Coffee farmers raise alarm over falling prices at Nairobi auction

Business
By Macharia Kamau | Dec 03, 2022

The National Coffee Cooperative Union Chairman Francis Ngone speaking on the prices of Coffee. [Wilberforce Okwiri, Standard]

Coffee farmers have protested against the low prices of the commodity, claiming that there are artificial factors at play.

The National Coffee Co-operative Union (Naccu) has alleged that a clique of businesses that dominate marketing of the produce has been driving down prices, with intentions of buying the commodity locally at rock bottom prices and selling high as economies continue post Covid-19 recovery.

Coffee prices at the Nairobi Coffee Exchange (NCE) have dropped in recent months, with the top grade Kenya AA selling in the range of $200 (Sh24,000) per 50 kilogramme from nearly $400 (Sh48,000) for the same quantity early this year.

NCE in mid November attributed the drop to a number of factors that include bumper harvest from producers such as Brazil that are flooding the international market with coffee, and that the local coffee produced towards the end of the calendar year was a lower quality, which affects prices.

However, Naccu, an umbrella body for coffee unions, dismissed the reasons given by the exchange.

The union instead claimed that the prices are being driven down artificially by “cartels” that have a hold on the marketing of Kenyan coffee.

Naccu Chairman Francis Ngone also claimed there were deliberate efforts to lock out coffee farmers from trading at the NCE, with a framework that was to allow them to access the trading floor rescinded by former Agriculture Cabinet Secretary Peter Munya during his last months at the ministry.

“We are witnessing with shock and pain unprecedented and prevailing low coffee prices...where an AA 50kg bag has been selling at over $400 and has currently dropped to $200,” he said.

“There is an attempt to justify an artificial pricing mechanism that continues to exist in the Nairobi Coffee Exchange due to the collusion of players within the auction where coffee marketing agency companies are owned by the same coffee buying companies.

“How can the same entity set the selling price and at the same time the buying price and expect a fair price for the farmer? While coffee farmers are locked out of the exchange floor?”

Five coffee co-operatives were licensed by the Capital Markets Authority (CMA) to trade at NCE as part of reforms started in 2016 that sought to give farmers more say in the sale of the crop.

The reforms also brought on board CMA to regulate aspects of trading at NCE.

Amended regulations

The regulations that enabled the co-operatives to trade at NCE were, however, amended in June this year, which Naccu said has locked them out despite having been duly cleared to participate on the trading floor by NCE and being duly licensed by the CMA.

The five coffee co-operatives licensed by CMA were Machakos, Meru, Kipkelion, Mt Elgon and Murang’a, which had set up their own marketing agencies for trading at the exchange.

Naccu further asked President William Ruto to intervene and see through the reforms that are aimed at benefiting the farmer.

In explaining the low prices, NCE Chief Executive Daniel Mbithi said that in addition to good harvests by other countries, an imminent recession next year has seen investors shy away from investing in commodities, resulting in prices falling.

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