Commodities

New coffee fund to cushion farmers from falling prices

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A coffee farmer tends the crop. FILE PHOTO | NMG

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Summary

  • Coffee farmers will be cushioned from extremely low prices if Parliament approves a proposed law aimed at cheering production of the crop.
  • The State-sponsored Bill proposes the establishment of a Coffee Stabilisation Fund (CSF) to compensate profit margins for farmers whenever prices of the commodity plummet.

Coffee farmers will be cushioned from extremely low prices if Parliament approves a proposed law aimed at cheering production of the crop.

The State-sponsored Bill proposes the establishment of a Coffee Stabilisation Fund (CSF) to compensate profit margins for farmers whenever prices of the commodity plummet sharply.

“There is established a Fund to be known as the Coffee Stabilisation Fund which shall be managed by the Board,” reads the Bill sponsored by Majority Leader in the National Assembly Amos Kimunya.

“The Board shall apply the monies received into the Fund to income and price stabilisation and any investment that furthers the objective of stabilising the prices paid to farmers,” it reads.

The Cabinet Secretary for Agriculture will have powers to make regulations on how the fund will be used to compensate farmers.

Farmers have an option of selling their coffee directly to international buyers, or they could contract marketing agents to sell through the weekly auctions at the Nairobi Coffee Exchange (NCE).

Sales through both channels, however remain susceptible to price volatility due to fundamentals in the global markets—leaving farmers deeply exposed, especially in instances where commodity prices fall sharply.

Sharp drops in commodity prices affect the financial well-being of farmers amid low revenues that cannot cover for production costs incurred or repay credit incurred.

The CSF may boost the morale of farmers long disillusioned by low earnings and mismanagement of the sector.

Since the early 1990s to the 2010/11 crop year, the area under coffee in Kenya has declined by 35 per cent from 170,000 hectares to 109,795 hectares, while production has dipped from 130,000 tonnes in 1988 to 45,000 tonnes in the last season (2016/17) as farmers abandoned the crop.

Many farmers have uprooted coffee trees in exchange for better-performing crops such as avocado.