Blow to farmers as coffee prices fall nearly three-fold

Coffee farmers in the country are staring at reduced earnings as local prices fall nearly three times.

This is on account of a growing surplus in the global market.

According to the latest data from the Nairobi Coffee Exchange (NCE), auction prices fell nearly three times in the last six months from an average of $500 (Sh50,500) in January to $200 (Sh20,200) in June this year.

The amount of coffee bought in the same period also fell by more than half from 68,190 bags in January to 32,821 bags in June.

Further, overall earnings fell dramatically from $18.5 million (Sh1.8 billion) in January to $3.8 million (Sh383.8 million) in June.

This was a continuation of a downward trend where earnings from the previous period fell from $26.2 million (Sh2.6 billion) to $4.3 million (Sh434.3 million) in July last year.

The decline is linked to oversupply where global coffee production in the 2018/19 financial year is estimated at 167.75 million bags compared to global consumption of 164.64 million bags. According to the International Coffee Organisation (ICO) June report, although the increase in imports during the first six months of last year indicates ongoing demand growth, it has not kept pace with the rise in global production in the last two years.

"As a result, there is a surplus of 3.11 million bags in coffee year 2018/19 following a surplus of 3.84 million bags in coffee year 2017/18,” said the report.

The glut was brought about by increased importation where as of May this year, world coffee exports rose by 19.4 per cent to 11.6 million bags compared to May 2018, while exports in the first eight months of coffee year 2018/19 rose by 7.5 per cent to 86.57 million bags.