This year's Kenyan coffee marketing window has suffered supply hitches that have seen the auction twice suspended due to lack of beans. Traders mainly blamed the development on premature flowering of crop from the last season. Traditionally, coffee volumes at auction surge around March but they peaked earlier this year after Kenya experienced unusually heavy rains in the first months of last year. Because of the unpredictable weather, coffee bushes flowered when they should not and produced coffee berries at different stages of maturity. The Kenya weekly coffee auction has been skipped several times this year due to low supplies.
The tight supplies are attributed to a cold spell in early May that delayed the drying process, Daniel Mbithi, KCPTA
(Kenya Coffee Producers' and Traders' Association) spokesman said last month.
The overall average price across all grades rose to $311.67 for a 50-kilogram bag in June from $294.66 for a 50kg bag in the previous auction, held on April 20, according to auction reports.
Currently, due to low supplies at least 20,000 bags are required to sustain the auction.
The auction, which normally closes in July or August for an annual one-month recess, this year closed April 19 due to tight supplies, resuming weeks later.
Kenya coffee production has been in decline since the all-time high of 130,000 metric tons in 1987-1988 crop year [October-September], reaching a record low in 2009-10 of 42,000 tons due to an unexpected change in the weather which caused a high incidence of coffee leaf rust, according to the Coffee Board of Kenya.
Kenya exports nearly 98% of its coffee output, mainly to the European Union, U.S. and Middle East. The price for Kenya’s benchmark coffee grade climbed 2 percent at the auction held during the last week of July 2011 because of demand from a major buyer, the Nairobi Coffee Exchange said.
The top AA grade sold for an average of $465.59 per 50- kilogram (110-pound) bag, compared with $456.59 at the previous sale. According to the Nairobi Coffee Exchange, the grade sold for as much as $544 a bag compared with $510 last week, while its supply climbed 28 percent to 846 bags while the average price for all the coffee sold fell 3.2 percent to $323.89 a bag, due to an increase of supplies.
Sales at the auction also fell 5.6 percent to 7,619 bags valued at $3.01 million, from 8,072 bags worth $3.30 million the previous week as bean supplies rose 32 percent to 18,867 bags from 14,325 bags due to warm conditions which help dry crops.
The following are details of the auction as of 27th July, 2011 in USD for a 50-kilogram bag:
Grade Low High Average
AA 354 544 465.59
AB 242 382 362.07
C 236 347 308.05
HE 175 279 233.20
MH 189 213 198.64
ML 121 170 133.15
PB 350 379 363.41
T 127 284 237.76
TT 265 400 343.71
UG1 236 291 278.38
UG2 201 275 250.22
A batch of Kenya's benchmark AA coffee fetched a record price of $1,008 per 50-kg bag during the first sale of 2011, which is the highest price fetched in more than 10 years.
Such a performance was last recorded in the 1996/97 crop when a batch of coffee sold for $1,080 per 50-kg bag.
The lot of 1,108 bags originated from Rianjagi Co-operative Society in Embu, Eastern Kenya, and was bought by Josra Coffee, which exports to Germany, Finland, Japan and the United States of America. The cooperative produces coffee certified as sustainable by Utz Certified.
In the first week of August 2011, the overall average price across all grades rose to $346.30 for a 50-kilogram bag from $323.89 a bag in the previous auction, held on July 27. The average price for Kenyan benchmark grade AA coffee fell from the previous auction. (The Kenyan auction uses New York ICE futures as its benchmark)
According to David Muriithi, acting director of the Kenya Coffee Producers' and Growers' Association, which runs the auction, there was a shortage of supply of grade AA, the reason there was less demand for AA.
A total of 14,872 bags were offered at the auction down from 18,867 bags offered at the last auction. While 8,052 bags were sold, up from 7,619 bags sold at the previous auction.
The coffee fetched $3.4 million, compared with $3.0 million at the previous auction.
Following are highs and lows in dollars for a 50kg bag of main grades, as quoted by the Kenya Coffee Producers' and Traders' Association.
GRADE LOW HIGH WEIGHT (KGS) AVERAGE PREVIOUS AVERAGE
AA 412 517 33,970 492.74 465.59
AB 276 408 249,665 379.48 362.07
C 272 343 76,625 302.35 308.05
PB 281 429 12,448 373.60 363.41
T 202 278 27,874 251.25 237.76
TT 232 389 10,701 327.11 343.71
UG 250 280 5,134 275.02 N/A
UG1 256 340 37,978 284.65 278.38
UG2 132 268 25,444 246.05 250.22
As the international prices keep been skyrocketing, there will continue to be a coffee deficit due to high demand. The weather looks promising so far and if there are no incidences of coffee berry disease in August then the crop output will be very good. Output is expected to grow between 12,000 and 15,000 tonnes.
A surge in the number of youthful entrepreneurs taking up coffee farming is expected to revamp the industry and as fresh energy and ideas are injected, it is certain that both quality and output volumes will be driven higher for the good of the industry. Government-led reforms are also encouraging more farmers to invest in coffee production.
Most small-scale scale coffee farmers disillusioned by poor earnings have neglected their coffee trees or chopped them down altogether and taken up dairy farming in frustration at years of hard toil with no returns. According to new rules, co-operatives can keep only 20 percent of net sales and must pass on the rest to farmers. Growers are also replacing corrupt co-operative officials that siphoned their cash, which is also beginning to bear yields.