Africa's agriculture and value addition magazine

Stakeholders warn of hard times ahead for coffee sector

Posted in Tea, Coffee & Cocoa

TANZANIA - The coffee sector in the country is headed for hard times following continued low prices offered for the crop both in regional and global markets, sectoral stakeholders have warned.

According to the International Coffee Organisation (ICO), coffee prices have recently followed a similar declining trajectory to global commodity prices.

It says that the downward trend over the last year has been driven by concerns over slowing economic growth in China and the increasing likelihood of a US interest rate rise.

At the Moshi Coffee Exchange, the price of Mild Arabica fell against at the last week auction. Tanzania Coffee Board (TCB) data for the sale show that the price of a 50-kg bag slumped by over US$6 from what it fetched during the previous auction.

“Overall average price at Moshi Exchange were down by US$6.26/50-Kgs for Mild Arabica compared to the last auction held on November 12, 2015,” TCB said in a market report.

This week’s auction was held yesterday. Tanzania uses New York ICE futures prices as its benchmark for Arabica prices and London’s Liffe market for Robusta prices.            

“Moshi Exchange average prices were above the terminal market by US$4.81/50-Kgs for Mild Arabica.

New York March deliveries were down by US$4.40 cents/Lb equivalent to US$4.85/50-kgs FOB and the London market January delivery were down by US$121 per metric tonne equivalent to US$6.05/50-kgs FOB compared to last week terminal market,” the report added.         

Primus Kimaryo, director of quality and promotion at the TCB, said on Wednesday that the trend has begun sending shockwaves across the spines of stakeholders. The most worried are farmers and traders, who said the slump has come at the wrong time and will adversely affect their end-year and January plans.

Coffee farmer and marketer John Kanjagaile said the industry had projected a tonne of Robusta to be above US$2,000 but that has not been the case. 

“In May, the price of a tonne of Robusta in London was US$2000. Today (Wednesday), the price plummeted to US$1,500 and this was not what we had expected,” he told The Guardian from Bukoba. 

For the third consecutive week, no Robusta coffee was offered at the Moshi auction. 

Kanjagaile said sellers for the breed must have opted for direct sales while the major Robusta seller at the exchange, Kagera Cooperative Union, had sold all of its stock that was small this year.

“We did not have much coffee this time,” he said.

The TCB report show that out of the 21,401 bags of Mild Arabica offered during the November 19 auction, only 19,311 bags were sold. On November 12, the offered amount was 31,706 bags of which 19,977 bags were sold.

Traders offered 25,722 bags on November 5 and the sold amount was 19,914 bags. During the auction, the overall average price at the Moshi Exchange was down by US$1.91/50-Kgs for Mild Arabica.

Until last week, the sold coffee this month amounted to 59,112 bags compared to the offered amount of 78,646 bags.

Tanzania is Africa’s fourth-largest coffee producer after Ethiopia, Uganda and Ivory Coast.

Nearly all its coffee is exported mainly to Japan, the European Union and the US, and is looking to increase its market in East Asia, especially China. 

Last year, 41,100 tonnes were exported to earn the national economy US$121.5 million. In 2013, the exported volume was 59,500 tonnes that raked in US$171 million.

According to the latest review of the economy by the Bank of Tanzania (BoT), coffee export earnings for the year ending September 2015, 2014 and 2013 were US$157.8 million, US$127.8 million and US$180.9 million respectively.

“Despite a slight jump in coffee prices at the beginning of October, these gains were short-lived as global commodity markets turned lower. Total exports for coffee year 2014/15 dropped for the first time in five years, but still reached the relatively high level of 110.7 million bags,” ICO said in a report.

“Looking ahead to the coming year, however, several major producing countries are facing potential production setbacks, putting a lot of pressure on the 2016/17 Brazilian crop,” it adds.

November 25, 2015;