KENYA 2007/2008 CROP ASSESSMENT – 2/15/08 

Final figures for the 06/07 crop are now in at 51,762 metric tonnes, up from the previous year and only slightly less by 1,238 tonnes than our prediction a year ago.  (Not bad!) 

Due to increasing world demand, the farmers are enjoying higher prices and now investing once again in improved husbandry.  This includes efforts to rehabilitate abandoned farms and renewed interest in political reforms effecting coffee marketing and quality --- all to the good. However, countering this was the weather.  Though the rains started as usual last April, they continued on relentlessly through last summer to October which caused a lot of flowers to fall off prematurely and also prevented some existing cherries to ripen properly. 

We therefore predict that the 07/08 crop will be down 10% coming in at about 48,000 tonnes.  This lack of proper ripening will also result in lower quality --- not so good.  But there is a silver lining behind these clouds in that this super, saturated past season has set the stage for a fantastic future.  So far the 08 weather has been really good and if the  periodic rains continue, the flowering will be incredible resulting in an 08/09 banner year for both quantity and quality.  We are excited. 

As to the social unrest caused by what many are saying was a stolen national election, both sides are trying to cool down thanks to the mediation efforts headed by retired UN General Secretary, Kofi Annon and other prominent Africans.  So far, there have been no significant problems in the coffee producing areas although everyone is jittery.  Our hope is that the rival Kikuyu and Luo tribes involved will realize that the Kenyan economy is dependent on coffee and tourism the future of which is dependent on peaceful political accommodation.  As a side note, US Senator and presidential candidate Barrack Obama’s father is from Kenya’s Luo tribe. 

ETHIOPIA 2007/2008 CROP ASSESSMENT – 2/15/08 

The 2006/07 Ethiopian crop increased to 321,000 metric tonnes out of which 236,710 metric tonnes was exported. And the reason the Ethiopian coffee industry is continuing to grow and prosper is for the following reasons:

• Increased demand for different kinds of coffee
• Higher world prices
• Improved quality control and inspection systems
• Lowering of certain taxes by the Government

For these reasons we are projecting the 2007/08 crop to continue to expand to around 344,000 metric tonnes.


KENYA 2006/07 CROP ASSESSMENT -  3/19/07 

The final 2005/06 crop came in at 48,297 tons, lower than our estimate of 52,000 tons. This was mainly due to delayed payments, high cost of production, indebtedness and lack of affordable credit and farm inputs. However, due to recent price improvements, farmers are making efforts to improve the quality and quantity of coffee. We, therefore, estimate the crop for the year 2006/07 to be around 53,000 tons.

Bidding at Nairobi auction with our buyer, Naim

Unfortunately, we are also seeing an increase in demand for planting materials such as Ruiru 11 seedlings, especially amongst the large Estate farmers. Although, this variety matures faster, cuts production costs by 30% and is resistant to coffee berry disease and leaf rust, it still does not come close to the original unique Kenya taste of the original bourbon varietals like SL 28 and 34. We constantly encourage the growers and especially the small scale farmers to continue with the original varietals in order to maintain the high quality of coffee with its unique taste, otherwise they will just commoditize the coffee in Kenya and it will soon become like any other ordinary tasting coffee of the world.

The "Second Window" is now officially open in Kenya, yet the first direct purchase contract has yet to materialize due to legal responsibility issues required of those who enter into the contract.  We shall keep you informed on any developments.

EAFCA CONFERENCE IN ETHIOPIA – 3/19/07

I had the pleasure of attending the Forth Annual Conference of EAFCA in Addis Ababa in February 2007. Being one of it founding members (Membership Number: 004), I am proud of its progress. In the short time since its inception in 2000, it has done extremely well by opening its membership to all players in the coffee value chain.  EAFCA’s ultimate aim is to improve the quality of life of the small, coffee growers upon which the future of the trade depends.  Promoting fine coffees at fair prices is the EAFCA strategy to achieve this goal.. We couldn’t agree more.

To do this, EAFCA has helped form linkages and relationships amongst its ten member countries.  As a direct result of the linkages formed at its conference,  EAFCA anticipates generating $20 million in fine coffee sales for the year.  With USAID’s support through the RATES program, EAFCA is also now successfully providing marketing and educational services to its members. This includes training in post harvest processing, roasting and blending, cupping, marketing and barista championships. USAID intends to continue to support these efforts to increase the quality of coffee in East Africa on into the future.

ETHIOPIAN 2006/07 CROP ASSESSMENT – 3/19/07

The 2005/06 crop in Ethiopia came in at 270,000 tons, out of which 150,417 tons was exported and the rest was consumed locally. It is encouraging to see that the export during the last 3 years has steadily increased from 136,614 tons in 2002/03 to 150,417 tons in 2005/06. This is mainly due to increased production and improved crop husbandry. The Government in its 2006/07 Fiscal Year Policy is encouraging further expansion of exports to 200,000 plus tons to mark the upcoming Ethiopian Millennium.

