Farmers return to coffee as global demand hit new highs

As global demand for coffee reaches unprecedented highs, Kenyan farmers are replanting what they uprooted decades ago due to its poor returns and this time even the government is keen to reap from the international demand.

In the 1980s Africa produced about 30 percent of the world’s coffee, but today, going by current statistics, it only accounts for 13 percent, a far cry from its potential according to data from the Ministry of Agriculture.

According to InternatiAs onal Coffee Organization, Ethiopia with 7.45 million bags in 2010 was lead producer, followed by Uganda with 3.1 million, Ivory Coast with 2.2 million, Tanzania 917,000 and Kenya 850,000. Coffee is the second most traded commodity in the world after oil with an estimated value of $80 billion annually.

A reality check on the performance of most African producer countries indicates that all is not well as evidenced by recent statistics that the continent produced an estimated 17 million bags in 2010. This accounts for only 13 percent of the global coffee production compared to 30 percent in the 80s. In Kenya despite the good prices and government interventions, coffee production has remained low averaging between 40,000 metric tones and 55,000 metric tonnes.

“In 10 years the supply gap will be 30 million bags. This is a big opportunity for farmers in the country to increase production and earn more from their produce,” said Coffee Board of Kenya Managing Director Ms Loise Njeru. The government projects to introduce coffee production to 100,000 metric tonnes according to Vision 2030. This however will still be below the peak of 130,000 metric tonnes achieved in 1988/89.

World coffee prices are expected to remain high for over 10 years according to experts with supply falling below demand last year. About 158 million bags of coffee were consumed in the world in 2010 compared to 159 million bags the previous year.
In 2010 the country received Sh16 billion, an improvement from Sh10 billion registered the previous year. Coffee earned the country Sh22 billion in 2011. “We have witnessed crazy prices at the Nairobi Coffee exchange. Speculation may correct this in the long run, but the prices will not come to the low levels they were due to constrained supply,” said Mr. Kennedy Gitonga an economist at Coffee Research Foundation.

He said the Columbian mild which is similar to Kenya’s coffee will be coming to the market in few years after maturing, which will tilt the coffee market with added supply. However prices will be stabilized by rising demand, estimated at 2.5 percent per year.
Mr. Gitonga said Kenya could exploit the anticipated decline in coffee production in the world, by taking measures to mitigate the effects of climate change and increasing production per tree. “Kenya has no carryover stocks, even in times of high supply, indicating that local coffee is highly sought after at the world market,” he said.

And as researchers brace for challenges associated with the climate change, they are advising farmers to introduce measures that ensures that production is not reduced. Some of the challenges expected are new diseases and insects, drought and floods. Coffee Research Foundation, the body charged with carrying out coffee research in the country has advised farmers to initiate primary farming practices that have long been forgotten, to cushion the crop from the vagaries of nature.”The threat of climate change is real and the time to act is now to avoid being caught up a few years down the line. That is why we shall factor in climate change in our development of new varieties,” said the director of research Mr. Joseph Kimemia.  Among the measures cited by the research body include plating coffee friendly trees to keep the crop shaded. Planting grass strips in coffee rows and regular pruning are others.

Tree shaded Mr. Kimemia said can reduce temperature by 4 degrees Celsius while the other measures can hold more water for the plant. Firms like Kakuzi have reduced acreage of coffee to reduce risks as production plummeted. They have converted some of the land under coffee to mango growing.

But with the fast growing markets in China, India and Brazil, global supply of coffee is expected to be in a tight supply situation for several years and Africa has an opportunity to increase its production, the meeting convened for African coffee producer states and which deliberated on how to increase production and consumption noted.

A growing middle class in these countries that is increasingly taking to drinking coffee, has led to reduced exports from some of the traditional coffee growing countries. There are other emerging markets like Russia that the continent could use to increase exports. The continent with an estimated population of 1 billion also has a potential to increase local consumption but also has to increase value addition and produce brands for local and export markets.

However Kenyan coffee is a favourite in the global scene where it is purchased to blend produce from other countries.  This demand is rekindling hope to thousands of farmers who had previously abandoned the crop due to poor returns.

That coffee sector is on the road to recovery can be seen from the eyes of  farmer Jeremiah Muthomi of Meru Greens who says that in parts of Eastern and Central where his firm has contracted out growers, farmers have gone back to coffee on parcels where they were growing horticultural produce. “With the current coffee boom, farmers have started replacing horticulture with coffee trees,” he said.
Elgon Kenya Ltd is positioning itself to be a lead supplier to the coffee industry following the encouraging developments.

But on the flipside of all this interesting developments, local consumption remains low. Compared with other continents, Africa has an average consumption of only 750 grammes per person per year. In Brazil consumption is at 2.8 kilos. Ethiopia which is the top producer in Africa consumes nearly half of its produce while in Kenya only 3% is consumed locally. Algeria, Morocco, South Africa and Egypt which are non producing countries have a combined demand of 3.5 million bags every year and growing.

A coffee expert from Brazil Mr Carlos Bando, said the continent needed to invest in local consumption habit surveys to understand their needs in a bid to encourage more consumption. According to ICO, coffee consumption is estimated to be growing at 2.4 percent per year, and in 2010 the volumes were 158.2 million bags, a slight drop from the 159.2 million in 2009.

Among the reasons raised in the meeting for low coffee productions were concerns that farmers were aging and that it was necessary to encourage the youth to be active in reviving the crop. “We have to find innovative ways to encourage the youth to participate in growing coffee. Coffee has to appeal to the youth and has to be fashionable and trendy,” said Mr Ishak Lukenge from Uganda.

He said a youth programme had been initiated in his country where tournaments are organized around coffee, where youths plant coffee and discuss the crop before tournaments.