The volume and prices of coffee sold at the Nairobi Coffee Exchange (NCE) have dropped sharply as traders and buyers stayed away from the market amid looming worker layoffs by processors as confusion over the issuance of trading permits by the State intensified.
The NCE’s poor performance coincides with reforms overseen by Deputy President Rigathi Gachagua, who oversaw the relaunch of the exchange in mid-August.
According to NCE data, auction volumes in August fell 95.62 percent to 192 tonnes from 4,380 tonnes at the same time last year.
At the moment, the auction attracts an average of 25 buyers on each auction date, a low rate that affects bid competition in a market where up to 80% of Kenyan coffee is traded.
Only 58 of the Agriculture and Food Authority’s 121 licenced coffee buyers for the 2023/24 season have registered at the NCE to buy from the auction.
Similarly, the average price of a 50-kilogram bag of coffee beans dropped by 31.13 percent, from Sh266.32 to Sh183.41.
Volumes delivered on the exchange’s floor have plummeted, owing largely to contracted millers who have been unable to obtain licences issued by county governments, affecting the flow of volumes to the exchange.
Due to the low volume, international buyers have stayed off the market, reducing demand for Kenyan coffee.
The dismal run continues the chaos in the coffee market, which came to a halt in July after a large number of brokers lost access to the market.
NCE chairman Peter Gikonyo, on the other hand, insisted that no licences had been suspended.
“I am not aware of the suspension of any licences as the licences were to expire at the end of June, which marked a transition from previous regulations. I would encourage brokers to comply and make applications for licences with their respective regulators,” he stated.
Coffee millers are now considering layoffs in order to cut costs. The millers announced on Tuesday, during a consultative meeting convened in Nairobi by Crop Development Principal Secretary Kello Harsama, that they would begin retrenching thousands of their workers next month due to the suspension of their trade permits.
“We do not have trading licences and as a result, we are not able to sustain our workers. Before the end of October, we will be laying off a substantial part of our staff who number more than 18,500,” said James Muriithi, who represented the seven of the largest coffee millers.
Coffee traders also expressed disappointment that no coffee had been certified in the current licencing cycle, which began in July, implying that global coffee roasters such as the US-based chain Starbucks are moving away from buying Kenyan coffee.
“In the current licensing cycle about 16,000 bags of coffee have been produced but no single bag has been certified,” said Jack Marrian, who is a member of the Kenya Coffee Traders Association (KCTA).
“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.”
The introduction of a direct settlement system (DSS) is one of the ongoing coffee sector reforms. The Capital Markets (Coffee Exchange) Regulations 2020 established a direct settlement system for the expedited and transparent payment of coffee sales proceeds.
The Co-operative Bank outbid other banks for the contract to provide the DSS, but the system has sparked opposition from some coffee industry players.
On Wednesday, coffee stakeholders demanded that the government grant them interim trading licences while the government implements reforms, and PS Kello promised to inform DP Gachagua and President William Ruto of their concerns for resolution.
“We are going to make a decision on all the issues that you have raised today and we will formally inform you of the decisions that we will make so that we move forward together,” said the PS.
Last month, DP Gachagua stated that the reforms are “unstoppable” and that some of the proposals will become law by December.
Some of the policy documents planned to revitalise the sector include the Coffee Bill 2023, the Draught Co-operatives Bill 2023, and the Sessional Paper No. 1 of 2020 on the National Co-operative Policy.
The Coffee Bill proposes reorganising the coffee industry by transferring the regulatory and commercial functions currently performed by the Agriculture and Food Authority (AFA) to the Coffee Board of Kenya.
It also aims to shift the Coffee Research Institute (CRI)’s coffee research from the Kenya Agricultural and Livestock Research Organisation (Kalro) to the Coffee Research Institute (CRI).
