256
Mitchell
however, policy changes were likely a major contributor to the decline. Other factors contributing to the decline in smallholder yields included a collapse in world coffee market prices, which reduced input use; the appreciation of the real exchange rate; and coffee disease. Estate yields fell by 24 percent during the 10 years after 1992, compared to the 10 years before, and these declines were due primarily to the collapse in global coffee prices, which led to reduced input use and consequently lower yields.5 Estates were especially hard hit by the appreciation of the real exchange rate, which increased their wage costs relative to export receipts. The booming tea sector also provided stiff competition to coffee, and land shifted from coffee to tea.
Smallholder Tea Processing and Marketing Smallholder tea production has been a success in Kenya. It began in the 1950s, when smallholders began to grow tea to sell to private factories. The Special Crops Development Authority (SCDA) was established in 1960 to expand smallholder tea production and, in 1964, the KTDA was formed as a government parastatal to replace the SCDA and manage the more than 20,000 smallholders already growing tea. The KTDA took over the assets, liabilities, staff, and facilities of the SCDA, and the KTDA was well run from the outset. It was established to provide the integrated services required by smallholders to enable them to participate in tea growing, including credit, extension, leaf collection, and the manufacture of green leaf. The KTDA was authorized to recover its operating costs by a cess levied on green leaf purchases. Under the KTDA’s First Tea Plan, financed by the Commonwealth Development Corporation (CDC) and the Federal Republic of Germany, 4,200 hectares were planted by the end of the 1963–64 season. The World Bank provided an International Development Association (IDA) credit in 1964 for the Second Tea Plan, which by 1967–68 had added a further 6,600 hectares of smallholder tea. The Third Tea Plan, also funded by the World Bank and CDC in 1968, added an additional 13,700 hectares, and, by the end of 1972, a total of 26,000 hectares of smallholder tea had been planted by 67,000 growers. By 1972, smallholders accounted for about one-quarter of Kenyan tea production, and the quality of smallholder tea was reported to be comparable to estate teas. During the period of rapid expansion of smallholder tea, the average price of all Kenyan teas at the London tea