Coffee woes deepen as price plummets to a 10 year low
By Nicholas Waitathu
The Kenya coffee industry is facing its worst crisis in the last one year following a downward price trend and stiff competition from other beverages.
Production is still at its lowest level despite increased reforms by the government in the last about two decades.
According to Nairobi Coffee Exchange (NCE), as at end of August, volume increased by 2.03 per cent from 545,509 bags by August 2018 to 556,608 bags.
As at end of the August this year NCE said that average price dropped by 25.02 per cent to Sh16,143.8 for a 50 kilogramme bag compared to Sh21,553.6 as at end of August, last year.
Equally, the benchmark New York Coffee Exchange has been below the Sh103.8 mark for some time now due to increased production levels caused by higher volumes from Brazil coupled with the lower Brazilian currency to the dollar.
Premium grades
Latest data from the International Coffee Organisation (ICO) composite indicator fell by 6.7 per cent to Sh199.4 per kilogramme in August 2019, compared to July this year and by 13.6 per cent from a high of Sh230.82 in October last year.
Value of coffee traded at the NCE dropped by 23.43 per cent from Sh14.4 billion to Sh11 billion this year.
Though premium grades AA and AB earned the maximum prices of Sh57, 015.8 and Sh40, 014.7 respectively.
Annual production is still below 50,000 tonnes from a high of 129,000 tonnes in 1987/88 production year.
Global stakeholders fear the crop might be scarce in the near future as farmers are likely to cease production due to the decrease in prices, which are currently 30 per cent below their 10-year average.
This is in addition to competition from other sectors such as real estate and urbanisation, high production cost and governments not subsiding production costs especially in the Third World countries.
In Kiambu and Muranga, farmers are converting their bushes into real estate. Last week county executives in charge of agriculture meeting under the umbrella of Kenya Coffee Platform said the key challenge facing local farmers is low income.
“Coffee farmers are now shifting to new economic avenues such as macadamia nuts and avocadoes due to marketing manipulation by traders,” said Lawrence Nzuga Makueni county agriculture executive.
ICO executive director Jose Sette said the current scenario, coupled with vagaries of climate change, is expected to provoke stiff competition from other beverages - mainly tea, cocoa and soft drinks.
“Currently prices are 30 per cent below the 10-year average,” he said during the 125th Coffee Council held in Nairobi in March this year.
NCE management cancelled this week session on account of low volume of clean coffee beans by farmers.
The auction session, that would have taken place on Tuesday, was cancelled because marketing agents did not have enough supplies to warrant execution of Sale 39 in 2018/19 coffee year.
“Kindly be reminded that the auction is not happening today for lack of enough volumes, and therefore Sale 39 is set for September17, as we come to the close of the coffee year 2018/19,” said NCE chief executive Daniel Mbithi.
Auction volumes
On a single auction day, coffee marketing agents must have mobilised not less than 60kgs, 10,000 bags of clean coffee. Any auction is preceded by collection of samples from marketing agents.
“The low volumes follow the cold period since June this year that has interfered with drying of parchment coffee,” he said.
Equally, he added quality of coffee being offered for sale is low. Current beans being offered for sale are main crop being sourced from Eastern areas of Machakos, Makueni and Embu and farmers from Central and Rift Valley Regions are currently selling beans of early crop.
Deliveries of the main crop are expected in the market from October mainly from the Mt Kenya region.
