By: John Kamau
Jeremy Block is the chairman of the C. Dorman’s Group, which has been exporting Kenya coffee to Europe, Asia, North America and Australasia and runs coffee houses, export warehouses and a roasting plant.
Its subsidiaries are also involved in farm management, and marketing. He spoke to JOHN KAMAU
What is the place of Kenya coffee on the world market?
Kenya coffee is important because it is considered to be the very best in the world.
Has the quality been compromised by the low production? Why is production falling, in the first place?
Quality is often a matter of taste. Kenya coffee gets the highest prices of all traded coffees in the world.
Yes, there is the odd small specialty lot of coffee from countries like Panama and Brazil that achieve huge prices but we are talking two, five or 15 bags, not thousands of bags like from Kenya.
If Kenya coffee disappeared, the world of coffee would be a much poorer place.
The quality of Kenya coffee has not been compromised by lower production.
If Kenya coffee has been compromised at all, it is through the introduction of new hybrid varieties such as Ruiru 11 that do not produce the flavour and acidity that traditional varieties of SL 28 and SL 34 are famous for.
Coffee production has decreased in the past 20 years partly due to mismanagement, lack of payment to farmers and urbanisation, especially around Nairobi.
Has low supply translated to better pay for farmers?
The price of coffee is directly related to the quality. Farmers receive prices that are up to seven times the cost of production.
So if a farmer produces top quality coffee, he gets a fantastic price.
Comment on claims that the auction system has been rigged against the farmer. Would direct sales benefit farmers more?
The auction is a fantastic marketing place. It gets the very best prices for the farmer under perfect competition and is the envy of many in the world. There is also a place for direct sales.
There are some buyers who want to deal directly with certain farmers or cooperative groups and who use their relationship with those farmers or groups to promote sales in their market.
However, almost 100 per cent of direct sales relate to the very top quality coffees.
Not all coffee produced in the country is top quality and it would be almost impossible to sell it directly.
Some companies hold multiple licences — as dealers, marketing agents, and millers. Does this lead to price fixing at the Nairobi Coffee Exchange?
One thing I can guarantee is that there is no price fixing at the Nairobi Coffee Exchange (NCE).
The competition for the coffees in the auction is fierce and there are too many companies for them to all get together and fix prices. More importantly than that, why would anybody fix prices, which are higher than any other prices for coffee in the world?
Do some buyers manipulate prices to reduce competition and depress prices?
No. Depressed prices at the NCE are usually a sign of poorer quality.
Is there a future for Kenya coffee on the futures market?
The coffee futures market is a benchmark for world coffee pricing.
Kenyan coffee prices are much higher than this benchmark, so I do not see any benefit from this.
If you are asking whether a farmer could benefit from selling his crop forward, that is a different question, but it requires stability in production and complete trust between producer and buyer for this to work.
Ethiopia brands its own coffee, would you advise Kenyans to follow the same path?
Kenya coffee is one of the most well-known single origin coffees in the world.
It is on high demand by the specialty market segment as well as the more commercial roasters who use it in bigger volumes to improve the overall cup quality of their blends.
Kenya coffee is already well branded. If you ask 10 coffee buyers from around the world what is their favourite coffee, many would answer Kenya coffee.
What is the future of the coffee industry in Kenya?
The future hinges on the ability to produce more top quality coffee for farmers to improve their yields significantly.
With some farmers in Brazil and Vietnam able to produce 2,000kg per hectare, Kenya is lagging behind with average yields per hectare of 200-400kg.
To increase tenfold might be asking too much, but to double, triple or quadruple yields would be fantastic improvement, and result in a huge increase in revenue for the farmer and government.
An enabling environment needs to be created to encourage investment in the industry.
We also need better corporate governance in the cooperative sector, faster payments to the farmers, better access to inputs and credit.
Building relations between producers and roaster buyers is very important, and that is one of the key roles of the dealers, who know well their buyers’ requirements in terms of quality.
SOURCE: DAILY NATION