Coffee farmers to gain as pent-up demand lifts prices

Coffee exports earned Kenya Sh12.4bn in the last financial year. FILE

By GERALD ANDAE
    
Coffee farmers stand to gain from a surge in price of the commodity driven by high demand in the global markets.

A standoff between coffee marketers and county governments that led to postponement of last week’s auction has built pent-up demand that saw prices of the beverage rise by 2.4 per cent in this week’s auction on Tuesday.

During the previous auction held on 14th of this month, a 50-kilogramme bag of coffee traded at Sh14,450 ($170) compared to Sh14,790 ($174) this week.

“We registered good price this week and we attribute it to the high demand at the auction,” said Nairobi Coffee Exchange CEO Daniel Mbithi.

Kenyan coffee, which commands 0.5 per cent of the global production, is always been on demand in international markets due to its high quality.

More than 90 per cent of locally produced coffee is exported with the country earning 12.4 billion in the last financial year.

Mr Mbithi predicted that the rising prices are likely to be sustained in the coming days following the recovery of the economic meltdown in Europe.

“We may witness a little upsurge in the price due to recovery of the eurozone crisis,” he said, noting that though the current supplies are lower than that of last year, it surpasses the demand by almost 10 million bags.

This week’s auction saw an increase in the coffee offered for auction to 1.1 metric tonnes from the previous 927 tonnes.

READ: Coffee farmers eye 2014 boom as Brazil pulls down global output

Regarding the ongoing tussle between marketers and counties jostling for control of the coffee sector, Mr Mbithi said farmers should be given a free hand to sell their produce.

“The counties should not muzzle the farmers but instead allow them to make their free choice in selling of their coffee,” he said.

The CEO, however, said that if the counties insist on going their way, then they should offset the debts that they owe the marketers and millers.

Agriculture PS Sicily Kariuki said that the millers have a contract with the farmers which can only be terminated upon them (millers) being served with a three-month notice.

Millers said they are likely to lose in excess of Sh1.5 billion under the existing milling and marketing contracts that they had signed with farmers in the event the standoff is not resolved.