Team recommends direct sales of coffee by farmers

What you need to know:

  • The taskforce wants farmers to be paid immediately they deliver their produce pegged at a minimum of 40 per cent of the prevailing price for cherry delivered.
  • Industry stakeholders have previously said that selling coffee through licensed dealer denies farmers good returns because they have to go through numerous chains to sell their crop.
  • But Coffee Marketers Chairman James Mureithi says while the idea to create a commodity exchange is good, farmers may not benefit much because coffee production remains low.

A taskforce formed by President Uhuru Kenyatta to come up with solutions to problems affecting the coffee farming has proposed far reaching measures which they hope will return the once vibrant crop to profitability.

In a report handed to the President on Thursday, the taskforce, headed by Prof Joseph Keiyah, wants farmers to be paid immediately they deliver their produce pegged at a minimum of 40 per cent of the prevailing price for cherry delivered.

The report called on marketers to cap the minimum advance payment for farmers per kilo at Sh15.

The team want farmers to be allowed to sell their crop directly, instead of going through licensed marketers. It says direct sales should increase from the current 10 per cent to 30 per cent.

The taskforce also proposes promotion of specialty coffee and the turning of Nairobi Coffee Exchange into a public limited company.

The proposal to allow farmers in co-operatives to sell coffee directly at the auction will perhaps be one of the biggest turnaround in over a decade.

Industry stakeholders have previously said that selling coffee through licensed dealer denies farmers good returns because they have to go through numerous chains to sell their crop.

The exchange forms a key part of the coffee business, but not many farmers understand what really happens there.

This is because only licensed dealers participate in the weekly auction with five of them controlling a significant share of the total trading volume. In the last financial year, 60 dealers were licensed.

“The inaccessibility of the NCE to many players due to stringent licensing requirements makes the exchange lack transparency and effective price discovery mechanism,” the report says.

SAVING MONEY

But the NCE Chief Executive Officer Daniel Mbithi says the recent upgrade of infrastructure at the auction that allows for real time streaming of the prices is an indicator that the auction has embraced transparency.

“We have no issue with turning the auction into a public limited company, in fact I am happy because the move will work in the benefit of our farmers,” he said.

Mr Mbithi, however, says that farmers might not benefit a lot from the direct sales because the international market only buys top grade coffee unlike the exchange where dealers buy all the beans regardless of the quality.

“For the direct sales, it means that farmers will only have to sell the premium variety to the international market to compete with produce from other countries and remain with the low quality one,” he said.

President Kenyatta has said before that the coffee farmer sells his crop without knowing how much it actually gains on the international market.

“He (farmer) just sits back and awaits for whatever shall come his way,” Mr Kenyatta said.

After harvesting, coffee farmers take their crop to the commercial millers and then to the marketers who take it to the NCE for auctioning.

Farmers pay about two per cent of the value of their crop to marketers. Should farmers bypass the marketers and sell their crop directly to NCE, they will save the money that they would have paid as service fee.

PENDING ISSUE
Last year, a dispute between the county government of Nyeri and marketers led to a standoff that saw coffee from the region held by the millers after Governor Nderitu Gachagua refused the crop to be sold through middlemen.

The marketers refused to forego their role as the county moved towards direct sales.

This is after Nyeri County signed an agreement with Green Coffee Vault, a US specialty coffee trade facilitation agency to enable direct sales of their farmers’ berries.

The report also recommends the establishment of the Central Depository Unit, which will be a building block towards transformation of exchange into a commodity exchange.

But Coffee Marketers Chairman James Mureithi says while the idea to create a commodity exchange is good, farmers may not benefit much because coffee production remains low.

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