To every ones benefit, the income of farmers is now on the rise due mainly to sustainable trades. The share of Fair Trade and Organic Certified coffee has increased as well as that of washed coffee.  Of note is that growers in the East and Southwestern producing regions, reacting to the uncertainty of international market prices, have, unfortunately, turned their attention to the production of Qat which fetches ten times as much as coffee.

“SECOND WINDOW” IN KENYA: STILL IN THE AIR – 3/15/06 

As readers know, the much touted “Second Window”, considered to solve every ones problems in Kenya, has been in effect for few years in Tanzania.  Records show that 93% of farmers have opted to sell still through the auction system, deciding it was in their best interest to achieve the best prices.  So, in the end, Tanzania’s Second Window has turned out to be “Much Ado about nothing.” Our opinion is that it will have the same fate in Kenya. In as much as we agree that the farmers must be given a choice to market their coffees, they will soon realize that once they have the opportunity and have burnt their fingers a few times, they will come running back to sell at the auctions. As we write, the rules for this Second Window have still not been gazetted, although we have been told that they would be for nearly a year now. Even if they are known soon, they will have to be enacted into a law, which could take some time since the Kenyan Parliament is not in session and when the law makers do return, they have many other urgent matters to discuss on their plate. As a result, the “Second Window” could be pushed to the back burner once again! This week, we saw an increase to 36,000 bags being offered as compared to 26,000 bags last week. Is this a sign that the farmers are getting tired of waiting, lest they miss the current up-tic in prices?  So, the bloom is off the rose even before Second Window has hit the streets.
 

KENYA 2005/06 CROP ASSESSMENT -  3/15/06 

A year ago we projected a 60,000 ton crop for the 2004/05 year. But this came in at 49,510 ton due to the continuing drought. Recently, the Coffee Board of Kenya has predicted that due to draught, which resulted in famine, could cut the 2005/06 harvest by between 15-20% from their earlier estimate of 65,000 tons. Fortunately, the rains have started again to the point where much of both the fly crop and especially the main crop will be saved.  So our sense is that the crop will now come in at about 52,000 tons --- still an anemic figure but not the catastrophe that would have been. 

Giving a hand to a farmer

During my visit to few farms on our annual Moledina Kenya Coffee Safari just before the rains, I noticed the coffee trees looked very depressed. Hopefully, the rain will help a little. But it was also obvious the farmer has not been able to afford good crop husbandry due to lower prices of coffee. The representatives of the one of the Co-operatives asked us quite openly to help them to buy fertilizer and insecticides as they had no money to maintain their trees. I was very saddened to see this desperation and feel very strongly that the government has to intervene and revive the co-operatives with better management to help the farmers get out of this economic plight. 

EAFCA ON TRACK  -  3/15/06 

I recently returned from Arusha, Tanzania and the Third Annual Conference of EAFCA, a first for me despite being one of the founding members of this organization. EAFCA was established in 2000 to “promote partnerships and networks amongst those participating and having an interest in quality coffee production, processing and marketing in the Eastern Africa coffee-growing region”. The enthusiasm, program quality and energy of the 500 attendees was matched only by the progress EAFCA has made in trying to achieve its mission. 

Shabnum and I with Fatima Azizi Faraji, owner of Finca Estate near Arusha

I visited couple of farms in the Kilimanjaro and Arusha region and was struck by the care and improved husbandry of these growers.  As with Kenya, the drought has taken its toll, especially in the area visited.  The original projection for the 2004/5 crop had been 56,000 tons but now the officials are predicting only 45,000 – that’s the bad news.  The good news is that the rains have finally come, just in time to have a positive effect.  I estimate that the final tallies will come in at about 50,000 tons.  My hat’s off to the Tanzanians.

CHANGES BREWING – 3/23/05

I recently visited Kenya to assess the impact of the rule changes percolating throughout the many industry rumor mills. What is being referred to as the “Second Window” is a push to allow a portion of production (probably about 30%) to by-pass the auction and be sold directly to buyers through licensed brokers. Prices would be determined by those established at the most current auction, plus a surcharge of 3% … much like the system already in place in the tea industry.

The exact details of this “Second Window” are to be worked out by a newly established committee by the Government Cabinet of six members, one from each of the Agriculture, Finance, Co-operatives, Trade & Industry, Office of the President and from the National Security Ministries. They will review all the guidelines given to them by the Minister of Agriculture, Mr. Arap Kirwa, and once agreed, these guidelines will be gazetted (as a legal notice in a newspaper) and they would then become law.

While not yet a done deal, we feel this “Second Window” will be adopted in the near future and will benefit our customers. Moledina Commodities’ strength has always been its close ties to the land and its people. These ties and our network in Kenya have served us well in the past and will become even more valuable since we are considered to be “the” preferred customer of the best offerings of the farmers. So, we are excited for the future and our ability to provide our customers with increasing supplies of the “best of the best”.



KENYA 2004/05 CROP ASSESSMENT & QUALITY – 3/23/05

Provided the weather continues to cooperate, we stand by our original prediction of the 2004/05 crop to come in at about 60,000 tons.

