Drinking local coffee key to averting risk of volatile international pricing: ICO


Drinking local coffee key to averting risk of volatile international pricing: ICO
A cup of coffee

In Summary

  • International coffee prices have been on a free-fall since November 2016 where the price of coffee per pound (lb) has then fallen from a high of nearly Ksh.150 (150 US cents) to close below the Ksh.100 mark (100 US cents) as at February 2019 according to data from the ICO composite indicator.
  • Falling global prices for the produce has however been paradoxical given the ever growing consumption of coffee year on year and concerns around inadequate production capacity on a global scale.
  • In Kenya, productivity across the last 5 years has peaked at an average of 50,000 metric tonnes (MT) against a historical high of 130,000 MT at the end of the 80’s.
   

The International Coffee Organisation (ICO) has backed the increase of domestic coffee consumption by exporters to shield against ongoing volatility in the international market pricing.

Visiting ICO Executive Director Jose Sette said Friday, the solution to uncertainties in the valuation of coffee on the global front primarily lie with the coffee producing countries.

“There is no on silver-bullet to cure the situation. We must take a multifaceted approach. Coffee exporting countries have to do their homework to pursue cost-effectiveness in production while assuring of the better remuneration of farmers who sit at the very base of the supply chain,” he said.

According to the ICO boss who spoke at the close of the organization’s 124th council session in Nairobi, the resilience of the industry during the now 2-year straight fall in prices must be generated in-house.

International coffee prices have been on a free-fall since November 2016 where the price of coffee per pound (lb) has then fallen from a high of nearly Ksh.150 (150 US cents) to close below the Ksh.100 mark (100 US cents) as at February 2019 according to data from the ICO composite indicator.

The volatility in prices has seen the change in price paid to growers for a kilo of coffee fluctuate by between 2 and 36 percent as per ICO estimates.

Further to the effects of price volatility has been the paltry reduction in the area under coffee to include a 29 percent slide in the average annual income to coffee producers.

Falling global prices for the produce has however been paradoxical given the ever growing consumption of coffee year on year and concerns around inadequate production capacity on a global scale.

In Kenya, productivity across the last 5 years has peaked at an average of 50,000 metric tonnes (MT) against a historical high of 130,000 MT at the end of the 80s.

Chair to the coffee sub-sector reforms implementation committee Joseph Kieyah is confident of Kenya’s own ability to develop a mature domestic market going by the changing tastes and preferences for beverage choice especially among the youth.

“Young people have begun consuming coffee. The key intervention at this time would be to ensure the affordability of a cup of coffee. One way to achieve this is by exporting all of our premium coffee and retaining part of the remainder in the local market,” he said.

Available data already points to an improving domestic market to include an annual local consumption growth of between 2 and 5 percent.

Domestic consumption at the close of the 2017/18 fiscal year for instance stood at 1,103 MT or about 18,396-60 kilo bags from a low of 510 MT (8498 bags) in the 2009/10 period.

Further to domestic consumption as a coffee sub-sector intervention are ongoing reforms to prop up the sector amid the prolonged and longstanding challenges in the industry.

The Ministry of Agriculture has for instance announced of a timely gazette of new regulations while President Uhuru Kenyatta in his address, Tuesday, proclaimed the implementation of Ksh.3billion revolving credit facility to prop up coffee farmers financially.

According to Mr. Kieyah, the government must scrutinise the operation of the fund to consider a waiver of all debt owed by farmers for the effective use of the credit facility by government.

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Story By Kepha Muiruri
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