Coffee industry on its knees

Besides fluctuating international prices, the commodity has been badly hit by competition, inefficiency and uncalled for government interference. Consequently, the growing of the crop, touted as the world’s most traded commodity after oil has been a costly undertaking to farmers who haven’t enjoyed any meaningful incomes.

This has led to the compromising of the standard production practices and the resultant decline in output and quality. Prices have fallen dramatically over the past six years, a decline attributed to deteriorating quality. Since 2000 alone, the prices have fallen by 50 per cent, but production has increased steadily, creating a glut of cheap low- grade coffee.

The prices have fallen from the 1980s value of US$170 to stand at US$70 currently for a 50kg bag. In January, two large- scale producers – Kakuzi limited and Socfinac made clear their intention to bow out of business.

According to the International Coffee Organisation [ICO], income from coffee in Africa has fallen more than 65 per cent, affecting more than 125 million people who directly or indirectly depend on the crop.

Though Kenya’s coffee remains superior to that of other countries, less than 20 per cent can be considered top quality, the requirement for speciality coffee, for consumers according to East African Fine Coffee Association [EAFCA].

Co-operatives development minister Peter Ndwiga says overreliance on traditional markets in Europe, America and Asia has had its toll and the country is working on strategies to explore emerging markets like China, Japan, Korea, South and North Africa.

According to statistics from the Ministry of Agriculture, Kenya’s coffee output declined from a high of 130000 tonnes in 1987/88 to 50000 tonnes in 2002/3. However, Ndwiga is upbeat that this will increase to 150000 tonnes in the next two years.

The Coffee Board of Kenya [CBK], which initially controlled marketing but has also been hit by pressure from the non-performing sector, owes farmers over KES 8.5 million [US$110,389] for deliveries made between January and May 2003. The board is currently operating with a skeleton staff after retrenching 800 employees and is unable to collect KES 400 million [US$5,594,805] owed by farmers on account of advance payments..

A bureaucratic and inefficient marketing system that requires all the Kenyan coffee output to pass through the Nairobi Auction even when farmers are being offered better prices outside is now a major threat to the sector. CBK for instance, realized KES 641 million [US$8324675] in 2002 but to date the money has not reached the farmers.

Hundreds of small -scale farmers have consequently uprooted or abandoned the crop in favour of horticulture and dairy farming. The bigger players have also followed suit. Mr Jeremy Block, the managing director of Doorman, a leading coffee dealer says buyers and coffee auctions pay within seven days but the money is delayed and gets lost somewhere in the chain. As the government hesitates to make urgent policies, the regulatory body CBK will continue to remain in limbo.

“What we need is the second window of coffee marketing. If top quality coffee farmer is being offered higher prices abroad, why should he be denied the chance to sell?”, posed Edwin Agasso, the chief liquorer at the Nairobi’s Lion Coffee company.

In Tanzania, the farmers are now selling directly to the international buyers. Founded in May 2002, EAFCA has the objective of promoting marketing speciality coffee to increase both local and export consumption.

The world coffee prices have nose-dived over the past six years due to overproduction in Brazil and new growers in south -east Asia such as Vietnam and Cambodia.

The Kenyan farmers might not gain from the international coffee price rises expected in 2004/2005. The international coffee buyers are worried that the Kenyan farmers are unable to sustain the quality of its top ranked “Colombia mild” arabica coffee which has been used for decades to blend other foreign coffee . In January, a German coffee dealer Michael Nueman said: “Kenya has suffered a two thirds fall in the quantity and quality of the crop while tea continued to flourish”.

Eight African coffee production countries from the COMESA region attended the conference to discuss ways of accessing lucrative markets in Europe and America. It was attended by Uganda, Malawi, Burundi, Tanzania, Ethiopia, Zimbabwe and Zambia. It was also attended by buyers from Sudan, Egypt and South Africa. The conference lasted for four days.

Said agriculture minister Kipruto Kirwa at the conference: “Coffee faces a major crisis. In Kenya, it has lost its place as a leading foreign exchange earner to tea and tourism”.

Though the government had pledged to revive the coffee industry in its Economic growth and recovery Strategy Paper for Employment and wealth creation launched by president Mwai Kibaki last year, nothing has been put in place as the agriculture minister and his Co-operative development counterpart continue fighting.