A storm is brewing in the coffee sector as unions demand an independent and thorough analysis of why prices of the cash crop has significantly dropped and its implications. Coffee co-operative unions accuse Nairobi Coffee Exchange (NCE) of justifying an artificial pricing mechanism at the Nairobi auction that has seen coffee prices drop by half.

National Coffee Cooperative Union (NACCU), an umbrella body of coffee co-operative unions, a 50 kilogram of AA coffee at the Nairobi auction is now selling at $200 (Sh24,530) down from $400 (Sh49,060) previously, the lowest price in 10 years. The union rubbished an earlier explanation by NCE on why the prices were low, saying it only served to justify collusion at the exchange.

In the earlier explanation issued on November 15 this year, NCE had attributed the drop in prices to a wide range of local and international factors including a bumper harvest in Brazil, an expected recession in 2023, and high coffee inventories resulting from the Covid-19 pandemic, among others.

Artificial pricing

“This statement attempted to explain the reason behind the low prices, and we have found it is extremely unfortunate because there is an attempt to justify an artificial pricing mechanism that continues to exist in the Nairobi Coffee Exchange,” said NACCU in a statement.  According to the union, the drop is due to the collision of players within the auction where coffee marketing agency companies are owned by the same coffee-buying companies.

It said that a few buyers at the auction were colluding with millers and marketers over coffee prices in a cartel-like behaviour that continues to deny farmers their rightful share of coffee revenue.

It called on President William Ruto to order a probe into why the prices had dipped at the Nairobi auction. “We pray that you may intervene and demand an independent and thorough analysis on why coffee prices have significantly dropped and its implications,” the statement added.

Several coffee unions in the country are licensed by the Capital Markets Authority to trade at the Nairobi Coffee Exchange.

Approval of Parliament

However, the unions were locked out of trading despite being licensed after former Agriculture minister Peter Munya amended the regulations guiding the exchange without the approval of Parliament. 

Licensed unions include Machakos Coffee Co-operative Union, Meru Coffee Cooperative Union, Kipkelion Coffee Cooperative Union, Mt. Elgon Coffee Cooperative Union and Murang’a Farmers Cooperative Union.

“How can the same entity set the selling price and at the same time the buying price and expect a fair price for the farmer while coffee farmers are locked out of the exchange floor?” NACCU posed.

The Union now want President Ruto to instruct NCE to allow coffee cooperative unions that have been licensed by the Capital Markets Authority to sell their coffee directly on the auction floor.

Additionally, they want the President to request Parliament to prioritise the Coffee Bill 2020 which was passed by the Senate on August 5 2021, saying it captures all their aspirations as they were involved during public participation.

National Coffee Co-operative Union represents all the Coffee Co-operative unions across the Country.

It draws its membership from all 31 coffee-growing counties in Kenya. It was formed to enable members to synergise their efforts when addressing common challenges as well as enabling them to seize opportunities in the production, processing, and marketing of coffee among others.