This being said, as must be apparent to most, Kenya’s quality-edge over other countries has noticeably been slipping over the last 2-3 years for the following reasons:

1. Worldwide weather pattern changes have effected the coffee growing cycles in Kenya, as a result there is sometimes lack of rain during the growing season and not sufficient sunshine during the drying period.
2. Kenya has been growing coffee for over 100 years now and gradually the nutrients in the volcanic soil that have made Kenya coffee so distinctive are becoming increasingly depleted, especially in the lower elevations. Efforts to replace these nutrients with fertilizers and chemicals are not having that much effect, in fact, they are burning the soil. However, in the higher altitudes, there has not been as much depletion of nutrients, allowing the small scale farmers in these areas to produce higher quality. Also, to their credit, the small scale farmers tend to be more selective in their picking of only ripe cherries than do the large farms in the lower areas, thus producing better quality coffee.
3. The size of the family is getting larger and as it does so, all the new children want their own homes along with small areas for growing subsistence crops. As a result, the acreage for coffee growing within the same farm is getting smaller and smaller. Secondly, due to population explosion, coffee growing towns like Thika, Ruiru, Nyeri, Meru etc., are forced to expand into farmlands, further reducing available coffee growing areas.
4. We are also finding that when coffee prices are low, the small scale farmer finds it more profitable to move from coffee to dairy farming or growing tea, which also flourishes very well at the higher altitudes.
5. Also due to slow payments and too many deductions, the farmer does not have any incentive to invest in improving the farm management and thus quality

While it is sad for the country to go through this general erosion of quality dominance, we are optimistic that we will be able to continue providing our customers with the same high quality coffee to which they are accustomed.

We say this with confidence because of our three-generations-old experience and our own unique quality improvement facility in Mombasa, Kenya that helps to offer our customers, who are famous for their discriminating taste, the best coffee Kenya has to offer.

 

We personally believe, that although it is trendy to use these fine coffees like Kenyans to uplift the rest of the blend, in the long run, the success of specialty coffee as we know it, will depend largely on promoting the best Arabicas as single origin coffees. In offering these fine Kenyans as a single origin, there is so much to say and write about them as to surely fascinate the discriminating consumer and bring them back. Single origin can also be promoted as single origin espresso as some fine specialty coffees on their own can beat any espresso blend hands down. The larger issue is that, for the best of the best coffees of origin, there is even more potential profit to be made than ever before as the rest of the industry slides ever further down into the mediocrity.

Our business model is to provide the best of the best coffees of origin to those who insist on the highest quality.

However, because the specialty coffee industry here in the US has matured along the beverage model and the overall demand for the high quality beans is shrinking, we have decided that our long term expansion depends on finding new customers in emerging markets. Therefore, with our loyal US customers as our base, we are taking steps to expand our marketing into the new economies of Eastern Europe, the Middle East, Russia, Central Asia and the Far East.

BUCK’S COUNTY COFFEE COMPANY A DOUBLE WINNER – 6/1/04

In the latest Coffee Review’s blind cupping results, Buck’s county Coffee Company of Langhorne, Pennsylvania took first place in both the Kenyan and Ethiopian categories.

Said Buck’s County’s President, Rodger Owen, “We are delighted to be the recipient of the best Kenyan award. In mentioning the award, Ken Davids, founder and cupper of www.thecoffeereview.com said he considered this lot of Kenya as the finest he had cupped since founding of the award seven years ago. He gave us the highest rating ever, 95 out of 100. He also awarded our Ethiopian Yirgacheffe a grade 92. Both these fine coffees were supplied to us by Mohamed Moledina of Moledina Commodities in., of Flower Mound, Texas. The coffee Moledina provides has made it possible for us to please literally thousand of our customers. We value and are grateful for Moledina’s expertise in the Specialty Coffee Industry and can’t think of a better way to increase sales ….. have the best coffees.”

KENYA COFFEE INDUSTRY IN GRIPS OF A CRISIS – 11/5/03

Checking out fly crop coffees for the coming year in the cupping room of our office in Mombasa on 10/19/03

Having just returned from our annual “Moledina Coffee Safari”, I can report that the fly crop shows some promise of quality for the coming year. However, I find that the Kenyan Coffee industry in the grips of a crisis created by poor global prices and serious internal mismanagement. 

Production has been falling gradually from 130,000 tonnes in 1987/88 to about 50,000 tonnes in the coffee year just ended. About 750,000 Kenyans used to be employed in the coffee industry but now the number has fallen to around 220,000. The biggest reason that has discouraged production is the crippling debts incurred by the growers.  Most farmers today cannot even get bank loans due to bad credit. 

A government appointed task force on coffee marketing has just come out with some proposals last month. The most important one is that the Kenya government consider asking the banks to cancel around 10.5 billion Kenya shillings ($134 million) owed by peasant coffee farmers. Furthermore, the government itself should set aside 5.0 billion Kenya shillings ($64 million) as a coffee development fund for long-term credit to be used in rehabilitating the industry. The task force also asked the government to pressure the state-owned regulator, the Coffee Board of Kenya to quickly pay a total of $8.5 million owed to farmers since May 2002. The extra cash flow should certainly help to revive the coffee production. 

