSh242.92 per litre in May before settling at KSh217.86 in September and rising again to KSh227.76 from 15 October. For tea factories that rely on diesel to collect leaf from thousands of smallholder plots and transport processed tea to Mombasa, that kind of price movement adds substantially to operational costs and reduces what remains for distribution as a bonus.
The third and perhaps most structurally significant factor is the change in monthly payment rates. The Embu and Nyeri tea boards, which include Rukuriri — last year’s top-paying factory — raised the monthly payment from KSh25 to KSh30 per kilogramme from February. Because monthly payments are deducted from sales revenue before the bonus is calculated, a higher monthly rate mechanically reduces the bonus, even when a farmer’s total annual earnings hold steady or improve. Rukuriri’s bonus fell from KSh57.50 to KSh50 per kilogramme, while its monthly rate rose from KSh25 to KSh30. EBC estimates that five or six months at KSh5 more per kilogramme accounts for between a quarter and a third of that KSh7.50 bonus reduction, with the effect potentially larger given the strong output recovery from March onwards.
All five of last year’s top-paying factories — Rukuriri, Mununga, Gathuthi, Imenti, and Ngere — paid smaller bonuses in 2025/26. Gianchore was a notable exception, rising from KSh13 to KSh18. The spread between the highest and lowest factory bonus narrowed from nearly six times — KSh10 to KSh57.50 — to four times, KSh12.50 to KSh50, suggesting that the factors at play affected the sector broadly rather than penalising specific factories through individual mismanagement.
Looking ahead to 2026/27, EBC cautions that several cost pressures remain firmly in place. A 15% rise in agricultural minimum wages, backdated to 1 May, adds to factory expenditure. Electricity costs have increased following the energy regulator’s October adjustments, which add approximately KSh4.10 per unit, largely driven by a KSh3.22 fuel charge. KTDA has indicated that an unpaid fertiliser subsidy is accruing interest — a liability that could weigh further on the bonus — though the Agriculture Ministry’s KSh2,000 price support measure will reduce farmers’ fertiliser deductions. July’s auction average of USD 2.24 per kilogramme, up from USD 2.05 a year earlier, offers some encouragement, but with fuel costs and a full year at the higher monthly rate both baked into the coming season’s arithmetic, the bonus outlook for 2026/27 remains uncertain.
For Kenya’s smallholder tea farmers, the lesson from 2025/26 is that auction prices are only one part of a considerably more complicated equation — and understanding the rest of it has never mattered more.
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