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Coffee-zone counties fight to free market [Nation (Kenya)]
[February 15, 2014]

Coffee-zone counties fight to free market [Nation (Kenya)]

(Nation (Kenya) Via Acquire Media NewsEdge) Huge milling losses and control of prices by multinationals are at the centre of a row between Nyeri County and value chain actors that have over the years dominated the coffee business.

Coffee societies currently appoint millers and marketers who enter into contracts to take up coffee after wet processing, from which point these firms take control of value chain activities.

Farmers wait for whatever price the Nairobi Coffee Exchange auction determines. The system of picking the millers and marketers is largely dependent on elected coffee society officials, some of who are compromised by the milling firms.

Now, county governments in coffee-producing zones want an overhaul of the current system in which farmers sell their coffee through millers and marketers appointed by the societies.

"The societies have been experiencing high milling losses, reducing the volume of coffee that ends up in the market, which in return has reduced the final pay received by farmers," read a statement from the Nyeri coffee societies last week. "In some societies, such losses have gone up to a high of 30 per cent for good quality coffee." Governors Nderitu Gachagua (Nyeri), William Kabogo (Kiambu), Mwangi wa Iria (Murang'a), Joseph Ndathi (Kirinyaga) and Peter Munya (Meru) last week issued a joint statement saying they planned to collectively market their coffee to improve farmers' earnings.

Some societies have invested in milling plants as a way to enable farmers to earn more from their produce. An insider familiar with the business says millers used the excuse of losses to fleece the farmers as they control the entire system. (READ: Coffee farmers vow to kick out agents) MULTIPLE LICENCES Matters worsened after the amendment in 2009 of the Coffee Act 2001 through a finance Act that allowed the issuance of multiple licences, effectively handing control of the coffee industry, from the farm to the cup, to a group of players, mainly multinationals.

The firms registered multiple companies from milling, warehousing, roasting and marketing, introducing conflicts of interest, and even adopted fictitious names to guard their interests in the value chain.  The fragmented selling of coffee to different marketing agents makes it difficult for any society to consolidate its coffee even at the local level, the end result being inadequate volumes to meet external market demand. The coffee is consolidated at the Nairobi Coffee Exchange (auction) and off-loaded to the market at better prices than those offered to farmers.

African Fine Coffee Association director Robert Nsibirwa believes that Kenyan farmers are restricted in a way that has created desperation due to poor returns.

"The regulator (Coffee Board of Kenya) thinks the Kenyan farmer is unintelligent, but boxed in, the farmer has been moving away from the coffee farming business," he said.

According to Mr Nsibirwa, Ugandan farmers receive 80 per cent of the per kilo sale price, compared to the 7 per cent offered to Kenyan farmers even when Kenyan coffee fetches higher premium prices compared to those of its neighbours.

"It is embarrassing that while coffee prices globally were in excess of $ 3.5 (Sh300) per kilo, Kenyan farmers in 2012/13 received an average of Sh34 ($0.4) per kilogramme of cherry," the societies' statement says.

But experts say farmers will have to raise productivity per tree to between 30 and 40 kilograms from the current average of two, to boost returns. The other concerns in the sector revolve around the high cost of production, management of the growers associations and declining sales returns.

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