Kenyan Coffee Fetches highest ever price?

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Kenyan Coffee Fetches highest ever price?

Postby Mark Prince on Fri May 16, 2008 10:17 pm

http://www.nationmedia.com/dailynation/ ... sid=123456

The price breaks down to about $10.35 a pound. No doubt high, but is this an indicator of how fucked up Kenya's coffee system still is? I note the article says the source is a cooperative factory (what's up with that). And no real details on the coffee.

I know some top shelf roasters are bringing in what they consider awesome kenyas - Terroir, 49th, Intelly (?), others. It must be a challenge to deal with the "system" in place over there still, I admit I don't know much about the Kenyan coffee situation, but what little I know is all skewed towards commodity production, corruption, and a lot of graft.

Could Kenya do much better? eCafe's happening with their neighbour, and Rwanda is starting to take off in the specialty realm. What's holding Kenya back?

Mark
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Re: Kenyan Coffee Fetches highest ever price?

Postby Peter G on Tue May 20, 2008 9:57 pm

Hey Mark-

I'm actually en route to Kenya right now from Rwanda.

The Kenyan system is indeed different from other systems in the world. Years ago, the Nairobi Coffee Auction was set up. As a measure of protecting the farmers, it was legislated that all coffee must be bought at that open auction. The idea being that if the coffee is seeing an open auction, it will receive a fair price. This system has worked very well for many many years, and it was the inspiration for such coffee auction systems as the Cup of Excellence. A few years ago, a law was passed that allowed coffee farmers to sell their coffee outside the auction, to exporters and other buyers. This "second window" was (and is) controversial; the fear is that big buyers will use big contracts to lure farmers into long-term price commitments, which would be to the detriment of the farmers. On the other hand, there are a whole new group of coffee buyers who seek to develop direct relationships with coffee farmers, and tendering coffee to an open auction is not really consistent with that.

In any case, over the years, very little coffee has been sold via the "second window" outside the auction. It is starting to gear up, but everyone is being cautious. This purchase was outside the auction, directly from a producer group. (Farmer ooperatives are organized around washing stations, which are called "factories" in Kenya. The majority of the great coffees of Kenya come from these co-ops, often referred to by their factory name)

Kenyan coffee has consistently fetched a higher price for its coffee, via the auction, than any other coffee producing country in the world. In my experience and via my research, Kenyan coffee farmers receive, on average, a higher price for their coffee than any other producers in the world. Corruption and graft are a big problem in Kenya, but that is more cultural and is not "built in" to the system in my opinion. There is of course commodity production in Kenya, but I would say that it is pretty well developed in the specialty realm, and Rwanda and Ethiopia actually look to Kenya for leadership in many ways!

There are many problems in the Kenyan system, however. Distrust is higher, and relationship building is harder, than any other place, in my opinion. It is an exciting time, however, with more sales like this one (via the second window) happening all the time. And, of course, there is no substitute for a great Kenyan coffee. As for prices, this is the highest price yet paid for a lot of Kenyan coffee (the previous record being set, I believe, by Kevin Knox of Allegro coffee), but I wager we might see higher prices in the coming months and years.

Peter G
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Re: Kenyan Coffee Fetches highest ever price?

Postby Mark Prince on Tue May 20, 2008 11:34 pm

Thanks so much for this perspective, Peter!

As stated above, my knowledge of the Kenyan coffee system is severely limited - as in limited to a few horror stories I've heard second and third hand over the years about particularly bad situations involving murders and death.

Also have vague recollections of being told that most of Kenya's coffee is "forced" into giant lot auctions, where it becomes the generic "Kenya AA" or other classes.

In the back of my mind, I wondered for a few years now why Kenya didn't have its own equiv. of CoE, and always placed the blame on these horror stories and gentrifying / homegenizing of the coffees into mass anonymous lots, etc etc - and these things would spin wheels in my mind.

Getting your perspective really helps clear some things up. I didn't know about the Nairobi Coffee Auction or how it benefits farmers overall. I didn't know that some of Kenya's coffee systems for auction are admired by its neighbours.

This "second window" sale sounds very cool, and the prospect for more sounds even better. I'd definitely like to hear about more coffees like this, and wished the article had more details on the source, cupping notes, etc.

Mark
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Re: Kenyan Coffee Fetches highest ever price?

Postby Peter G on Wed May 21, 2008 2:25 am

Hey Mark-

Yeah, in one sense, Kenya has it's own version of CoE every single week during auction season!

