Traded volumes and prices at the Nairobi Coffee Exchange (NCE) have improved, buoyed by inflows of higher-quality fresh crop and deliveries of old stocks by co-operative societies from the Mount Kenya region.
Data from the NCE show volumes offered for sale at the exchange improved from 3,773 bags on August 15 which represented the 30th auction of the 2022/23 season to 20,199 bags on December 13.
Traders linked the improvement to bigger deliveries from Kirinyaga and Nyeri growing zones and inflows of batches of fresh crops from the October-December main coffee crop season in Kenya.
“There is quality fresh crop entering the auction as part of the main season which has helped improve prices. Then we are also witnessing a bump in volumes because of releases of old stocks that had been held by co-operatives in Kirinyaga and Nyeri,” a trader said.
“The groups in Nyeri and Kirinyaga have released big volumes of crop for the third consecutive auction.”
Over the same period, the NCE has registered an improvement in volumes of coffee beans sold from 40 percent of bags offered for sale to 84 percent. There was mixed performance in the prices of the various grades of the beverage in the review period.
The average price of premium coffee beans, AA grade, declined to Sh38, 377.58 ($240.10) from Sh39, 952 ($249.95 per 50-kilogramme bag.
That of AB grade meanwhile rose from Sh29, 818.15 ($186.55) to Sh30,281.68 for similar quantity.
The NCE now has an average of 18 buyers at each auction and 10 sellers compared to 17 buyers and only four sellers as at August 15.
The exchange has credited the improvement in activity to the return of confidence among market participants, along with improving global coffee prices.
“By now, the market has gained confidence in the new way of doing things and we are seeing stability in participation. We have seen about 40 buyers being boarded onto the exchange and about half of them have made successful bids,” NCE acting chief executive officer Lisper Ndung’u told this publication yesterday.
“Global prices are also rising, meaning that even offer prices on the floor of the NCE have also gone up.”
The return of activity at the coffee exchange is in stark contrast with the months of August and September when volumes and prices fell sharply as traders and buyers kept off the market amid confusion over the issuance of trade permits. Auction volumes in August for instance fell by 95.62 percent to 192 tonnes from 4,380 tonnes a year prior.
Volumes brought to auction tanked as contracted millers struggled to secure licenses issued by county governments which affected the flow of coffee volumes to the exchange.
The low volumes had seen international buyers staying off the market which in turn reduced the demand for Kenyan coffee.
Coffee millers were considering laying off workers to minimize their costs as some of their trading permits were frozen.
The turnaround from the market turmoil which saw trading on the NCE partially halted in early August seemingly points to early successes of coffee sector reforms which were steered by Deputy President Rigathi Gachagua.
Among the reforms carried out in the Capital Markets (Coffee) Exchange Regulations 2020 was the introduction of the direct settlement system which allowed for expedited and transparent payment of coffee sales proceeds.
The Co-operative Bank of Kenya won the direct settlement system contract-DSS but initially faced resistance from some players.
More reforms for the sector have been lined up including the transitioning of regulatory and commercial roles held by the Agriculture and Food Authority and the Coffee Board of Kenya.
The NCE has credited the approval of 11 grower affiliated brokerage companies by the Capital Markets Authority as a positive step in the restoration of market confidence as activity on the exchange continues to normalise.
“The biggest benefit is that growers now have the opportunity to present their own coffee for sale on the (NCE) floor,” added Ms Ndung’u.
The government has taken credit for the improved activity at the NCE terming the rebound as testament to working sector reforms to the benefit of coffee producers.
“The good news is that our coffee product has attracted big interest across the globe with some 32 companies now participating in the NCE translating to good prices. Our farmers are the biggest beneficiaries as good prices continue to be recorded at the coffee exchange,” Co-operatives Cabinet Secretary Simon Chelugui noted previously.
Despite losing its former glitter, coffee remains a key forex earner for Kenya despite headwinds including the reduction of agricultural land under coffee over recent years.
According to data from the Kenya National Bureau of Statistics (KNBS), coffee production increased from 34.5 thousand tonnes in the 2021/22 crop year to 51.9 thousand tonnes in the 2021/22 crop year on the back of conducive weather conditions in the coffee growing areas and improved crop husbandry.
Earnings from coffee meanwhile increased from Sh18.6 billion in 2021 to Sh27.3 billion in 2022 as the quantity of marketed coffee increased to offset lower coffee prices.
The price of coffee in 2022 had declined by 25.8 percent to Sh48,871.40 from Sh65,864.90 in 2021 per 100 kilograms on a dip in demand from the international market.
The estimated area under coffee has however come down from 115,700 hectares in the 2017/18 crop season to 109,400 hectares in the 2021/22 season. Apart from small holder farmers, coffee in Kenya is produced by cooperatives and estates.
