BusinessPeople Daily

Societies choke coffee earnings

Coffee continues to attract premium prices locally and internationally, but ironically major producers – small scale farmers, still grapple with grinding poverty, stakeholders claim.

Last week local and international coffee value chain players decried the low earnings that farmers receive even as local coffee beans continue to attract high prices.

The coffee actors were speaking ahead of the 124th International Coffee Organisation (ICO)meeting to be held in Nairobi starting today until Friday, March 29. Kenya will host the meet for the first time since the establishment of theICO in 1963, with 600 delegates both local and international expected to participate.

The conference comes at a time when the industry is facing numerous challenges, including low earnings, the threat from other beverages and emergence of other economic sectors such as real estates, climate change and lack of government incentives.

Share of prices

According to Coffee Subsector Implementation Committee (CSIC) chairman Joseph Kieyah, local coffee farmers are among growers who earn the least globally as a share of export prices at 30 per cent. This is below what farmers in other African coffee growing countries received which stands at between 50 and 70 per cent.

In Brazil, Vietnam and Colombia farmers receive between 80 and 90 per cent of the export price.

Former President Mwai Kibaki’s administration enacted regulations that require farmers tom paid 80 per cent of the export price.

“The rule has been largely ignored by majority of cooperative societies in the country while few that have adhered pays their farmers even more than 90 per cent. But majority of societies, owing to high overheads coupled with poor governance, pay their growers below 30 per cent. New regulations to be enacted this year target to ensure the law is applied to the letter,” said Kieyah.

Commissioner for cooperatives Mary Mungai said cooperative leaders delay to submit the societies financial statements for auditing annually leading to malpractices.

Majority of coffee societies were subdivided into economically unviable units in late 1980s and 1990s following the introduction of Structural Adjustment Programme by the Bretton Woods institutions -World Bank and International Monetary Fund.

This resulted to escalation of grinding poverty, low development, illiteracy, insecurity and low yields.

“For a society to be proven viable, it must receive and process a minimum of 1.2 million kilogrammes of beans. Majority of the units are today processing less than 500,000kgs affecting the societies’ ability to meet their financial obligations and thus equally affecting farmers cherry payment,” said Mungai.

New regulations

CSIC proposal to establish a Central Depository Unit to ensure timely payment has been opposed by millers and marketers among other value chain players.

In an interview, Mungai said new regulations being fast tracked will ensure Cooperatives separate the society and factory operation accounts from growers payment accounts to ring fence farmers’ payments and control operational charges.

Cooperative Principal secretary Ali Noor Ismail said to ensure farmers benefit from their coffee, the government will carry out forensic audits of more than 450 coffee societies.

“Over and above fast tracking strategies to modernise the coffee societies, deep analysis of the institution will be equally undertaken looking into regulations, financial statements, management styles and their viability,” said Ismail.

ICO executive director Jose Sette said Kenya coffee has for long continued to dominate the world in terms of high prices and quality.

Kenya is globally reputed for production of fine Arabica coffee that has high flavor and pleasant aroma.

“Kenya may be grappling with low coffee production over the years but her coffee beans are still the best in the world market. Increased production can be achieved especially if value chain players work together, “said Sette.

The ICO forum, he said, is a big plus to local farmers and equally enhances the visibility of the local beans.

New ideas

“Equally, producers will have an opportunity to share experience as well as learn and benefit from new ideas from other countries on how to tame challenges facing the sub-sector,” he said.

“In the last 12 years, the coffee world has faced a major crisis, with prices at their lowest. ICO is now taking measures, through dialogue with coffee stakeholders, to ensure a sustainability plan that benefits both the producer and the consumer.”

Show More

Related Articles