EAST AFRICA – Kenya’s coffee production in the market year 2022/23 is forecast to decrease by 10 percent to 700,000 bags due to lower yields caused by reduced fertilizer application, triggered by rising input prices.
Additionally, yields in are expected to decline due to cyclical variations especially of the Arabica variety which is the main coffee grown in Kenya.
Despite the decline in production, coffee consumption is anticipated to marginally increase from 30,000 to 32,000 bags, driven by resumption of activities in the country’s tourism and restaurant sectors, following the removal of COVID-19 restrictions.
However, growth in domestic consumption will be constrained by high inflation, which is reducing consumer purchasing power.
Coffee is one of the country’s leading export commodities, but it is set to register a decline of 11% in export volumes during the period under review to 670,000 bags, as lower domestic production reduces exportable supplies.
Although Kenya’s coffee attracts relatively high prices compared to coffee from other countries that produce mild arabicas, its coffee accounts for less than one percent of world coffee exports.
Coffee prices at the Nairobi Coffee Exchange (NCE) continued to surge in MY 2021/22 due to increased global demand and lower production in leading producer countries such as Brazil and Vietnam.
Moving into MY 2022/23, industry sources have expressed concerns that inflation in buyer countries will slow demand as consumers curb spending and reduce visits to restaurants and cafes. This lower demand could lead to reduced prices in producer countries.
Uganda coffee exports to rise on back of increased production
In neighbouring Uganda, coffee production is expected to increase by 6 percent year-on-year to 6.65 million bags, driven by a recovery in robusta production due to favorable weather and recently established plantations coming into full production.
Arabica coffee on the other hand is expected to register decline in production by 5.2% to 900,000 bags due to cyclical yield variation.
Just like in Kenya, due to rising fertilizer prices, robusta yields and production are expected to remain below their MY 2020/21 peak.
Fertilizer prices have increased dramatically throughout East Africa, however Uganda is likely to be less affected than other coffee-producing countries as most of its coffee is produced through low-fertilizer farming regimes.
Domestic coffee consumption in the country is projected to reach 150,000 bags from 125,000 in MY 2021/22 due to a rebound in the hotel and restaurant sectors following the lifting of COVID-19-related lockdowns and restrictions.
In terms of trade, the country’s coffee export during the period is projected to jump by 6.7 percent to 6.52 million bags due to increased production.
Coffee marketing in Uganda is liberalized, allowing private traders to purchase coffee from either producer organizations or directly from farmers for onward processing and export.
As a result, the sector has attracted significant private investment and most international coffee trading companies are locally represented.
The 2020 National Coffee Act mandates the Uganda Coffee Development Authority (UCDA) to establish a coffee auction, potentially introducing a new marketing channel, although this has not yet been implemented.
In February 2022, the government signed an agreement with Uganda Vinci Coffee Company, a locally incorporated business, which would give the company exclusive rights to buy all of Uganda’s coffee until 2032, as well as provide the company with state-owned land to establish a coffee-processing facility. The agreement has not yet entered effect.