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Confidence returns to coffee market after State-led reforms

The coffee sector, is experiencing a resurgence as traded coffee volumes from both buyers and sellers have rebounded, showing a remarkable increase in market value.

Data from the NCE reveals substantial growth in volumes offered for sale, rising from 3,773 bags on August 15 (the 30th auction of the 2022/23 season) to 20,199 bags on December 13.

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During this period, the NCE has witnessed an improvement in the sale of coffee beans, increasing from 40pc to 84pc of bags offered for sale.

Moreover, the price performance of various coffee grades during this period has been unsteady. The average price of premium coffee beans (AA grade) decreased to Sh38,377.58 ($240.10) from Sh39,952 ($249.95) per 50-kilogram bag.

Conversely, the All grade saw an increase from Sh29,818.15 ($186.55) to Sh30,281.68 for a similar quantity.

This revival in activity stands in stark contrast to the downturn observed in August and September when volumes and prices plummeted due to traders and buyers staying away amid confusion over trade permits.

Auction volumes in August, for example, fell by 95.62pc to 192 tonnes from 4,380 tonnes a year prior. The struggle of contracted millers to secure licenses from county governments significantly impacted the flow of coffee volumes to the exchange during that period.

However, NCE currently boasts of an average of 18 buyers and 10 sellers at each auction, a significant improvement from the 17 buyers and 4 sellers recorded on August 15.

The introduction of the direct settlement system in the Capital Markets (Coffee) Exchange Regulations of 2020 contributed to this positive turn of events.

Despite initial resistance, the Co-operative Bank of Kenya secured the direct settlement system contract, expediting and transparently handling coffee sales proceeds.

Further reforms for the sector are in the pipeline, including the transition of regulatory and commercial roles held by the Agriculture and Food Authority and the Coffee Board of Kenya.

Lisper Ndung’u, NCE acting CEO, said the shift is attributed to the restored confidence among market participants and the overall improvement in global coffee prices.

“The market has gained confidence in the new way of doing things, and we are seeing stability in participation. About 40 buyers have joined the exchange, with half of them making successful bids. Global prices are rising, reflecting an increase in offer prices on the NCE floor,” said Ndung’u.

Gene Gituku
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