Business

Why farmers must wake up, smell the coffee

As bean prices dip in recent months, producers have no option but to rethink on how to shore up earnings

Optimising direct sales, value addition and targeting emerging markets stand as key options coffee farmers can exploit to cushion themselves against price volatility.

At Nairobi Coffee Exchange (NCE) prices since mid-last month have been plummeting owing to low quality of beans being offered for sale at the moment.

For example, earnings recorded 11.47 per cent decline in the first half of 2017/18 coffee year compared to the same period last year.

NCE chief executive Daniel Mbithi explained that between October and March, earnings declined to Sh10.5 billion compared to Sh11.9 billion registered between October and March in 2016/17.

During the last six months, he said, average price for a 50kg bag declined to Sh24,926.80 from Sh26,595.32.

“There was a slight drop in volumes offered compared to the same period ending March last year. This may have been caused by the lower prices experienced during this period,” said Mbithi.

International prices have been at their lowest for the last three years but thankfully the Nairobi Coffee Auction held firm majorly due to good quality of beans.

Coffee Directorate interim head Kiplimo Melli told People Daily exports under the direct sales platform decreased by 10 per cent to 6,492 tonnes in 2015/16 production year compared to 7,183 tonnes realised in 2014/15. While value of the same decreased to Sh3.9 billion against Sh4 billion in last season.

Despite the recent decline in local prices Kenya clean coffee is still reputed for fetching high prices at the international market compared to robusta coffee largely grown in Uganda.

Value addition

Kenyan coffee is mainly exported to Europe and US while only less than 10 per cent of the commodity is value added.

The country is still yet to make headways in tapping the emerging market such as China, India, Korea, Malaysia and coming up countries that split from the former Union of Soviet Socialist Republics (USSR).

Over the years direct sales to US and other regions has offered a rich opportunity for local coffee.

Industrialisation, trade and cooperatives Cabinet secretary Adan Mohamed earlier in an interview said enhancing value addition has been regarded as an avenue for local producers to earn high proceeds both locally and internationally.

Adan said that only four per cent of local coffee is enriched while 96 per cent of the commodity is shipped in raw and bulk form, thus denying local farming an opportunity to earn premium prices at the international markets.

Premium prices

“Government’s strategy is to increase value addition of local products to more than 50 per cent in the medium term. Doing so will qualify local products to attract premium prices at the international market,”Mohamed said.

Prof Joseph Kieyah, head of Coffee sub-sector Implementation Committee (CSIC), says proposed reforms in the industry advocates for integration of farmers in the value chain.

“Farmers stand to earn high prices if incorporated in the various levels of value chain, for example, milling and marketing over and above fast-tracking value addition,” he said.

Recently, Robert Mudida, an associate professor of Political Economy at Strathmore School of Business, called for heavy investment with a view to boosting productivity and quality in the agriculture sector.

To cushion local farmers against price instability, Mudida advised value addition needs to be enhanced.

International Coffee Organisation (ICO) director Jose Sette early in the year, during the 16th African Fine Coffee Conference and Exhibition (AFCA) in Uganda, said Kenya’s may be grappling with low coffee production but her coffee beans still stand out as the best at the world market.

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