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Good news for farmers as Danish firm exports first batch of processed coffee

BUSINESS
By Moses Michira | September 5th 2016
A sample of coffee berries at Kiamabara Village in Nyeri County on December 17 2015.Kenyan coffee farmers are set to benefit from a coffee roasting factory that will soon be put up in Nairobi by a Darnish firm. Kenya has called for the removal of subsidies on coffee trade during the 10TH World Trade Organisation in Nairobi. PHOTO:KIBATA KIHU/STANDARD.

A Danish firm has exported the first batch of locally processed coffee, raising farmers’ earnings more than three-fold.

Africa Coffee Roasters (ACR), set up by Denmark’s largest retail chain, produced 300 kilogrammes of the shelf-ready commodity on Friday.

This marks the start of local processing of high-value coffee that has traditionally been exported as beans and roasted abroad before being blended with inferior coffees from other countries.

Poul Videbaek, the managing director of the firm located at the Export Processing Zone (EPZ), said local processing and packaging would ensure farmers get a much bigger share of the eventual selling price.

“Since we started associating with Othaya [Nyeri County] co-operatives, the income of the farmer has increased by 212 per cent,” he said.

At an average selling price of Sh400 for the best grades at the Nairobi Coffee Exchange (NCE), ACR could be offering farmers more than Sh1,000 a kilo. Inferior grades fetch less than Sh100 a kilo at the NCE.

Mr Videbaek added that the higher prices were possible because his firm had cut out middlemen from the supply chain, sourcing for beans directly from farmer co-operatives.

Smallholder coffee farmers have not had the capacity to process beans at home, where coffee consumption has for years been minimal. It is only in the last 10 years that there has been an uptick in demand, with the entry of international coffee-themed restaurants, such as Java and Dormans.

Domestic consumption

Official records put domestic coffee consumption at 3 per cent of the total production.

Among the reasons for the low consumption is a predominant tea-drinking culture, and non-availability due the previously limited domestic roasting – which is now set to change.

Heavy taxes have also discouraged coffee and tea processing for export, when ideally, such commodities should not be taxed. The existing levies include a 16 per cent value-added tax on the produce, and other levies on packaging materials.

But in local processing for export markets, producers are required to pay the taxes and claim the funds after ascertaining to the Kenya Revenue Authority that the products left the country and were received in the export country.

It is for this reason that ACR and many other export-oriented producers are based within the EPZs.

Videbaek said his firm has the capacity to process 2,000 tonnes of coffee a year, with an estimated value of Sh2 billion.

Kenya accounts for less than one per cent of the global coffee production, but its produce is among the finest. Last year’s production is estimated at 700,000 bags, less than a third of the 1980s levels, as the rapid expansion of Nairobi and neighbouring towns ate into coffee fields.

A slump in global prices compounded the troubles of mismanagement in the coffee sector, which has seen farmers replace coffee bushes with alternative crops.

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