The most ingenious suggestion of the task force is to create Kenya Coffee Development Agency (KCDA), a clone of the relatively successful Kenya Tea Development Agency which has less cost centers. The KTDA has only 51 tea factories owned by farmers themselves and they can elect or fire the factory officials on their performance. Whereas, previously under 250 or so co-operative societies that served the coffee farmers, the officials were appointed by the governments and they practically had “carte blanche” to do what they liked and remain as long as they had relatives in the government. The KCDA would undertake the management of the coffee sub-sector, offer credit for acquisition of inputs and coordinate marketing and payments to growers.  

In our opinion, the implementation of this report will be a “hot” political issue and not easy to implement.  There was no unanimity in its creation and the three existing, licensed coffee millers will put up a fight to preserve their lucrative marketing franchises.  None the less, it does offer the hope of reviving the industry. 

KENYA 2003/04 CROP ASSESSMENT – 11/1/03 

The Coffee Board of Kenya’s production estimate was most accurate for the year 2002/03 as the final figure came in just over 59,000 tonnes, which is an increase of 7.2% from the previous year. This was mainly due to favorable weather conditions. One wonders what would have been the total production if some of the farmers had not uprooted coffee trees as was reported in some areas and if some of them had more money to spend on better crop husbandry. 

Despite higher production, the export quantity and earning fell 3.8% and 18.2% respectively during the October 2002 to August 2003 period due to poor demand from overseas and continuation of depressed world prices. (See chart below). The overall quality was also poorer as farmers just do not have the money to take care of the trees.  

The production for 2003/04 is expected to be around 65,000 tonnes, but a lot will depend on whether the government and the coffee industry solve the internal mismanagement problems within the of the coffee sector. 

The Top Ten Importers of Kenya Coffee

October 2002 – August 2003

ETHIOPIA 2003/04 CROP ASSESSMENT – 11/1/03 

With by far better weather than expected, the Ethiopian coffee production for 2002/03 period was just over 230,000 tonnes, slightly higher than the previous year’s production. Out of this production, 93,386 tonnes were consumed locally and 136,614 tonnes exported . This is an increase of 34% in local consumption but a 13% decrease in exports. This is quite understandable as with the global prices still below the cost of production, there is no incentive for farmers to export.  The quality also dropped due to the falling revenues’ inability to support proper crop husbandry. 

Some farmers have even uprooted their coffee trees and are instead growing other cash crops. Their favorite is growing Qat, a mild stimulant chewed in most of Eastern Africa and the Arabian Peninsula (except in Saudi Arabia, where it is banned). Qat, which is legal in Ethiopia, yields four crops per year as compared to one crop of coffee.  Qat  fetches as much as 10 times the price of coffee. Who can blame them? 

The 2003/04 crop estimate is little difficult at the moment as the first flowering has not been good due to hot temperatures.  As a result, we will have to wait for the second flowering before we can give our own best estimate. For what it’s worth, however, the Ethiopian Coffee & Tea Authority is optimistically predicting an export figure of160,000 tonnes.  We’ll see …….

A MOMENT OF VICTORY – 11/22//02 

As we celebrate our 20^th year in business in the United States, we have always taken pride in providing the best quality and service to our customers. Over the years, it has been very gratifying to receive a small hand written “Post-it” note on a copy of the contract or a check, saying “Thanks” for providing the best coffee etc.; or a phone call to say “Wow, this coffee was just incredible.”  We have been mentioned favorably in many company newsletters and trade publications. We have even got world press coverage for paying record prices for the finest coffee ever produced in Kenya.  So it does not surprise us that this year, we provided Allegro Coffee Company and Community Coffee Company were recognized as the coffee companies receiving the two highest ratings on taste evaluations with the lots we had provided for the September 2002 Coffee Review Panel Cupping Contest of Kenyan and Ethiopian coffees.  

Chris Thorns, Coffee Buyer of Allegro said after winning the top prize, “Allegro Coffee Company is known throughout the coffee industry for consistently buying the best Kenyan lots available at the weekly auctions in Nairobi. This year was no exception, as Allegro once again received the highest rating from the Coffee Review cupping panel with a score of a 93 for their selection of Kenya AA. This is one of the highest ratings ever given by the distinguished panel of coffee experts and appreciations must go out to Moledina Commodities Inc., supplier of this year's winning lot from the Ndaroini cooperative. After searching out the best lots presented for the weekly auctions, Mohamed Moledina, president of Moledina
Commodities, sends samples to us and after evaluating, we select our favorites and place a bid at the auction. Moledina Commodities Inc., the leading importer broker of East African coffees, has been providing Allegro with prize winning Kenya AA's for over ten years. 

Carl Leonard, The Green Coffee Procurement Manager at the Community Coffee, said very kindly, “Thank you for continuing to provide the high quality coffees that enable Community Coffee to provide what our customers expect from us … “Quality, Consistency, and Value.” 

