Every Tuesday, Dirk Sickmueller, General Manager of premier export company Taylor Winch (Coffee) in Nairobi, goes to auction. Rather than a vision of excited bankers yelling out figures and gesticulating wildly like a scene from The Wolf of Wall Street, green bean buyers and local roasters bunker down in a theatre-style auction hall.
The scene appears more subdued thanks to the digital platform the Nairobi Coffee Exchange implemented 20 years back, which only a few months ago had an upgrade to include a web camera and TV screens so that farmers in certain coffee growing regions can watch the bidding action unfold. Prices are displayed on a large digital screen. The numbers fly back and forth, with the final print, or best bid, confirmed or noted to a particular buyer.
“This week, there are some 450 different lots of coffee on offer. In peak times, this will rise to as much as 900 coffees. It’s my job to sift through the lots week after week to present the best possible estate and smallholder cooperative coffees to our buyers overseas,” Dirk says.
Kenya’s early crop prices are top of conversation, and Dirk says it’s traditionally the smaller and less flavour-based harvest of the year (May to July). What people really wait for, he says, are the late crop coffees harvested during the last quarter of the year and marketed from January to April.
“That’s our busy time. Not only is it a bigger crop, but the late harvest is where the flavour is. Buyers are looking for complexity with velvety texture and silky body and the blackcurrant, forest fruits and blackberry flavours Kenyan coffee is known for,” Dirk says. “Kenya really has to perform compared to other origins because its price point is quite high.”
Dirk says smallholder farmers that deliver freshly picked red cherry are ultimately paid about 75 per cent of the auction proceeds, allowing for deduction of milling, marketing and processing costs incurred by the cooperative society. Estate farmers who process their own cherry will receive a considerably higher percentage.
“In the better cooperatives, farmers will be paid about US$1 per kilogram of cherry, which I think is higher than anywhere else in the world,” Dirk says.
“The price point actually moves far along the value chain to the point the farmer is selling their coffee in the most value added form possible, short of roasting. They’re not selling cherry or parchment – rather, green coffee, ready-graded, ready-milled, and ready for export.
“In this way, they can achieve the best price based on the quality of the coffee. Kenyan coffee is sold on merit. The internal marketing structure, anchored by the auction, is the best ‘value add’ that our farmers could possibly want.”
At auction, samples of about nine kilograms per lot are distributed to the internal Kenyan market of about 45 licensed buyers, which Dirk says drives competition.
“The auction promotes transparency, traceability, and serves a settlement function. Having bought a particular lot, we know exactly where the coffee comes from and we can visit the estate or cooperative factory the next day,” he says.
Dirk notes that this particular internal marketing structure may be slightly more expensive than others as it takes more time to prepare and process coffees properly for auction. It also requires a considerable layer of bureaucracy and legislation. However, the prices achieved by growers far outweigh this small negative.
Even though farmers have received excellent payments in the past 10 years or so, Kenya’s coffee production has been on the decline for the past 20 years only, producing around 790,000 60-kilogram bags in the 2017 crop season.
“There are important factors affecting coffee production today other than price,” Dirk says. “We can point to structural challenges that Kenya faces, such as ageing coffee trees and coffee farmers, continued urbanisation, detrimental weather conditions, and increasing pressure on fertile land as a result of the growing population. But Kenya is not alone in facing these challenges.”
He adds that there’s also tremendous competition from other cash crops such as dairy, tea, and macadamia nuts that have a much shorter production and cash cycle, and each are competing for farmers’ resources.
Coffee in Kenya unfortunately is a seasonal crop that takes a long time to process and prepare for market.
“Today, cash in the pocket is almost more important to most households than cash on the tree,” Dirk says.
Kenya has a rather “conservative” research institute that is relatively poorly funded with very little energy put into developing new coffee cultivars. Dirk says most of the country still relies on traditional cultivars, such as SL28 and SL34, which are susceptible to fungus attack. Ruiru 11, the unfairly maligned 20th-century hybrid, and Batian, a new variety, are resistant to coffee berry disease and rust, but still represent the minority of plants.
“We would like to see more research innovation, seedling provision, and active extension work by government, which can have a national reach. Unfortunately, it is not yet forthcoming. Anything that happens is basically private sector/farmer led,” he says.
Many farmers don’t have the space to plant more trees, but through teaching good agricultural practices and application of fertilisers, mulching, and use of the right fungicides and husbandry, yields in many cooperatives have improved.
Most welcome is the country’s newly launched National Coffee Platform. It aims to address the country’s declining production through increased productivity, farmer education, and extension services. The Platform will serve as a participatory forum to facilitate the alignment and collective action needed to achieve the national goal of doubling productivity and income of the 500,000 farmers who rely on coffee as a source of livelihood.
This article appears in the October edition of BeanScene. To read the story in FULL, subscribe now.