It is true that farmers were "forced" for many years to tender their coffee to the auction. It is also true that law requires coffee to be graded with the AA/A/AB/PB etc. system. As for the "generic" part, most coffees are sold as straight lots, with their co-op name, in the auction. It has been the tradition that exporters (called marketing agents in Kenya) buy these lots and "bulk" (blend) them into larger, more generic lots for export. Good specialty buyers know how to buy straight, uncut auction lots and sell them as such. George Howell has been doing this for years, Kevin Knox was famous for it, us younger buyers have followed in their footsteps and seek out awesome auction lots to sell. Competition is fierce, however, and the great lots are expensive. This new second window thing is a whole new world, and we're all figuring out how it is going to work, buyer and farmer alike.

Here are some details that were not in the news clip: the buyer of that lot of coffee was a Swiss roaster who loved the particular flavor of the lot and wanted to pay big money for it, setting a record, in part to celebrate the 100th anniversary of the company! Also, it is one of the top lots of the year, and the buyer wanted to reward the growers for such an awesome job. The lot was 10 bags (600kg).

It's funny, in my opinion we don't pay enough attention to Kenya and the incredible coffees from there (except perhaps Peter L.)

Also, to correct myself: I claimed that Kenyan coffee farmers fetch more than coffee producers from other countries. That is a hard claim to back up, and is only my feeling, and besides Kenyan farmers probably don't fetch nearly as much in dollars as Hawaiian farmers. But I hope my point was made.

Best,

Peter G
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Re: Kenyan Coffee Fetches highest ever price?

Postby Chris Kornman on Wed May 21, 2008 9:21 am

Hi Mark & Peter,

I hope I'm not invading on a private conversation; and if I am I'll gladly butt out.

While I've never been to Kenya, the situation there has been an armchair concern of mine for a few years, ever since I heard a few stories about the required auction participation. I did a little research about a year or two ago when the Second Window was just beginning to open up.

According to my sources, farmers rarely receive more than 15% (and often much less) of the price at auction (approximately $3/kg). Calculate in the fact that more than 95% of Kenya coffee is wet processed (a labor and production intensive method requiring hand-picking/sorting and extensive equipment), and the result is labor expenses that are overwhelming for the farmers. Over 60% of coffee farms in Kenya are small (averaging around 3 acres), and there are few “estate” coffees. As a result of embezzlement, mismanagement, and corruption at the state & local level, both growers unions and the growers themselves have accrued excessive debts, which (according to my understanding) must be paid in full before they are allowed to participate in the direct relationships enabled by the Second Window.

While the KCPU argued in 2006 when the window opened that the new laws would undermine the 'financial transparency' of the auction system, the KCPU's own financial mismanagement was one of the driving factors in the Second Window's initiation.

It seems to me the biggest problem may be, like you said Peter, ignorance on the part of the local grower when it comes to dealing directly with buyers, which they have never done before. (http://www.flex-news-food.com/pages/4791/Coffee/Kenya/kenyan_coffee_farmers_ignorant_new_export_system.htmlKenyan Coffee Farmers Ignorant of New Export System)

http://www.flex-news-food.com/pages/4067/Coffee/Kenya/kenya_publishes_rules_direct_coffee_sales.htmlPress Release of 2nd Window Rules

http://news.bbc.co.uk/2/shared/spl/hi/world/02/voices_from_kenya/html/kigochi.stmKenyan Coffee Farmer on Politics & Coffee Prices

http://www.worldpress.org/Africa/787.cfmKenyan Coffee Farmer on Falling Prices

http://ipsnews.net/news.asp?idnews=33153Falling Prices and Production in Kenya

http://www.flex-news-food.com/pages/5789/Coffee/Kenya/kenya_licenses_new_players_market_coffee.htmlDetails on Marketing Agents for the 2nd Window
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Re: Kenyan Coffee Fetches highest ever price?

Postby SL28ave on Thu May 22, 2008 1:00 pm

Mark Prince wrote:What's holding Kenya back?


The relative quietness about Kenyan coffee is a bit of a mystery. Maybe people are too embarrassed about the great orgasms they get when drinking it. I was raised to be very open with my... nevermind.

There seems to be great Kenyan coffees throughout Central Province, and perhaps outside Central Province. I believe there might be a ~25 mile grand cru strip running from Tetu Division (Tegu Factory) east to Gichugu Division (Mamuto Farm). I'll pay 1000 patty-cakes to whoever finds a good name for this strip of farms/co-ops. Most of these are small farms with holdings of about 1 acre each, which group into cooperatives of hundreds of farms. FWIW, the best Starbucks coffee I ever had, a couple months ago, was labeled "Mathira" which is a division in the heart of this strip. With the 2nd window, hopefully the farms and co-ops will sell to the high bidders, and, especially with the higher quality coffees, not blended into anonymity.

Maybe Kenyan coffee should be drunk out of a brandy snifter. Or, much better yet, it should be drunk with a twirly straw with flashing purlple LEDs.

