The Elephant in the Room; Kenya’s coffee crisis

The Elephant in the Room; Kenya’s coffee crisis

Coffee plays a crucial role in the livelihoods of millions of rural households in many developing countries. However, the coffee market continues to be a showcase of the need to address the commodity crisis on both a global and local scale. In Kenya, its production continues to decline despite Government efforts to revive what was once the country’s leading foreign exchange earner.

Kenya’s coffee currently grows under 114,000 hectares total area, of which about a third (3 300 large-scale coffee estates ) is under plantation sector. The rest is under small holder sector with over 600,000 growers who command more than 48% share of the market. They are organized into about 550 cooperatives and account for 75% of the total land under coffee. However, Kenya’s coffee production has been on a declining trend since 1987/88 crop year when production peaked at an all-time high of 128,700 metric tonnes. It since dropped to 42,000 metric tons in 2010.  Consequently, its contribution to the country’s foreign exchange dropped from 40% in 1986 to 3% in 2010.  Production loss by small holder farmers was more pronounced at 47% decline during the same period.

According to the most recent data from the Nairobi Coffee Exchange, the volume of coffee exports from the country dropped from 10,900 to 9,400 metric tons, a 3.8 per cent in 2016/17 crop year. The decline was sharp and more severe among the small scale farmers as yield per tree declined to two kilogrammes against a potential more than 30 kilogrammes. Similarly, the area under coffee has over the years sharply declined leading to the general output decrease. It was around 170,000 hectares in 1987/88 production year but has dropped to 114,000 hectares in 2015/16 crop year. Current production is estimated at 40,500 metric tons , denoting a 66% decline during the last 30 years. This is as disgruntled farmers continue to uproot the crop in favor of other economic activities.

What ills Kenya’s coffee sector?

Kenya’s government liberalized the coffee sector in the early 1990s. They believed that this would promote increased production, foreign exchange and farmer’s earnings.  However, coffee production has declined  and remains depressed almost 30 years since liberalization began. Many research findings agree that Liberalization of the coffee sector resulted in decreased coffee production. Although its intention was noble, it became riddled with challenges most of which remain unresolved today, among them:

Mismanagement of co-operative societies: A close look at coffee audit reports for many coffee cooperatives reveal gross misappropriation of money earned from coffee. Many of these audits are recent having taken place from 2014. Losses are occasioned by exaggerated repairs and maintenance costs as well as fictitious tax payments to the Kenya Revenue Authority. Other means through which the money is siphoned off include alleged survey expenses, unaccounted for cash withdrawal from the society’s bank accounts, alleged purchase of goods and irregular allowance payments.

Late Payments: Regular payment is the latest attempt to woo farmers back to coffee growing after many years of disillusionment arising from mismanagement of the sector and the resulting late payments. An upcoming pilot project with the banks which is a partnership between the Coffee Directorate, Co-operative bank and county government however comes with undisclosed interest charges on the funds. This is a welcome move as farmers previously received payments six months after coffee was sold through the central auction system. Whether the price will improve or be fair is still not guaranteed.

Declining farmers’ earnings: Unknown to many coffee farmers, Kenya’s coffee continues to fetch premium price in the world market. This makes it the most valued beverage at the New York Exchange, which is the world’s largest auction for the commodity. It is highly sought by roasters for blending with other coffees owing to its high quality and rich tasting profiles. For example, in 2018’s most recent trading, Kenya’s Arabica fetched $330 for a 50 kilo bag with Indonesian produce coming in second at $259 for a 50 kg bag. Despite Kenya’s coffee being in high demand in world markets, the country only accounts for 0.5 per cent of the total global output.

Decline in application inputs: Costly farm inputs and labor costs has led to many farmers doing without them especially fertilizers, pesticides and certified seeds. This is largely attributed to low and irregular farmer income, low access to credit facilities and lack of government subsidy for most of these farm inputs.

Poor farming practices:  In addition to lack of access to affordable farm inputs , huge yield losses have been caused by poor coffee husbandry especially weeding and pruning, lack of pests and diseases control besides limited knowledge on crop husbandry. Most farmers lack of extension services to facilitate them in sustainable farming practices. Additionally, small holder farmers have to contend with the changing climate and its impacts such as severe and unpredictable weather patterns, and the spread of pests and diseases thereof.

Farmers’ loss of confidence in management of coffee affairs: After years of low income and a sector that has continued to ail, many farmers have abandoned coffee farming in favor of other economic activities that include tea, horticulture and dairy farming. To put this into perspective, horticulture and tea exports in the recent years account for 34% and 32% of agricultural exports respectively, while coffee accounts for only about 6%.  Similarly, most of the prime coffee growing zones around Mt.Kenya region and close to Nairobi have been converted into real estate and governments development infrastructure such as road expansion and water projects.

Low youth engagement:  Besides the low returns , the system does not support inclusion of the youth in coffee farming and their absence has subsequently led to continuous decline of output. Consequently, the sector suffers reduction in productive population and rural-urban migration of youth to more attractive opportunities.

Creating opportunities for small holder producers

Many of these issues emanate from poor management in marketing factors, finances, government policies, physical and human resources. However, positive steps such as formulating favorable marketing factors, policies and offering regular extension services will improve coffee yields and quality. Further, a relatively stable institutional environment where proportions of generated revenue are fairly distributed between producers and consumers, while creating more direct grower-farmer market is imperative. To be part of such a network reduces the vulnerability of the small holder coffee farmer while safeguarding their livelihood.

 

 

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