Kenya coffee - how does the market work?

[jameso]

Thanks for lots of helpful answers, Matt.

with regards to the COE, this happens every week.

Samples are available...

... to the end buyer, or only to a rep in Nbo?
... how about cupping notes, scorings, etc., to help those who care about things like the amount of apricot they can taste (or banana, or orange...)

Basically, do you have to personally cup every sample to find out what is worth what? Or is there some system (like COE) that improves the efficiency of the market?

James

[mattmills]

Well we receive samples each week for the following auction. We then cup each lot twice. In the past when we used to have the samples two weeks in advance we would send selected lots to overseas buyers.
Yes we have cupping notes as we score each coffee... with a number and other notes too... but with so many cups we do not have time to spend half an hour on each one.

If you enjoy cupping then its great... around 400 cups a day!

[jameso]

Matt,

The other question that comes to mind is what the effective monopoly does.

From the way you describe things, although there are 3 firms that can help a farmer bring his beans to auction, there's only one auction. Presumably the state takes a cut of the sale price to fund the auction. Like any monopoly if there's only one such auction, there are no market pressures to regulate the fees. I'm imagining this is some of the reason why the Fair Trade organisation won't accredit Kenyan coffee.

Do the farmers lose out because the export channel narrows down to a single agent (the state) at one point in the process? Or are these potential problems not realised in practice?

[mattmills]

James,
That is a fair question. And yes the state does take a small cut through the CBK Coffe Board of Kenya. This money is used to fund the board as a regulatory body, and this is only a very small amount.

In reality one of the prome reasons that kenyan coffee is not fair trade accredited is that it is too expensive in the first place, but also the auction prevents groups like this getting involved.

To answer how all of this effects the farmers, this is quite tricky and there would be different opinions. But in my opinion (for what it counts) the auction system here ensures that the highest possible price is paid for all of the grades of coffee, and this can be seen by the general prices of Kenyan coffee. It is still the most expensive coffee. Yes there are more expensive speciality coffees.... but in the larger scheme of things Kenya still rules and a the auction has a large part to play in that.

In the long run that farmer really does not lose out, in fact they do better through the auction system than if were removed.

[Steve]

A question for matt, I read something about the second window for the auction, can you explain it to me as the article didnt really go into any depth.

steve

[mattmills]

Steve,
The Second Window is meant to run parallel to the Aution. Therefore the Auction will still be in place, however the Second Window will allow thos capable to selling direct to do so. So far the details have not be finalised and so this year is going to be another headache.

But I believe that it will follow a similar to the system in Tanz.... ie certain so called specialities are allowed to exported directly but need to be certified by the coffee board etc

[trevor]

How things change.

[jameso]

Ooh, Kenyan COE here we come...

[Steve]

Wow that’s really interesting, I'd really like Matts take on that (he obviously knows the whole market)

You guys find some cool stuff Well done Trevor

Steve

[mattmills]

Interesting article. The coffee board are still working out how the direct business will/can work.
So we are expecting something to start moving at the end of Jan begining of Feb..... chaos here we come

[jameso]

chaos here we come

Am I right that's just in time for the main crop to go to market?

[mattmills]

Well, yes we are starting to see the bginings of the main crop come through. Tricky bit is that expectations have not been managed and so many farmers are holding onto their crop in the hope for substantially higher prices with direct export.....

[jameso]

...which will lead to oversupply when they do all decide to sell, which will lead to...

Also concerning me is the country's political stability. KANU's been gone two years, but it looks less clear now than it ever did what is going to replace them in one / two years time.

[mattmills]

you got it! add to that the over ambitious expectations and then it going to be interesting.

Political situation is actually pretty ok, there is still a fair amount to back and forth, but all sides are starting to come to grips with what needs to be done. Nairobi is progressing pretty well, and as this happens the people will not allow things to move backwards. So generally positive