This is one of those topics where only too little can be said without visiting the region. I have yet to. Peter G, I'm jealous. We do what we can, and I'm considering starting a consumer-oriented Kenyan Coffee Club to help spread awareness.
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Re: Kenyan Coffee Fetches highest ever price?

Postby Peter G on Thu May 22, 2008 1:22 pm

Chris-

It's a public forum! Glad you jumped in!

I'm in Nairobi now. I spent the day going over this with farmer cooperatives in Nyeri.

It's all very complex, of course. Way more than a thread like this could hope to illuminate.

About 3 years ago, a law was passed in Kenya that requires co-ops to pay producers a minimum of 80% of the gross revenue of their coffee sales. In Kenya, the price the co-op receives averages about 90% of the auction price. For the Tegu-Karagoto-Ngunguru cooperative association (where I was today) that price was around 1.55/lb (so...3.41/kilo). So, according to the math, the farmer receives about 76% of the auction price. Compared to other countries, that is normal, even on the high side. It is all too common all over the world that the farmer receives less than 70% of the export price. (15% is impossibly low, however. That figure smacks of questionable figuring or conversion errors….maybe they are talking about the roasted price?). By the way, since the co-op manages the washing station, the costs of the wet processing come out of the 20% the co-op is permitted to keep.

Whenever I travel, I ask coffee farmers what price they received for their coffee. In Kenya, I have always been pleasantly surprised at the high price they report. However, that doesn’t mean the price is high enough: we all still pay too little generally for coffee. Also, I always convert to dollars, and local prices, value of the dollar, and inflation all play a role in what that value really is. Just because a farmer in Kenya is earning more dollars than a farmer in Peru does not mean he is richer. International economics get complex quickly.

As for your other notes: indeed, excessive debts are a problem all over the coffee world- indeed all over the world, period. Right now, I am dealing with serious debt issues with farmers in Rwanda, Nicaragua, and Mexico. My point is, this problem is not limited to Kenya. Credit for coffee farmers is hard to come by and very expensive worldwide. This has nothing to do with the Kenyan system specifically, although since the auction traditionally paid the banks, they could hold the assets of the co-op until they made their payments, which really made it tough. It seems to me that is less commonplace today, although I don’t have any specific knowledge of that.

You are dead right about KPCU. They fought the second window tooth and nail. However, by the time the second window was being created, KPCU was already losing its stranglehold over the Kenyan system. Other mills and marketing agents were being licensed- the current Kenyan system is much more liberal than the system even 4 years ago. As for corruption, everyone knows that corruption is a gigantic problem in Kenya, both within the coffee industry and outside of it.

I realize my previous post reads like I am defending the Kenyan auction system. In fact, I believe that there are both good and bad things about the past and current Kenyan system. I am a big fan of the second window, although it will not necessarily dispense with some of the biggest problems here (like credit and corruption). I am gradually shifting away from the auction, and we (I work with Geoff Watts, C. Dormans, and CMS on this) setting up direct purchases (through the second window) with cooperatives. That's what I was doing today. Neither the auction nor the second window (or the upcoming “third window”- stay tuned!) are a panacea. Farmers are celebrating higher prices this year, but of course that has more to do with supply and demand on the global level than anything.

As I said, complex.

Peter G
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Re: Kenyan Coffee Fetches highest ever price?

Postby Chris Kornman on Thu May 22, 2008 2:23 pm

Thanks for the clarification, Peter!
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Re: Kenyan Coffee Fetches highest ever price?

Postby SL28ave on Thu May 22, 2008 8:58 pm

Peter G,

Thanks for all the info!

Apparently there was at least a decent amount of rainfall, a Coffee Berry Disease catalyst, in Nyeri in late April. Are you noticing any CBD at the farms right now? Hope not.

Thank You,
Peter L
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Re: Kenyan Coffee Fetches highest ever price?

Postby SL28ave on Sat May 24, 2008 3:59 pm

Peter G,

There is extensive reporting since early May of armyworms attacking food crops in Kirinyaga and Nyeri discricts. Is this the coffee farmer's food supply or polyculture crops that are being eaten? On top of that, I believe last year had historically low coffee yields, much due to CBD. (and who can forget January's political uproar). Are people's spirits better than what one would think from reading the news?

Sorry if I shouldn't be forcing so many questions on you. Hope you're enjoying yourself.
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Re: Kenyan Coffee Fetches highest ever price?

Postby Peter G on Sat May 24, 2008 7:32 pm

Hello!