PLIGHT OF A SPECIALTY COFFEE FARMER – 11/02/02 

After writing my recent updates for Kenya and Ethiopia, I have been constantly thinking and obsessed by the plight of the peasant farmers, not only in Kenya and Ethiopia but throughout the world where most of the specialty coffee is grown by a small scale farmer. Coffee prices have dropped 75% since it peaked at $1.81 a pound in May 1997. With the current world prices, which are below the cost of production in many countries, I just cannot understand how a small farmer is able to feed his family and live a “normal” life. 

We have seen very few (and we repeat few) articles describing their grave situation but no one is doing anything about it or even trying to offer any solutions. Proctor & Gamble, Nestle, Sara Lee and Phillip Morris are obviously not saying a word. Nor are the trade associations speaking out for their producing members. It seems recently only Oxfam has tried to bring forward the plight of coffee farmers. If nothing is done about it now, and we know Vietnam and especially Brazil continue to grow more coffee trees everyday, we believe in 10 years there will be no specialty coffees available from many of the African and Central American countries.  

One solution is getting back to ICO quota system. With all its faults, by maintaining the price band of $1.20 - $1.40, this system provided a happy and a reasonable living standard to everyone from seed to cup for 26 years until the quotas were suspended in July 1989. It is going to be an uphill battle to convince the US Government and especially the “big” boys to return to price quotas. But with enough pressure from the rest of us in the industry and if we can get our trade associations to take this case seriously, we believe we can halt this crises. A slight lower adjustment of the price band, say to $1.00 - $1.20 may just convince the “big” boys to see justice and reason while the Government can be convinced that this would indirectly provide financial aide and stability to many third world countries. Otherwise, the alternative is most grave. About 100 million people depend on their living on growing coffee in more than 50 developing countries, who in turn, depend heavily on coffee export earnings, some even more than 80%. Therefore, if this acute crises is not corrected NOW, many of these countries could face a catastrophic economic, political and social disaster, that could lead to violence and social unrest. Some of their people may start growing drugs, while many could die of misery and hunger.      

ETHIOPIA 2002/3 CROP ASSESSMENT – 11/1/02 

The total Ethiopian coffee production was only slightly less than last years production at 226,200 tons for the budget year of July 8, 2001 to July 5, 2002. Out of the total amount of coffee produced,  69,301 tons were consumed locally while 156,899 tons were exported. Of the coffee that was exported, 46,327 tons was of washed coffee and 110,572 tons was unwashed sun-dried. We found the overall quality acceptable, yet average compared to what we used to see few years ago. 

Due to cyclical effect and the current draught, we expect the next crop to be down by as much as 30 to 35%. Furthermore, the low world prices provide no incentive to the farmer invest in any farm inputs, which is such an essential part of crop husbandry. As a result, the quality should suffer too.

KENYA 2002/3 CROP ASSESSMENT – 10/31/02 

The final production figure for the crop year 2001/02 came to 55,020 metric tons, even lower than our revised estimate of 60 – 65,000 metric tons on 1/18/02. Out of this production, total exports were only 48,050 metric tons as compared to 72,562 metric tons shipped in the previous year. As a result, the export earnings dropped sharply by over 42% to $81.63 million from $140.65 million the year before. The peasant farmers are totally discouraged with the concerns of the new coffee reforms, bad weather and the poor world prices and thus many have abandoned their coffee trees and growing other cash crops. Short of a miracle, the situation can only get worse. 

The Coffee Board of Kenya has estimated that the production for the year 2002/03 will be around 60,000 metric tons. Since we have seen better weather recently, we agree with their estimate. However, we have our reservation as far as quality is concerned. At current below the cost prices, the farmer can in no way save any money, especially for good crop husbandry. As a result, our job in finding the best of the best is going to get even harder. But we would like to assure you that, as always, we will try our darn best to get you the best available.



KENYA 2001/2002 CROP ASSESSMENT – 1/18/2002

We have just returned from Kenya and offer the following report.  The crop year ending September 31, 2001 closed out lower at 51,632 metric tons due to poor weather.  Unfortunately, over-all quality too, was mediocre due to the inconsistent rains during the final months of maturation.

The new Coffee Act, 2001

As we have informed our readers in previous updates, the long anticipated changes to the Kenya coffee governmental control system contained in the Sessional Paper No. 2/2001 on the Liberalization and Restructuring of the Coffee Industry, and Coffee Act, 2001 was finally signed into law on 12/31/01.  While the full details are not known as the new bill is still at the Government printers, we understand the administrative details will not be completed for the next three months. However, we are optimistic that the new plan will eliminate many of the problems that had grown ever more troublesome over the past several years.  The following is a general outline of how the new system will work, as we understand it.

Thankfully, the Auction system, which puts all buyers, large or small, on an equal footing, has been preserved.  The Auction is a proven system that keeps the large international cartels and monopolies from taking over the market of this small country.  It is the only system that we know of, that establishes a true market price.  It is a “price discovery mechanism” as Simeon Onchere, the Deputy General Manager of Coffee Board of Kenya recently put it.

