The HK Nairobi Coffee Exchange Summary (Sale 8 of Tuesday, 5th Dec 2023)

Coffee at the Nairobi Coffee Exchange

By Henry Kinyua (HK)

Welcome to this weeks’ edition of HK Coffee market summary of Sale number 8.

This week the rains seems to have retreated and Tuesday 5th December was rather a hot day and so was the coffee trading inside the NCE trading floor and online platforms. This week was the sale 8 of 2023/2024 Coffee year.

Back to Sale 8

In this sale 10,372 bags of coffee were traded at the auction. The value of coffee traded was $2,198,083.06 or  Kshs 340M. The number of brokers selling coffee at the auction were six  with New KPCU trading the highest volume at 46% followed by Alliance Berries at 27% and KCCE Marketing Agency Ltd at 12%

Others included Kinya Coffee Marketing Agency at 7% , Kipkelion Broker ltd at 5% and United Eastern Kenya Coffee Marketing Company Ltd at 2%.

The highest price paid for coffee was $275 per 50kgs bag or $ 5.5  per Kg. This is equivalent to about Kshs 120 per kilo of cherry at pulping station factory gate. This lot was from Sorwot Farmers Cooperative Society and was sold by New KPCU and bought by C.Dormans.

Top grades AA and AB comprised 46%  of the volume traded with the other balance taken by the lower grades introduced. What I learned then is that certifications do not guarantee you high prices but opens opportunities in markets that require them. The Rainforest Alliance (RFA) and Fair Trade (FLO) are the two certifications that growers hold. In this sale 8 ,a total of  2,278 Bags or 22% of volumes traded were from certified growers.

Coffee Buyers

A Total of 18 buyers participated in the coffee auction. The top 5 buyers who bought 80% of the coffee traded were led by Ibero at 29%.

Others included Kenyacof buying 16%, C.Dormans buying 16%, Taylor Winch bought 9% while Louis Dreyfus bought 9% of the coffee traded taking the 5th  position.

In the category of the least volume procured by a buyer we had Africoff Trading Ltd with 16bags.

This week I also checked how Farmers cooperative societies faired at the market. Kapsoas Farmers Cooperative Society had the lot that received the highest price per lot. They had one lot of 135 bags that was presented by their broker New KPCU and bought by C.Dormans at a price of $250 per bag for a total of $40,780.

 Thangaini Farmers’ Cooperative in Murang’a also had one lot of 140 bags again presented by New KPCU and bought by KenyaCof Ltd at a$182 per bag for a total of $30,758. The other Farmers cooperative with a lot that fetched the third and fourth highest paid lot was Kibisi Farmer Cooperative society in Bungoma County which had two lots that were also presented by their broker New KPCU and bought by Sasini. The first lot of 109 bags was bought at $197 per bag for a total of $25,536 and the other lot comprising 88 bags at $240 per bag for a total of $23,916

Download the document below for detailed information

Status: Confirmed or Noted

This was discussed last week and I still want to emphasize on it. The last column of the sales transaction listing released by NCE after every sale is Status that indicates if the lot traded was Confirmed or Noted. Like in this sale 8, 0nly 112 bags which is 1% of the volume traded were listed as confirmed.

 To understand these terms better let’s look at the process of trading at the exchange as defined in the Capital Markets (Coffee Exchange) Regulations 2020 (see section attached below).

Before going to the market, the broker together with the grower or owner of the coffee states their reserve price. This is the minimum amount they are willing to take for their coffee and the figure is only known to the broker and the grower. If the price offered for each lot traded meets or surpasses the reserve price, the broker confirms the sale as complete.

However, if the highest bidder falls short of the reserve price, the broker Notes that price. The broker then has 24 hours to consult both the grower and the buyer mostly the highest bidder to negotiate. They might agree a price which is different from what was offered and can confirm the sale. If they do not agree then the coffee is removed from the market and can be presented in the subsequent markets.  It is important to note that the negotiation can only be with the highest bidder.

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