STATEMENT BY THE GOVERNORS OF MERU, NYERI, KIAMBU, KIRINYAGA AND MURANG’A ON A REGIONAL APPROACH FOR THE COFFEE INDUSTRY
THEME
UNLOCKING VALUE IN THE COFFEE INDUSTRY TOWARDS ENHANCED COMPETITIVENESS AND SUSTAINABILITY
INTRODUCTION
Since the coming in of County Governments in March 2013, farmers across the coffee growing regions have besieged their respective governments seeking support to revive the coffee industry. Their main areas of concern revolve around high cost of production, management of their growers associations and declining returns from sale of their produce.
CHALLENGES
The coffee industry in Kenya has been characterized by unstable production, declining and unpredictable coffee prices. This is mainly attributed to unreliable market outlets and market forces which are beyond the producers’ control. This is a sad and sorry state of affairs for the small scale coffee producers who are the majority in the industry and who heavily rely on the crop for their livelihood.
The main cause of this sad scenario is the monopoly of the coffee Value chain by well positioned players (cartels) who have established themselves in such a manner that they ensure that all the coffee from the societies is processed and marketed through them at their own dictated prices. This pricing mechanism is what is largely responsible for the decline in coffee production in the country from a whopping 135,000 metric tons in 1999 to the current average of 45,000 metric tons of clean coffee annually. A corresponding decline of acreage under coffee has also been noted as farmers shift to other enterprises as an alternative due to disillusion with coffee farming.
The Coffee Amendment Act (2001) put an end to the practice of holding multiple licenses by individual players for milling, marketing and buying of coffee. It also opened a second window for marketing of clean coffee directly outside the Nairobi Coffee Exchange. However, there has been collusion between the players and licensing agencies to circumvent the system. Sadly, today we have players who own coffee multiple licenses thus, accessing coffee from cooperatives societies illegally by mortgaging the crop in advance. Of major concern, is the huge indebtedness of the smallholder coffee farmers leaving the mother cooperative societies highly exposed and some virtually insolvent.
The scenario is aggravated by the backward integration which creates almost absolute monopoly and exploitation by the major players operating under several pseudo names with multiple licenses. In one extreme peculiar instance one player was seating in the board of the coffee regulator.
The situation referred to above can never achieve competitive coffee prices for the producers. For instance, last year the highest price per kilogram of coffee (cherry) was paid at Kshs 50.00 (USD 0.60cents). Therefore, at last year prices the farmer got Kshs 300 (USD1.60) per kg of milled clean coffee or bean. In comparison, one kilogram of roasted AA beans retails at Kshs 4,000 (USD 47.0) in any of the coffee retail shops in Nairobi city. The farmer, therefore, receives only 7% of the retail price and as low as 2% for the lower coffee quality grades.
The County governments in the coffee growing region of Kiambu, Meru, Nyeri, Murang’a and Kirinyaga, therefore, commit to the following principles as a regional initiative to salvage the coffee industry: -
1)That the Counties will market their coffee collectively;
2)The Counties will source quality fertilizers and other inputs collectively to reduce cost and ensure better returns to the coffee farmers;
3)The Counties will revitalize the agricultural (agronomy) extension services in order to increase coffee productivity both in quality and quantity;
4)The Counties will pursue financing partnerships that will ensure affordable, accessible and timely credit facilities to coffee farmers;
5)The Counties will progressively pursue initiatives that will enhance gradual coffee value addition; and
6)The Counties will aggressively promote local coffee consumption.
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