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Coffee prices on the mend after slow year

By Macharia Kamau | February 13th 2020
Coffee prices are currently 30 per cent below the 10-year average. [Kibata Kihu, Standard]

Coffee prices have started the year on an upward trend after a devastating 2019 that saw earnings plunge to a historic low.

The price of the commodity has steadily risen at the Nairobi Coffee Exchange auction, with the country’s top-grade coffee – Kenya AA – selling at $310 (Sh31,000) per 50kg bag during Monday’s auction.

This translated to about Sh620 per kilo and is a 26 per cent increase compared to $229 (Sh22,900) for the same quantity in December and $304 (Sh30,400) last month.

When other grades are considered, the average price of coffee sold at the auction was $209.71 (Sh20,900) per 50kg bag. This is up from $177 (Sh17,700) in January and $150 (Sh15,000) in December.

The Nairobi Coffee Exchange has attributed the rise in prices to quality coffee in the market, as well as high demand from buyers.

Despite the recent surge in prices, players are still wary that the industry has not shaken off market risks, especially those associated with climate change.

The unpredictability of the weather, which has significantly affected the production and quality of coffee in the country, is just one of the many challenges that the industry has had to deal with in recent years.

Others are governance issues, the creeping of real estate into coffee growing areas and the high cost of inputs. Chief Economist at International Coffee Organisation (ICO) Denis Seudieu said these factors, as well as increasing competition to coffee from other beverages like tea, cocoa and other soft drinks, paint a not so rosy picture for farmers.  

“As the world coffee community, we fear that the downward trend of prices is likely to demoralise farmers and thus contribute to reduced production, even as the demand for the beans continues to grow at a healthy rate of two per cent annually,” Seudieu said earlier this week at the African Fine Coffee Conference and Exhibition currently taking place in Mombasa. 

“Since 2016, the coffee market has experienced a continued downward trend and today prices are 30 per cent below the 10-year average.”

Agriculture Principal Secretary Hamadi Boga said the ministry had stepped up attempts to reverse the decline in coffee as an industry, including ongoing legal reforms as well as a Sh3 billion revolving fund that advances credit to farmers at low interest rates.

The PS speaking told the Fine Coffee Conference that while Kenya may have over time lost the global market share, there were still numerous opportunities. “In recognition of the importance of the sub-sector in the promotion of our overall development agenda… Kenya has initiated a number of institutional, legal and support-services interventions, which are intended to reverse the negative trends in the coffee industry and ensure sustainable coffee farming in the country,” he said.

“We have developed a comprehensive reform agenda to address challenges in the coffee sector, whose strategies include production and productivity - enhancing and domestic coffee consumption strategies. But more importantly is the youth agenda, which has a correlation with value addition and domestic coffee consumption.

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