Is a new revolution brewing for farmers with coffee auction posting record weekly prices?

Small scale coffee farmer Jacob Ruto at his farm in Lelmokwo Ngechek Ward, Nandi County. [Titus Too, Standard]

Nairobi Coffee Exchange (NCE) posted record prices and turnovers during this week’s coffee auction amid stringent Government-backed reforms aimed at dismantling cartels and ensuring decent returns for farmers.

Data from NCE reveals a premium price of $533 (Sh81,549) - as per Friday's official exchange rate of 153.2039- for a 50-kilogram bag of coffee.

During the period, a weekly turnover of $8.2 million (Sh1.2 billion) was also recorded marking the highest price and turnover figures since the implementation of a new regulatory regime.

The high price is equivalent to Sh246 per kilogram of cherry at the factory gate.

Coffee from Kii factory, which is part of Rung’eto Farmers’ Cooperative Society in Kirinyaga, earned the top price.

Kii factory had 268 bags receiving over $500 (Sh76,500) per bag, with Rung’eto Farmers coffee also fetching the highest price in last week’s auction.

The top-earning coffee was offered for sale by Kirinyaga Slopes Brokerage Company Ltd, which is wholly-owned by Kirinyaga farmers and is one of the newly-licensed coffee traders following the coffee sector reforms.

According to NCE data, this week’s sale saw a total of 27,046 bags (50kgs) of coffee traded, representing a 64 percent increase from the 16,468 bags traded in Sale Number 1 the prior week.

Eight brokers and agents participated, with Kirinyaga Slopes trading the highest volume of 7,809 bags, of which 5,335 bags or 68 percent of their coffee were top grades AA and AB.

An upward price trend is emerging in the market, with the number of bags receiving more than $400 per bag increasing to seven percent from the constant two percent recorded over many years in the past.

Coffee sold this week was largely from Kirinyaga, Nyeri, and Embu counties. Premium grades dominated the market, with 17,522 bags constituting 65 percent of the volumes traded being grades AA and AB.

The Ruto government has been pushing coffee sector reforms with hopes of increasing productivity from 2 kg to an average of 10 kg per tree by 2027 and boost annual production to 100,000 metric tonnes from the current 51,000 metric tonnes.

The Kenya Kwanza administration says it is committed to reviving the coffee industry by targeting the cash crop as one of the economic subsectors to drive wealth creation in the rural areas.

A farmer sorts out coffee berries. [File, Standard]

Deputy President Rigathi Gachagua has been the man behind the mission to destroy what he says are coffee cartels and middlemen controlling the coffee sector in Kenya, and reaping big at the expense of coffee farmers.

Last year (2023), the cabinet approved an additional Sh4 billion for the Coffee Cherry Advance Revolving Fund to help provide affordable financing for coffee farmers.

This is in addition to the Sh3 billion released by the former Jubilee administration.

The Revolving fund, which will be managed by the New Kenya Planters’ Cooperative Union (New KPCU), aims to increase the Coffee Cherry Advance payment to farmers from the current Ksh20 per kilogram to Ksh80 per kilogram of Cherry delivered to the factories.

The coffee sector reforms commenced in June 2023 following a National Coffee Stakeholders’ Conference convened by Mr. Gachagua in Meru, where challenges were identified, and strategies to address them were categorized into various thematic areas.

The production of coffee during Kenya’s independence in 1963 was 43,778 metric tonnes (MT) and it substantially increased to a high of 128,926 MT in the year 1987/1988.

However, following the collapse of the International Coffee Agreement in 1989, production of coffee went into a steady decline and coupled with other key challenges, production currently is estimated at 40,000 MT, according to the report of the National Task Force on Coffee Sub-Sector Reforms.

Currently, the coffee sub-sector is facing unprecedented challenges which have drastically affected the production levels.

Key among them; low earnings from coffee despite its premium quality, delayed coffee payments, mismanagement and inefficiencies in cooperatives, restrictive coffee laws, high cost of production, and lack of direct access to the trading floor.

Successive regimes, including the current Kenya Kwanza administration, have blamed cartels for running down the sector, which was once a leading foreign exchange earner.

Under the new reforms, 11 coffee cooperative unions have been licensed to sell coffee directly at the Nairobi Coffee Exchange (NCE) and overseas, thereby eliminating the need for a middleman between the farmer and the buyer.

Under the new changes, the Capital Markets Authority (CMA) has also been entrenched as the regulator of the NCE, where the President Ruto's administration expects that the regulator will oversee a transparent and efficient price discovery process that benefits farmers.