Meeting with Simeon Onchere, Deputy General Manager of CBK - 1/10/02

The big change, though, is that the Auction will no longer be the property of the Coffee Board of Kenya (CBK).  The once all-sweeping powers of the CBK have been significantly curtailed.  Its principle functions from now on will be only that of regulatory, promotional and advisory services.

The Auction, Marketing, Sample Room, Information & Technology, Laboratory, Warehouse, Acct./Audit, etc. functions will be covered by a new organization, The Kenya Coffee Producers and Traders Association (KCPTA).  The KCPTA membership will be comprised of coffee growers, dry millers, marketers, dealers, auctioneers and warehousemen.  An Executive Director will manage it.

An emphasis here needs to be placed on the term marketing and marketers.  This is a new classification that allows the growers to sell their coffee to any one of several licensed “Marketing Agents” who in turn will then bring their crops to the central auction of the Nairobi Coffee Exchange. The marketing agent will have to provide in favor of the grower a bank guarantee worth between US $1 million and US $12 million dollars, or one and a half times the value of the coffee transacted on in each particular case, whichever is the higher.

Commentary:  While a new entity, we do not view the marketing agents as a new layer of “middle men”, but rather a more efficient way to deliver the needed value added services to the growers that already exist but are currently haphazardly delivered, are of low quality, and way too expensive and corrupt.  We believe that this new system will correct much of these ills, but no one will know for sure until it has some time under its belt.  April 1, 2002 is the switchover date to the new system.

Supply of new crop

Although things are still a bit up in the air until the new changes take effect, there does not seem to be any supply distortions brewing that we can see.  The new crop is coming in, with only a few of the farmers holding their coffees back until they see what the marketing agents will bring to their table.

While Kenya is frantically doing what it can to make its system more cost efficient, and will survive so long as its high quality prevails, it too suffers from the worldwide over supply of coffee.  Up until only a few years ago, World supply and demand were pretty much in balance, as were the prices.  Distortions to this stability were only caused by weather anomalies.

Over the past five years, consumption has not increased to any significant level.  What has driven the prices downwards is the growing over supply caused principally by huge production increases in Brazil and Vietnam.  World prices have dropped almost 60% as a result.  As a result about 30% of farmers in Kenya have abandoned their coffee trees, due to poor returns, which are much lower than their productions costs.  Quality is falling victim as well.  Last year, producing countries received only 14 cents of every dollar collected at retail and the farmer gets even less.  There is so little “blood left in the turnip that one more squeeze will turn it into a radish”.

Can we help?

We could ease the situation and help the coffee growers in whatever small way we can. Moledina Commodities has been supporting Hope & Mercy International Ministries, a Christian Charitable Organization, which has been providing practical economic development assistance to failing rural communities. In the coffee growing areas of Nyeri, Hope & Mercy, in conjunction with Othaya Family Helper Project, supports the Karima Grade Goats Self Help Group, building of cisterns to store uncontaminated water for schools, and provides tuition support to educate the children.  While the latter two need no explanation, you say goats??

Well, yes, goats.  As their husbands coffee revenues began to dry up and they could no longer pay to educate their children, 125 mothers took matters into their own hands deciding goats were the answer to providing extra needed cash.  The Othaya Family Helper Project has been helping them build the herd.  Goats are low maintenance, will eat just about anything including weeds and underbrush, provide a good source of milk, spare milk is sold for cash, and, here is the good part, a great source of free, high quality organic fertilizer for their husbands’ coffee trees.  For more information on Othaya Family Helper Project, send us an email.

Goodby Mr. Gatere

Cupping with the new CBK Chief Liquorer, Michael Mungai - 1/10/02

Mr. Gatere has been my cupping mentor and a good friend since I entered the business. Much of my success comes from what I have learnt from him.  He was the best of the best at his trade and freely passed on his cupping skills to all comers.  His baton has been passed to the very able Michael Mungai, another of his protégés.  We will miss you, Mr. Gatere.

KENYA 2000/01 CROP UPDATE – 6/5/2001

The changing weather patterns and the worldwide depression in coffee prices for the past two years are continuing to impact Kenya’s coffee industry.  For example, the traditional spring 2-month “long rain” and fall 2-month “short rain” cycles have been out of whack for few years.  In the beginning, El Nino was blamed but that is now long gone and the cycles should have re-adjusted but  haven’t.  Last year’s drought has been followed by 6 months (as of this writing) of continuous rain.  The good news is that this means a potentially bigger, higher quality 2001/02 crop is in the making.  The bad news is that if these rains don’t taper off soon, the cherries won’t mature properly.  It’s time for the sun to come out. 

There is a growing concern in Kenya that these recent climatic shifts may be caused by the acceleration of deforestation in the region and resultant thermal changes and soil erosion.  Deforestation started in the forests around Mt. Kenya and Rift Valley and has now spread even Langatta area of Nairobi.  Only time will tell if this deforestation will have any significant impact on Kenya’s coffee industry. 

