Coffee prices plunge, job cuts loom as reforms disrupt Kenyan market
KENYA – The Nairobi Coffee Exchange (NCE) is grappling with a significant downturn in both coffee sales volume and prices, leading to concerns of impending layoffs within the industry.
According to data released by the NCE, auction volumes in August plummeted by a staggering 95.62 percent, falling from 4,380 tonnes during the same period last year to a mere 192 tonnes this year.
This drastic decline in sales has sent shockwaves through the coffee trading community.
The NCE auctions, which were once buzzing with activity, are now attracting an average of just 25 buyers on each auction date, severely hampering competition in the bids.
The uninspired turnout is adversely affecting the trading of Kenyan coffee, which constitutes up to 80 percent of the country’s coffee market.
Notably, out of the 121 coffee buyers licensed by the Agriculture and Food Authority for the 2023/24 season, only 58 have registered at the NCE to participate in the auctions.
Adding to the woes, the average price for a 50-kilogram bag of coffee beans has plunged by 31.13 percent, dropping from Sh266.32 (US$1.81) to a meager Sh183.41 (US$ 1.24).
The dramatic slump in auction volumes is seen to largely attributed to contracted millers who have been unable to secure trading permits issued by county governments, thereby disrupting the flow of coffee to the exchange.
This, in turn, has deterred international buyers from entering the market, leading to a decrease in demand for Kenyan coffee on the global stage.
The current crisis in the coffee market comes on the heels of a period of chaos, with the NCE auction coming to a grinding halt in July after numerous brokers lost access to the market.
NCE Chairman Peter Gikonyo, however, refuted claims of license suspensions, stating that the licenses were set to expire at the end of June.
Meanwhile, coffee millers are now contemplating the distressing prospect of laying off workers in a bid to reduce costs.
At a consultative meeting convened in Nairobi by Crop Development Principal Secretary Kello Harsama, representatives of the seven largest coffee millers revealed plans to start retrenching thousands of workers next month due to the suspension of their trade permits.
Adding to the crisis, coffee traders bemoaned the fact that no coffee has been certified in the current licensing cycle that began in July. This has caused global coffee roasters, including the US-based chain Starbucks, to seek coffee alternatives outside of Kenya.
“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,” Jack Marrian, a member of the Kenya Coffee Traders Association (KCTA), said.
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