Firm prices promise good coffee year

Coffee earnings grew by 27 per cent over the first eight months of the year supported by firm prices, signaling a good run for farmers.

Provisional data by the Kenya National Bureau of Statistics (KNBS) shows earnings from the commodity to August stood at about Sh10 billion compared to the Sh7.35 billion over a similar period last year.

The performance is attributed to strong prices in international outlets.

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“The international markets have been up for much of this year and the prices have been good locally too,” Daniel Mbithi, an official at the Nairobi Coffee Exchange (NCE) said.

Latest projections by the International Coffee Organisation (ICO) showed producers worldwide were headed for higher earnings this year due to adverse weather conditions and a rise in production costs, which have cut global supplies.

The shortage is reflected by the fact that opening stocks in producing countries for the 2010/11 crop year are expected to fall below 12 million bags, the lowest level in recorded history.

The effects of the market conditions have been reflected in the local scene because pricing at the NCE largely tracks leading international outlets such as the New York Futures Market.

Besides, the Kenya Meteorological department expects dry weather in the country in the coming months — a situation that could further affect coffee stocks.

In a forecast for the final quarter for 2010, the department predicts depressed rainfall conditions across most parts of the country.

“Unfortunately, only a few will enjoy the bounty locally because production has not been good in terms of numbers,” Mr Mbithi said.

Some growers, unhappy about widespread mismanagement in the once vibrant sub-sector, have given up on coffee production and taken on the now lucrative real estate business.

Several coffee farms mainly in Central Kenya have been cleared to pave way for property development investment viewed to have bigger returns.

Last month, the Coffee Board said earnings grew by more than a half to Sh16 billion in the 2009 crop year driven by strong pricing locally and abroad, helping to offset the impact of adverse weather on output.

Production dropped from 50,000 tonnes in the 2008/2009 season to 40,000 tonnes, but farmers’ earnings were boosted by prices of Sh70 per kilogramme of cherry on average.

“Prices were firmly supported by positive global fundamentals,” Ms Loise Njeru, the managing director of Coffee Board of Kenya (CBK), told a media briefing in Nairobi.