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Higher prices for Kenyan coffee expected

By Moses Michira | April 23rd 2015
Coffee seeds. A worker sorts out coffee cherry at a factory yard in Central Kenya. Improved prices are expected to encourage farmers to increase production.

Kenya: Prices of Kenyan coffee in the global market are forecast to start a steady climb on growing demand for high quality beans, a leading exporter has projected.

"We have come to the end of the dull phase," said Dormans Coffee chairman, Jeremy Block, yesterday. He reckons that bean prices in the subsequent auctions are expected to rise.

Higher coffee prices would be a major boost for the country's struggling exports market where thousands of coffee farmers have already ditched the plant for alternative crops and real estate development after a price slump witnessed in the 1990s.

"Our best grades are fetching more than double the price of the second best, and I can see the prices soar," explained Block, after announcing plans to roll-out a major processing plant in Tatu City.

Favorable weather and high altitude have ensured that Kenya retains the top spot as the producer of the finest crop, despite accounting for only 0.5 per cent of the global production by volume.

"Our competitive advantage has always been quality since we have never been a large producer anyway," he added.

In the six months to March for instance, coffee farmers sold coffee worth Sh8.5 billion at prices that was 10 per cent higher than a comparable period in the year before, the Nairobi Coffee Exchange (NCE) has reported.

A decline in the quality of beans since January had impacted negatively on the prices of Kenyan coffee noted NCE in a statement released early this month. But Dormans is seeing better quality beans being harvested by farmers. NCE and Dormans are among the top three coffee exporters in Kenya.

A sustained rally in pricing is definite, according to Mr Block, who bought out the operations of Dormans - then a struggling and near bankrupt company, in 1986.

"The investment worth tens of millions of dollars will involve a bean roasting facility and the company's regional office factory, with a planned ground-breaking set for July," he said.

Dormans, one of the oldest players in the country's coffee export business has set its eyes on raising it exports by more than double to over 250,000 bags a year. The multi-million shilling investment in Tatu City is a significant step for the owners of the project, whose development has been bogged down by boardroom wrangles.

Stephen Jennings, the chief executive of Tatu City said the entry of Dormans was a major endorsement that his company badly needed. Coffee was once Kenya's top exchange earner (in the late 1980s), exporting a record of 130,000 tonnes in the 1987/88, according to official statistics.

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