In the heartland of Kenyan coffee, a pressing issue has taken center stage – the declining participation of licensed coffee buyers in the Nairobi Coffee Exchange (NCE). This critical situation has far-reaching consequences, including plummeting auction volumes and prices. In a bid to address these challenges, NCE Chairman Peter Gikonyo recently sounded the alarm, urging the coffee industry to take action before it’s too late.
Low Buyer Participation:
NCE auctions, historically a vibrant hub for coffee trade, are now grappling with a significant decline in buyer participation. According to Chairman Gikonyo, an alarming average of only 25 buyers show up on each auction day. This lackluster interest is a matter of grave concern, given that 80% of Kenyan coffee is traded at these auctions. The figures are stark – out of the 121 licensed coffee buyers for the 2023/2024 season, only 58 have registered at the NCE. The repercussions of this trend are already visible in the form of dwindling auction volumes and prices.
Auction Volume and Price Plunge:
The NCE has recently witnessed a staggering decline in both auction volumes and prices. Comparing August 2022 to August 2023, the volumes have plummeted by a staggering 95.62%, with prices suffering a 31.13% drop. This downturn in performance has been attributed to a multitude of factors, including a significant portion of coffee parchment being held by contracted millers awaiting renewed milling licenses from county governments.
A Silver Lining in Past Success:
While challenges loom large, it’s essential to acknowledge the positive strides made by the NCE in the past. Notably, the Exchange’s implementation of an automated coffee auction system in 1998, coupled with a web-based platform in 2020, has streamlined coffee trading. This digital upgrade has revolutionized how coffee is bought and sold, making it more accessible and transparent for participants.
A Forward-Looking Approach:
Despite the prevailing challenges, Chairman Gikonyo envisions a brighter future for the NCE. Several forward-looking initiatives are in progress. One such initiative is the development of a mobile app that will empower growers to track their coffee trading activities conveniently. Additionally, the NCE is actively collaborating with various partners on projects that enhance traceability and transparency in the coffee value chain.
Key Measures to Revitalize the NCE:
Gikonyo has outlined a comprehensive set of measures aimed at reinvigorating coffee trading at the NCE:
- Boost Buyer Participation: Encouraging all licensed buyers to actively participate in NCE auctions to enhance competition and potentially improve prices.
- Enhance Coffee Quality: Coffee growers must prioritize improving the quality of their production to capture a larger share of the international market and increase foreign earnings.
- Adopt the Direct Settlement System: Embrace and enroll in the Direct Settlement System for seamless and transparent settlement of coffee sales proceeds.
- Quality Analysis: Develop an independent Quality Analysis system for coffee buyers and grower representatives to bridge the gap between buyer and seller in reserve price setting based on cup quality and coffee grade.
- Digital Trading Platform: Create a robust digital trading platform alongside the auction system, allowing continuous trading of coffee, especially specialty coffee, beyond auction days.
- Commitment to Reforms: Embrace coffee industry reforms and ensure that all stakeholders play their respective roles in ensuring business continuity.
Conclusion: As the Kenyan coffee industry faces turbulent times, Chairman Gikonyo’s clarion call for action cannot be ignored. Urgent steps are needed to revitalize the Nairobi Coffee Exchange and restore it to its former glory. With collaborative efforts and a commitment to transparency and quality, the Kenyan coffee industry can once again flourish on the global stage.
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