Bad year for coffee farmers as global prices, output fall

Regulators from the region’s coffee industry are projecting a drop in earnings this year due to falling global prices and lower crop volumes.

The International Coffee Organisation notes that in the past one year alone, global prices dropped 24 per cent and are expected to plunge farther.

Some farmers also reported damage to their crop due to erratic weather patterns which will further impact on earnings in a region where coffee is a top foreign currency earner.

In Kenya for example, coffee production is expected to fall by eight per cent in the October-September 2012/13 season to 45,000 metric tonnes (MT) from 49,000 MT over the same period in the previous year.

Revenues are also expected to fall to Ksh18 billion ($214 million) from Ksh19 billion ($226 million).

In 2010/2011, coffee volumes and revenues stood at 47,000 MT and Ksh22 billion ($255.8 million) respectively.

The Coffee Board of Kenya notes that relatively low rains experienced since December impacted on the flowering and eventual ripening of the crop.

“This resulted in low quality produce because coffee seeds cannot develop in wet weather,” said the board’s managing director, Loise Njeru. “The April-June season is unpredictable and the board could revise its outlook.”

The board projects that international prices for Kenya’s coffee could average $210 per 50kg bag this year, down from $228 in 2011/2012 and $330 in 2010/2011.

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There are also fears that Kenya’s coffee production could dwindle farther in coming years as the fast-growing real estate sector eats into land previously under cultivation.

A validation exercise carried out by the coffee board shows that the hectares under coffee over the past 10 years have declined from 150,000 to 109,000.

The Coffee Board of Kenya says it is now eyeing the country’s Western and Rift Valley provinces where there are huge tracts of land that can be used to grow coffee.

Equally, the board plans to diversify the country’s production to include the robusta variety that has boosted Uganda and Ethiopia’s output. Kenya grows Arabica coffee.

In Uganda, coffee output is looking up due to favourable weather but uncertainty about annual earnings persist due to low global prices.

The Uganda Coffee Development Authority (UCDA) is projecting an 11.1 per cent increase in exports to three million, 60-kg bags this year compared with 2012.

UCDA executive director Henry Ngabirano said most regions where the crop is grown have received favourable rainfall since the start of the year, creating an enabling environment for the coffee plants to flower.

“We are expecting a higher output but we remain unsure about annual earnings,” Mr Ngabirano said.

In 2012, Uganda’s coffee exports stood at 2.7 million 60-kg bags valued at $392.7 million, down from 3.15 million bags valued at $488.91 million a year earlier. The decline was attributed to long dry spells especially in the eastern region.

In Burundi, coffee production fell by 2,000 MT in 2012 to 24,000 MT, against a projected output of 26,000 MT. Industry managers blame it on soil degradation, ageing trees, poor supervision of coffee growers and climate change.

In Rwanda, coffee earnings dropped to $60.89 million in 2012 from $73 million the previous year, on account of low prices on the international market, but yields rose to 21,000 tonnes from 16,989 tonnes, according to the National Agricultural Export Board.

Rwanda had hoped to fetch $87 million from coffee exports last year. This year, the country is targeting $99 million, but it could miss the mark if global prices continue to falter.

Rwanda’s main challenge is increasing the value of the crop by focusing on fully washed coffee.

In order to do this, the country plans to increase the number of coffee washing stations, now at 210. However, it is not clear yet how many more stations the government plans to add.

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“The national agricultural export board is rehabilitating coffee plantations and providing farmers with the best seeds,” said Alex Kanyankole, the board’s director-general.

Coffee is among Rwanda’s top foreign exchange earners alongside tourism, tea and minerals.

Tanzania, on the other hand, expected a drop in coffee revenues as a result of price volatility in global markets and a bumper harvest in Brazil and Colombia amid reduced demand in Europe and US.

Adolf Kumburu the director-general of the Tanzania Coffee Board, said the country expects $200 million in revenues against the initially projected $250 million.

“We haven’t closed the financial year, which ends in June, while the coffee season ends in March 2013, but so far we have produced 55,000 tonnes although our estimate was between 65,000 tonnes and 75,000 tonnes,” he said. To boost production, the board plans to expand coffee acreage with a 2020 target in mind that should see production rise to 100,000 tonnes.

But while the outlook for the coffee sector is bleak, that of tea is bright, with EAC countries expecting a rise in export earnings despite a prolonged drought that affected production at the start of last year.

Industry managers in Kenya, Rwanda, Burundi and Tanzania said they are expecting high returns due to good prices that resulted from low production.

Source: The EastAfrican, http://www.theeastafrican.co.ke, reported by Scola Kamau, John Gahamanyi and Rosemary Mirondo

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