Thus the final 2000/01 crop will probably reach 61,000 metric tons, lower than estimated due to last year’s drought.  Next  year should be better because of the rains already mentioned.  Quality should be better too assuming the sun cooperates.  Yet prices are still depressed due to the worldwide over supply.  While this is a short term benefit to coffee buyers, in the long run low prices mean a further lowering of quality levels to the detriment of all.  Farmers are no longer tending to their trees due to the lack of money.  More and more are being forced into other lines of work just to feed their families …. bare subsistence levels prevail.  The Kenyan government is concerned enough now to the point where the parliament is currently studying The Coffee Act and ways to improve the industry. In our 12/5/2000 ASSESSMENT (see below) we made three recommendations the government could adopt that would ease the plight of the growers.  We’ll have to wait to see what they finally decide.

On a lighter note, concerning deforestation:
An itinerant lumberjack applied for work with one of the Nairobi lumber companies.  Being short of labor and ignoring the applicant’s small size, the crew chief gave him a hectare of large trees to cut, more than an experienced crew of ten could do in a day.  An hour later the entire hectare had been cleared with the logs neatly stacked for pick-up.   Stunned, the crew chief asked where the new hire learned to be such an incredible lumberjack.  “In the Sahara.” Came the reply.  “But that’s a desert?”  puzzled the crew chief.  “Not when I first got there.” grinned the new man.

For our quality conscious customers, Moledina Commodities’ sole mission is to provide you with the only the very “best of the best” coffees from around the world.

KENYA 2000/2001 CROP ASSESSMENT - 12/5/2000

Weather and Factionalism Take a Toll
Last year’s bumper crop – October 1, 1999 to September 30, 2000 – closed out at 100,500 metric tons due to higher than normal rain during the short rainy season of October/November 1998. However, a subsequent drought since then, has played havoc when the rains were really needed to develop the cherries fully. This lack of moisture adversely effected the density of the bean and more importantly, the overall cup quality.

Inspecting coffee trees in Nyeri

Meanwhile, world coffee prices plummeted, dragging down the prices in Kenya as well. This coupled with the added costs of harvesting and handling of the much larger crop, put the farmers in a no-win situation – production costs way up with total revenues for the year down 20%.

Adding fuel to the fire, the large cooperatives to which the farmers have always counted on for the mass purchase their supplies and market their beans, became unglued and factionalized. The convergence of these three forces, lower prices, quality, and fragmentation of the cooperatives could not come at a worse time for the farmers and the country as a whole.

As we assess how all this affected our business, we see that, thanks to the hard work of our head office in Kenya, Rashid Moledina & Col (MSA) Ltd., (which in fact ranked #1 in Kenya Coffee exports from the 1999/2000), we were able to tip-toe through all these "mine fields" providing you with the very "best of the best" coffees.

Our color sorting machines in Mombasa

For this year’s 2000/2001 crop we see continued problems. The drought that caused so much trouble last year, continues on relentlessly, greatly reducing the quantity. Our best estimate is 70,000 tons. As to quality, last year’s reduced dollar intake and splintering of the large cooperatives into many numerous smaller units has already had a negative impact. For example, with fewer dollars in hand, the farmers are no longer able to buy fertilizers and new equipment or, for that matter, even doing ordinary maintenance. At the same time, the unit prices they must pay for these items are higher due to the breakup of the large cooperatives with their mass purchasing power. Credit is scarce for the same reason. All this translates into reduced quality potential.

Yet we are optimistic.

Our hope is that the Grace of Mother Nature will bring to this troubled country well-timed rains to improve the quality. At the same time we hope that Kenya’s government will take this opportunity to improve the situation by:

1. Adopting policies to encourage the re-formation of the large cooperatives or similar such entities into efficient organizations of the highest integrity.
2. Reducing taxes on farm equipment and supplies, and
3. Reducing farmer’s income taxes until the crisis passes.

For our quality conscious customers, Moledina Commodities Inc., continues to serve you with pride. Our sole mission is to provide you with the finest service and only the very "best of the best" coffees from around the world.

ETHIOPIA 2000/2001 CROP ASSESSMENT - 10/1/2000

Of the 230,000 tons produced in the just ended 1999/00 cycle, of which 109,697 tons was consumed locally. Out of the balance of 120,303 tons that was exported, 32,073 tons was washed coffee and 88,230 tons was unwashed coffee. Overall the quality was average, as we have seen in the previous couple of years.

Our initial estimate of this year’s crop (July 7, 2000 to July 8, 2001) is that it will be down 10-20% due to the same drought that is affecting the entire Northeastern region of Africa. A second factor affecting production is that the low prices have discouraged farmers from bringing what reduced growth they have to market. This will further reduce the production of washed coffee.

KENYA 1999/2000 CROP ASSESSMENT - 12/1/99

In March we estimated the 99/2000 crop to possibly reach 75,000 tons. While this is still a good figure, due to recent rains after a dry summer, the final tally could reach 80,000 tons according to the latest assessment of the Kenya Coffee Board. The fly crop is now in, but quantities are small to the point that the auction is on a bi-weekly schedule rather than the usual weekly. However, prices are reasonable and steady. The next two auctions will take place on December 15^th with an anticipated 40,000 bags offered and then after the traditional break for Christmas Holidays on January 11^th with an estimated 30,000 bags. After that, the usual weekly auctions should resume.

