In the heart of Kenya, where coffee cultivation has been a cherished tradition for decades, a storm is brewing. The Nairobi Coffee Exchange (NCE), the epicenter of coffee trading in the country, is grappling with a crisis of unprecedented proportions. The once-thriving coffee market is now in turmoil as plummeting prices and disrupted reforms threaten the livelihoods of thousands. In this article, we delve into the depths of this crisis, exploring its root causes, implications, and the looming specter of job cuts that haunt the industry.
The Unprecedented Decline:
The data paints a grim picture. According to figures released by the NCE, coffee sales volumes in August nosedived by a staggering 95.62 percent. Last year, during the same period, the exchange witnessed the trading of 4,380 tonnes of coffee beans. This year, a mere 192 tonnes exchanged hands. The shocking decline has sent shockwaves through the coffee trading community, leaving many stakeholders alarmed.
Dwindling Competition:
Once bustling with activity, NCE auctions are now a shadow of their former selves, attracting just 25 buyers on average during each auction date. This lackluster turnout has severely hampered competition in the bids, and the consequences are dire. Kenyan coffee, which once dominated the market, is now struggling to maintain its foothold. It constitutes up to 80 percent of the country’s coffee market, but the current scenario is anything but promising.
The Licensing Quandary:
A concerning aspect of this crisis is the sharp decline in the number of coffee buyers registered at the NCE. Out of the 121 coffee buyers licensed by the Agriculture and Food Authority for the 2023/24 season, only 58 have chosen to participate in the auctions. This phenomenon is a direct result of contracted millers who have been unable to secure trading permits issued by county governments. The ensuing disruption in the flow of coffee to the exchange has discouraged international buyers, ultimately leading to a decreased global demand for Kenyan coffee.
Price Plunge:
Perhaps the most alarming aspect of this crisis is the drastic drop in coffee prices. The average cost of a 50-kilogram bag of coffee beans has plunged by a staggering 31.13 percent. In concrete terms, it has fallen from Sh266.32 (US$1.81) to a meager Sh183.41 (US$1.24). This price plunge, coupled with the decline in sales volumes, has created a perfect storm that threatens the financial stability of coffee farmers and traders alike.
Root Causes and Implications:
The dramatic decline in auction volumes can largely be attributed to contracted millers’ inability to secure trading permits, disrupting the flow of coffee to the exchange. This, in turn, has deterred international buyers from entering the market, leading to a decrease in global demand for Kenyan coffee. Furthermore, the suspension of trade permits for coffee millers has pushed them to contemplate the grim prospect of laying off thousands of workers, a move seen as essential to reduce costs.
The Future Hangs in the Balance:
The coffee crisis in Kenya is further exacerbated by the fact that no coffee has been certified in the current licensing cycle that began in July. This has prompted global coffee roasters, including the renowned US-based chain Starbucks, to seek alternatives outside of Kenya. Jack Marrian, a member of the Kenya Coffee Traders Association (KCTA), paints a bleak picture, saying, “Every day roasters are calling us and telling us they want coffee but we have to tell them that we have no coffee. These roasters are moving to alternative markets, and once they turn away from Kenya, there is no bringing them back.”
Conclusion:
The Kenyan coffee industry is at a crossroads, facing one of the most significant crises in its history. Plunging prices, dwindling sales volumes, and disrupted reforms threaten the livelihoods of countless individuals who depend on coffee cultivation and trade. The industry must now come together to find solutions, navigate these turbulent waters, and ensure that the rich tradition of Kenyan coffee remains alive and thriving. The world is watching, and the fate of Kenyan coffee hangs in the balance.
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