I didn't hear anything about army ants, but farmers are definitely talking about the rains this year making it a particularly dangerous year for CBD. The co-ops I visited are being proactive, doing foliar applications of various cocktails of products. The mixed blessing is, the same rains are causing an extra-large crop for the coming season.

I didn't hear about CBD being a reason that yields were low last year, but many farmers said the rainfall patterns were the reason last year was a bad year, both quality- and quantity-wise. This coming season (the very first delivery came to Tegu while I was standing there) is looking very good, according to everyone in Kenya.

Peace,

Peter G
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Re: Kenyan Coffee Fetches highest ever price?

Postby Robert Goble on Sat May 24, 2008 11:30 pm

Anyone have some photos of this CBD they can post? (green and/or cherry) or it it something that attack the foliage?
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Re: Kenyan Coffee Fetches highest ever price?

Postby Klaus on Sun May 25, 2008 1:39 am

A farmer in Kenya showed me these as an example of CBD.

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Re: Kenyan Coffee Fetches highest ever price?

Postby Peter G on Sun May 25, 2008 6:41 am

CBD stands for Coffee Berry Disease and affects the cherry. Klaus's picture is good- you can see how the disease goes.... a blackish brown takes over the cherry from the end and moves towards the stem. In a bad affliction, you can lose pretty much all the crop from the tree. It's bad- one of the worst diseases in coffee there is.

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Re: Kenyan Coffee Fetches highest ever price?

Postby SL28ave on Sun May 25, 2008 8:56 am

I'll add that the disease has thus far been isolated to Africa. The SL28 tree is obviously susceptible to CBD. Ruiru 11 is not.

Peter G wrote:The co-ops I visited are being proactive, doing foliar applications of various cocktails of products.


I think George says 50% of a farm's costs can go into these products. I'm also curious if and what any toll on the environment might be.

If I *ever* get to write a thesis! Not that there isn't already tons of research and literature on CBD out there.
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Re: Kenyan Coffee Fetches highest ever price?

Postby Tim Dominick on Sun May 25, 2008 11:20 am

PeterG-

Is CBD an airborne fungal or viral attack that occurs on the outside of the cherry and moves in, or is it a systemic affliction that remains present in the soil from season to season?

I'm guessing they use an application of sulfur-based product in addition, perhaps some stronger anti-fungals. The real concern would be the disruption of beneficial bacterias which in the long term tend to weaken a plant and compound susceptibility to infection . CBD, like any infestation, would be an indicator of an out of whack system, do you know of any pro biotic treatments?

As Peter L. mentions, conventional treatments can cost a fortune. Pro biotic foliar applications and soil amendments can be made and maintained on the farm for a fraction of the cost. Long term benefits are genuine, however this does not give the instant results a cocktail of sulfur and antibiotics can offer. This makes it a harder sell to farmers, however the instant gratification of the antibiotic will ring hollow in the long run.

I've seen non-coffee farms that relied heavily on sulfur and a systemic chemical called SM90 to combat powdery mildew and root/stem rot make the switch to a pro bio tea with the results being a further reduction in the instances of powdery mildew and rot. Their need to combat insect infestations also dropped significantly and the applications of pyrethroid insecticides has been reduced to one application per season instead of weekly applications.
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Re: Kenyan Coffee Fetches highest ever price?

Postby Mark Prince on Sun May 25, 2008 12:25 pm

Just as an aside, I've learned more about Kenya coffee from this thread than I have in five years of various coffee research and reading. Awesome stuff.

Mark
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Re: Kenyan Coffee Fetches highest ever price?

Postby SL28ave on Sun May 25, 2008 2:23 pm

Tim Dominick wrote:Is CBD an airborne fungal or viral attack that occurs on the outside of the cherry and moves in, or is it a systemic affliction that remains present in the soil from season to season?


I know that young coffee fruit, small and green, are very susceptible to CBD. Often CBD will take the form of a dormant scab on the fruit, and can wait I'm guessing 7 months until the fruit is red until it devours the fruit. Now, most Kenyan farms are very close to the equator, where seasonal differences are less and there are basically two rainy seasons in the year. So, there are two crops in the year. There are always fruit on the trees to pass the disease on. It can be spread by people (husbandry, harvesting), or by air. The disease multiplies most when it is moist and cold.

I just moved and all my literature is in disarray (as it was before I moved), but I know at least the Wintgens/Wiley coffee book had a huge section on CBD. Will try to dig it out, at least to verify what I'm saying.
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Re: Kenyan Coffee Fetches highest ever price?

Postby SL28ave on Sun May 25, 2008 2:25 pm

Mark Prince wrote:Just as an aside, I've learned more about Kenya coffee from this thread than I have in five years of various coffee research and reading. Awesome stuff.


That's why we need to spread the word, Mr. Pollinator! :wink:
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