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Coffee no longer smells of money on Kenya's farms

"I want to get into dairy farming or pork production. If I could get money right now I would phase out coffee."

Ludovick Karanja, Kenyan farmer

The sloping hillsides on Mary Kiruri's tiny 0.4 hectare farm used to be filled with coffee trees, but not any longer.

As coffee prices started slipping two years ago, she planted maize and spinach amid the coffee trees so her family would have enough to eat. This year, as coffee prices hit 30-year lows on world markets, she pruned back the trees and doubled the amount of maize.

"Before, I had spare money in the house," said Kiruri, standing barefoot on the reddish soil of her farm at Githunguri, north of the capital Nairobi. "Now I'm not able to pay pickers on a daily basis."

Customers sipping a cup of specialty coffee at a Starbuck's in Seattle or an espresso bar in Sicily -- and paying as much as US$3 for the privilege -- might be surprised to know that growers like Kiruri are not doing a booming business.

Yet the benchmark prices for wholesale coffee tell the story: robusta coffee was trading at US$477 a tonne during the past week, the lowest since 1971, while higher-quality arabica coffee was going for US$0.50 a half kilogram, a 10-year low and half of its 1999 price.

The prices are particularly hurting such African countries as Uganda, Ethiopia and Rwanda, which specialize in the lower-quality robusta beans, typically used to make instant coffee.

Coffee is the world's second-most traded commodity -- after oil -- with annual sales around US$55 billion.

The drop in prices has prompted many Kenyan coffee farmers to uproot their plants, switch to other cash crops or even sell off their land for real-estate development, according to the Coffee Board of Kenya, the industry regulator.

Last year, Kenya produced about 100,000 tonnes of coffee and earned US$135 million. But this year, production is on track to be just half of that and earnings are projected at US$70 million, according to the Coffee Board.

"It's going to be difficult to get production back up again," said Coffee Board spokesman Michael Otieno.

Kenya specializes in arabica coffee. Germany is by far its No. 1 coffee customer, accounting for more than 40 percent of all exports, but Kenya also sends thousands of bags annually to the Netherlands, Saudi Arabia, Denmark, Jordan and Israel.

Coffee was once Kenya's premier foreign exchange earner, but has since been eclipsed by tea and tourism.

Otieno said Kenyan farmers are having trouble coping with the up-front costs they must pay for such items as pesticides and fertilizers. "What the farmer is really crying out for is credit," Otieno said.

A fund created by the EU in the early 1990s to provide cheap loans to Kenyan farmers to help them weather dips in export commodity prices has yet to be made available to the farmers.

Small-scale Kenyan farmers would also end up with more in their pockets if the industry were more efficient, analysts say. Farmers pool their beans into co-operatively owned societies for processing at factories, but these societies are notorious for inefficiency and mismanagement. Once they collect their fees and the Coffee Board pockets its share, farmers end up with as little as 50 percent of the price fetched at the weekly auction in Nairobi.

Ludovick Karanja expects this year's harvest from his 2 hectare plot near Kiambu will fetch about US$380. Out of that, he has to pay for inputs and hire pickers.

His five school-aged children haven't been to class since May, something he blames directly on low coffee prices. "Money for school fees is not there," he said.

Karanja has grown coffee for 35 years, but the low prices are making him contemplate a switch.

"I want to get into dairy farming or pork production," he said. "If I could get money right now I would phase out coffee."
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