Kenya's traded coffee volumes, prices rebound on participants’ return
Sunday January 14 2024
Nairobi Coffee Exchange Ag. Chief Executive Officer Lisper Ndung'u (L) and Chairman Peter Gikonyo addressing journalists at Wakulima House in Nairobi, Kenya on September 20, 2023. PHOTO | LUCY WANJIRU | NMG
Traded coffee volumes and prices at the Nairobi Coffee Exchange (NCE) have rebounded as calm returns to the market, months after both buyers and sellers shunned the market amid shaky reforms.
According to data from the NCE, volumes offered for sale at the exchange have improved from 3,773 bags on August 15, 2023, which represented the 30th auction of the 2022/23 season to 20,199 bags on December 13, 2023.
Over the same period, the NCE registered an improvement in volumes of coffee beans sold, from 40 percent of bags offered for sale to 84 percent.
There was mixed performance in the prices of the various grades of the beverage in the review period.
The average price of premium coffee beans, AA grade, declined to Ksh38,377.58 ($240.10) from Ksh39,952 ($249.95) per 50kg bag.
That of AII grade meanwhile rose from Ksh29,818.15 ($186.55) to Ksh30,281.68 for the same quantity.
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The NCE now has an average of 18 buyers at each auction and 10 sellers compared to 17 buyers and only four sellers as at August 15.
The exchange has credited the improvement in activity to the return of confidence among market participants, along with improving global coffee prices.
Confidence in the market
“By now, the market has gained confidence in the new way of doing things and we are seeing stability in participation. We have seen about 40 buyers being boarded onto the exchange and about half of them have made successful bids,” NCE acting chief executive Lisper Ndung’u told The EastAfrican.
“Global prices are also rising, meaning that even offer prices on the floor of the NCE have also gone up.”
The return of activity at the coffee exchange is in stark contrast with the months of August and September, when volumes and prices fell sharply as traders and buyers kept off the market amid confusion over the issuance of trade permits.
Auction volumes in August, for example, fell by 95.62 percent to 192 tonnes from 4,380 tonnes the year before.
Volumes brought to auction tanked as contracted millers struggled to secure licences issued by county governments.
The low volumes had seen international buyers staying off the market which in turn reduced the demand for Kenyan coffee.
Coffee millers were considering laying off workers to minimise their costs as some of their trading permits were frozen.
The turnaround from the market turmoil which saw trading on the NCE partially halted in early August now seemingly points to early successes of coffee sector reforms which were steered by Deputy President Rigathi Gachagua.
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The Co-operative Bank of Kenya won the direct settlement system contract-DSS but initially faced resistance from some players.
More reforms for the sector have been lined up including the transitioning of regulatory and commercial roles held by the Agriculture and Food Authority and the Coffee Board of Kenya.
The NCE says the approval of 11 grower-affiliated brokerage companies by the Capital Markets Authority points to market confidence as activity on the exchange continues to normalise.
Growers' opportunity
“The biggest benefit is that growers now have the opportunity to present their own coffee for sale on the (NCE) floor,” added Ms Ndung’u.
The government is already claiming credit for the change.
“Our coffee has attracted big interest across the globe with some 32 companies now participating in the NCE translating into good prices,” Co-operatives Cabinet Secretary Simon Chelugui said previously.
Despite losing its glitter, coffee remains a key forex earner for Kenya.
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According to data from the Kenya National Bureau of Statistics (KNBS), coffee production increased from 34,500 tonnes in the 2021/22 crop year to 51,900 tonnes in the 2021/22 crop year on the back of conducive weather conditions in the coffee growing areas and improved crop husbandry.
Earnings from coffee meanwhile increased from Ksh18.6 billion ($124 million) in 2021 to Ksh27.3 billion ($182 million) in 2022. The price of coffee in 2022 declined by 25.8 percent to Ksh48,871.40 ($325.80) from Ksh65,864.90 ($439.09) in 2021 per 100kg on a dip in demand from the international market.