Coffee earnings fall Sh2.5bn in eight months to May

Coffee earnings dropped by Sh2.5 billion in eight months to May on account of low volumes as the quantities offered at the trading floor were impacted by the closure of auction floor by the Health ministry as a mitigation measure to curb COVID-19.

Nairobi Coffee Exchange (NCE) data indicates the cash crop fetched Sh7.8 billion in the review period, down from Sh10.3 billion in the same period last year.

The decline in earnings resulted from a sharp drop in volumes, which were down 32 percent compared to the previous period.

VOLUMES DROPPED

NCE chief executive Daniel Mbithi says the volumes dropped from 485,962 bags of 60 kilos to 326,383 bags kilos on market disruption.

“Due to the drastic drop in the volume of coffee traded at the exchange, the value also went down by 24.19 percent,” he said.

“The cause for the drop might be due to the disruptions at the trading floor in March 2020 by the Ministry of Health due to the COVID-19 pandemic, which forced some marketing agents to sell some of the coffee through other marketing channels.”

SIGNIFICANT JUMP

The average price per bag registered a significant jump to record Sh19,320 up from the previous Sh17,220, boosted by good demand and high prices at the New York Exchange, where Kenya sells close to 95 percent of its produce.

The Agriculture ministry has given both the coffee and tea auctions two months to transit to electronic platforms to forestall disruptions witnessed this year, occasioned by Covid-19.

Kenya has one of the best coffees in the world, highly sought by roasters for blending with other low-quality beans.

However, the production has significantly dropped when compared to its peers in the region with Uganda, which was at par with Kenya in the past years now widening the gap.

CROP ABANDONED

Since the early 1990s to 2010/11 crop year, the area under coffee has declined by 35 percent from 170,000 hectares to 109, 795 hectares as farmers abandoned the crop due to poor management.

The government has been issuing incentives to farmers in the last couple of years to woo them back to this crop.

Last year, the State announced it will issue farmers with cherry advance funds, which they can use to meet their financial needs as they wait for payment. The issuing of the funds has already started to coffee growers in the country.

Cherry advance levy was announced by President Uhuru Kenyatta and it is aimed at helping farmers to invest back in the farming of the crop and meet other financial requirements as they wait for their returns from coffee cooperatives.

Normally, farmers would harvest and sell their crops through cooperatives but will have to wait for over a month before they get their payment.

The government will then recover the funds after farmers have sold their produce by deducting the amount that would have been advanced to them plus a three percent interest rate.

These reforms are designed to boost production, reduce the cost of processing and milling as well as transaction costs at the auction market.