The ongoing reforms in the country’s coffee industry have started bearing fruits with farmers cashing in on good prices, amid gains from high returns from the strong US dollar.
Record prices and turnover were reported at this week’s coffee auction, pointing to the benefits emerging from the bold reforms put in place by the government.
A premium $533 (Sh80,216) sale for a 50kg bag and a weekly turnover valued at $8.2 million (about Sh1.2 billion) were recorded, being the highest price and trade turnover, respectively, recorded since the new regulatory regime kicked in.
This 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 County earned the top price.
KII factory had 268 bags receiving over $500 (Sh75,250) per bag.
Rung’eto Farmers’ coffee also fetched the highest price in last week’s auction.
This week’s sale saw a total of 27,046, bags (50kgs) of coffee traded, signifying a 64 per cent increase from the 16,468 bags traded last week.
Eight brokers and agents participated, with Kirinyaga Slopes Brokerage Company Ltd trading the highest volume of 7,809 bags of which 5,335 bags or 68 per cent of their coffee was top grades AA and AB.
Kirinyaga Slopes is wholly owned by Kirinyaga farmers and one of the newly licensed coffee traders following the coffee reforms.
“An upward price trend is emerging in the market, with the number of bags receiving more than $400 (Sh60,200) per bag increasing to seven per cent, from the constant two percent that the market used to report,” a market report reads in part.
Coffee sold this week was largely from Kirinyaga, Nyeri, and Embu counties.
In addition, 17,522 bags constituting 65 per cent of the volumes traded were top grades AA and AB.
A total of 23 buyers participated in the auction, led by C. Dormans, Kenyacof, Ibero Kenya, Louis Dreyfus Company, and Sasini.
Deputy President Rigathi Gachagua has been leading reforms in the country’s coffee and tea sectors, in a renewed effort by the government to ensure farmers benefit from their crops, and the country increases its offering to the global markets.
Among reforms, which started last year, included having dealers purchase coffee through the Nairobi Coffee Exchange auction, as the government moved to revoke licenses of ‘cartels' who had infiltrated the sector.
"Dignity of farmers who toil in their farms only to reap peanuts from their produce will be returned and coffee made the black gold that it was for years," Gachagua had said, during the first national Coffee Reforms Conference, in Meru.
The DP said farmers had been exploited for long promising to deal with the ‘cartels’ and other interests by accelerating reforms in the sector.
Trading at the NCE was temporarily suspended last year to allow several measures to be put in place, including marketing and selling modules.
Co-operative Bank was then appointed by the NCE to provide the Direct Settlement System (DSS) technology platform, on which coffee trading is now being conducted.
This is as provided for in the new coffee trading regime, supervised by the Capital Markets Authority.
Coop Bank was picked as the DSS service provider following a competitive bidding process that had nine financial institutions submit their bids.
Coffee market users, which include brokers, traders, warehousemen, coffee farmers and other service providers, were trained on the workings of DSS.
Coffee remains among Kenya’s key exports and foreign exchange-earners, with the sub-sector supporting an estimated five million Kenyans, both directly and indirectly.
The cash crop is produced under two farming systems; smallholder estimated at 700,000 growers and large, medium, and small estates estimated at 3,000 in number.
The smallholder producers are clustered into 559 active coffee cooperative societies to enjoy economies of scale.
The cooperative societies operate 1,065 wet mills where they process and market their coffee collectively. The estates operate 2,132 wet mills of various capacities and models.
President William Ruto last year delegated his deputy to jumpstart and fast-track the implementation of the coffee sector reforms.