By Henry Kinyua
Welcome to this weeks’ edition of The HK market summary.
As the streets of Nairobi got extremely wet and deserted and farmlands flooded by the ongoing rains, coffee buyers, traders and other interested parties trooped to the trading hall and the online platform of the Nairobi Coffee exchange for the Tuesday ‘ritual’.
The Nairobi Cofffee Exchange trades Kenyan coffee every Tuesday and this has become a ritual.
This week was preceded by a bit of confusion in the industry the Agriculture and Food Authority released a list of 4 companies who have been approved to facilitate direct sales . This was followed by a letter from the Cabinet Secretary stopping the move.
Let us look at direct sales as defined in the Coffee General Regulations 2019
“Direct sale” means a contractual arrangement between a grower, a co-operative society, society, union, grower-miller, estate or an association of coffee growers and an overseas buyer or local roaster for the sale of own clean coffee based on mutually accepted terms and conditions enforceable in law”
Faciltating this should not be a preseve of four companies. The question many were asking is why only license the four that were also previously licensed as Commercial Marketing Agents, a license that was removed by the Coffee General Regulations 2019? Is this not a way of sneaking the new node in the value chain that had been removed through the back door.
In my opinion, to remove this confusion AFA should approve all brokers licensed by the Capital Markets Authority as agents to facilitate direct sales. Interestingly, one of the four that AFA approved, Kenya Co-operative Coffee Exporters Ltd is the same as KCCE Marketing Agency also licensed as a broker by CMA (see the lists below).
Names of Approved Coffee Agents by AFA to facilitate direct sales
- Sustainable Management Services
- Kenya Cooperative Coffee Exporters Ltd
- Iceberg Movers Enterprises Ltd.
- Coffee Management Services
Brokers licensed by CMA
- KCCE Marketing Agency
- New Kenya Planters Co-operative Union Public Limited
- Meru County Coffee Marketing Agency Limited
- Kipkelion Brokerage Company Limited
- Murang’a County Coffee Dealers Company Limited
- United Eastern Kenya Coffee Marketing agency
- Mt. Elgon Coffee Marketing Agency
- Embu Coffee Farmers Marketing Agency
- Kinya Coffee Marketing Agency Limited
- Alliance Berries Limited
- Kiambu Coffee Marketing Company Limited
- Bungoma Union Marketing Agency
- Meru South Coffee Marketing Company
- Baringo Kawa Brokerage Company Limited
This will enable brokers to support growers who have secured a direct market to export top grades and trade the balance at the auction. This will allow a holder of a grower and miller licenses who are largely farmer cooperatives, associations and individual farms to export to importers directly and also trade at the auction both physically and online without an intermediary. This is the true freedom than farmers want in these reforms. The true spirit of the reforms is to remove unnecessary intermediaries in the value chain.
Finally, the same Coffee General Regulations 2019 in section 24 sub section 4 states that “Direct sales shall be conducted according to the guidelines issued by the Authority in consultation with the county governments under the Sixth Schedule” AFA therefore should with haste work with the Council of Governors/Counties to develop guidelines for conducting direct sales as per the regulations.
Back to Sale 6
In this sale, 4384 bags of coffee were traded at the auction. The value of coffee traded was $968,437 or Kshs 147M. The number of brokers selling coffee reduced to four with Alliance Berries trading the highest volume at 43% followed by KCCE at 20%.
The highest price paid for coffee was $269 per a 50kgs bag or $ 5.38 per Kg. This is equivalent to about Kshs 115 per kilo of cherry at a pulping station factory gate.
Top grades AA and AB comprised 50% of the volume traded with the other balance taken by the lower grades.
A Total of 13 buyers participated in the auction. Taylor Winch (Coffee) Limited bought the highest amount of coffee at 34% followed by Louis Dreyfus Company at 21% and the rest being shared by the remaining 11 companies. Global Mark Foods Ltd bought 5 bags