When we arrived in Kenya three weeks ago for our annual "Coffee Safari" everything seemed much the same as in past years. The faint rumblings about trouble within the Coffee Board did not seem to be a concern with anyone during our visit. The idea of corruption, real or imagined, was not seen as a threat to the livelihood of the growers we visited in the Nyeri district.

This perception did not anticipate the rapid course of events that is now beginning to overtake matters, especially in Nyeri. While news reports dwell on corruption at the top, much more exists inside the cooperatives, especially at the management level.

The government of Kenya must take decisive action to root out the corruption, fulfill its commitment to the coffee auction, and get the system back on track. The preservation and advancement of Kenya’s coffee industry is at stake.

We are optimistic.

ETHIOPIA 98/99 CROP UPDATE - 6/9/99

Of the estimated 4,400,000 sixty kilo bag crop this year, only 50% will be exported. Of this, 1,650,000 bags will be sun-dried with 550,000 bags washed. While the sun-dried quality is generally good, 30% of the washed is unfit for export. The overall quality is poorer than last year's.

Furthermore, there are two major problems in the Ethiopian coffee industry this year:

1. Due to the breakup of the state run monopoly there are now hundreds of exporters within Ethiopia instead of one. Most of these are inexperienced and know little or nothing about coffee. Unless strict standards are observed when issuing export licenses, the industry will lose a great deal.

2. Additionally, the initial minimum coffee price controlled and set by the Commercial Bank of Ethiopia was too high for the world market earlier this year. At first, exporters did not realize this and began building inventories at this higher price. Shortly they realized the prices were too high compared to similar grades and quality available from other countries. The market for washed Ethiopian went south and inventories at the dock began to pile up. The Central Bank was left with no alternative but to lower the price, first 5-10 cents and now another 30 cents. Everyone throughout the chain from grower to exporter, is unhappy.

With tighter standards on issuing of export licenses, the coffee economy in Ethiopia theoretically should sort itself out now that it has opened itself up to internal competition. However, this cannot happen as long as the Central Bank maintains price controls. In a free market economy, price controls inevitably cause distortions and bottlenecks, of which this current situation is a classic example.

We believe the coffee industry in Ethiopia will continue to be unsettled for the next several years and is no longer a market for the inexperienced. We at Moledina Commodities are grateful for our reliable network of high quality Ethiopian coffee professionals. Without their expertise we could not continue to provide you with Ethiopia's finest coffee.

For the best of the best, call Moledina Commodities at 1-800-325-3692.

KENYA 98/99 CROP ASSESSMENT UPDATE - 5/25/99

As we stated in our earlier report, last year's (97/98) 53,000 ton crop was small, irregular and lower than average in quality. Global climatic shifts, caused by El Nino, were the principal reason for this.

For 98/99, now that we are better than half-way through the year we are increasing our earlier estimates from 65,000 tons to 70 - 73,000 tons for the year. This is encouraging as it implies a return to normalcy across the board, including the high quality that coffee connoisseurs expect of the world's premier growing area.

One thing that could be done to facilitate this return and ensure that the level of quality remains consistently high would be for Kenya's rapidly expanding millers to adopt the high standards of the Coffee Board of Kenya. We have noticed that many of these newer mills have a tendency to over-polish the coffee. This process generates heat by extra friction, and in a way prematurely starts the roasting process. This leaves a brownish tinge on the bean instead of the usual bluish green. While no one can control the effects of Mother Nature on quality, we must always do our best, as purveyors of fine coffee, to upgrade quality as the product passes through our operations.

Currently, the CBK auction is running at 35,000 bags per week and this should be increasing to 40,000 by early July, as farmers bring in more coffees for milling.

Because weather patterns are returning to normal, we expect next year's 99/2000 crop to be even better than this year's, probably around 75,000 tons. If the weather holds out, the quality should be better too. Furthermore, the farmers are becoming increasingly aware of the need to improve their quality. I believe, they will invest the income generated by the better prices they received last year to implement additional quality control systems.

Whatever the conditions, we will continue to provide the best of the best. You can reach Moledina Commodities at 1-800-325-3692.

1998 KENYA COFFEE SAFARI - 12/22/98

Each year we host a small group of our customers on a rotational basis to join us on what we call our Kenya Coffee Safari. Our purpose is to demonstrate why Kenya coffees are considered the world's best, and why quality, from seed to cup, is the main thing that really counts.

This year's Safari consisted of a seven-day study of the Kenya coffee industry from field to factory, mill, research laboratory, and auction through to our specialized coffee quality control and improvement checkpoint in Mombasa.

The weather was good in Kenya for this time of year, not so oppressively hot as it might be due to a cloud cover for most of the trip. Our first stop in the seed-to-cup chain was a visit to a small-scale farm and a large plantation in Nyeri. Both were beautifully run and husbanded ... lots of cherries, healthy, pruned, and well tended. This year's crop will be a good one

Our next stop in the seed-to-cup chain was the tiny village of Gatomboya. It is the home of small growers and their