Kenyan coffee fetches historic Sh80,000 per bag

By Standard Correspondent

A small batch of Kenya’s premium grade AA coffee fetched a record price of $1,011 (about Sh80, 000) per 50-kg bag at the second sale of 2011 amid tight supply, an official at the Nairobi Coffee Exchange (NCE) said Tuesday.

"There is no coffee and the market is grabbing the few available offers," Daniel Mbithi, an official with the NCE, told Reuters, adding: "The price rally seems sustained from the first sale when we had the highest price in nearly 14 years and the price outlook remains robust going into the coming weeks."

Last week a batch of coffee sold at $1,008 per bag.

This week’s record-fetching lot weighed 340 kg and originated from Kiomothai Co-operative Society in Kiambu, central Kenya.

CUT PRODUCTION

It was bought by C.Dormans Limited, a firm exporting to several global markets.

"The premium grade AB also had a good run during today’s trading touching a high of $710 per 50-kg bag," Mbithi said. "Supplies remain tight and we had about 27,000 bags of coffee offered for the sale on Tuesday, which is similar to the volume offered at the first sale," Mbithi said.

Kenyan coffee fetched record level prices Tuesday, a move which if sustained, is likely to play a major impact in recovery of the economy. Fears, however, are that the looming dry spell could negatively affect production. [PHOTO: Govedi Asutsa / Standard]

A dry spell around most growing areas is expected to cut coffee production in the country. Meanwhile coffee farmers who have sold their coffee through the Kenya Co-operative Coffee Exporters Ltd (KCCE), a coffee marketing firm, wholly owned by co-operative societies, have registered over 200 per cent growth in payments.

In some areas like Meru, farmers have registered over 380 per cent growth in incomes with coffee payments growing from Sh27 per kilo paid last year to the Sh81 paid in Meru this last season.

In the past payments for their coffee have remained poor even when international coffee prices had skyrocketed. These low prices have impoverished the peasant farmers who are the bulk of coffee production in Kenya.

GLOBAL BUYERS

The smallholder coffee farmers have been seriously disadvantaged as they were unable to directly market their coffee due to lack of market knowledge and an infrastructure to transact with roasters and other buyers globally.

The farmers have had little or no direct interaction with the buyers as trading has been done by powerful and connected intermediaries. But KCCE is now educating them on inputs, milling and marketing.

KCCE is a co-operative society fully owned by coffee co-operative societies and licensed by Coffee Board of Kenya as a Commercial Marketing Agent. The Delegates and Directors managing KCCE are elected from all the coffee regions countrywide to drive the farmers’ body.

Traditionally, coffee exports have been Kenya’s chief foreign exchange earner, together with tea.

—Additional reporting by Reuters