In June 2013, the US Department of Agriculture (USDA) published its annual reports on the coffee sectors in Kenya, Tanzania and Uganda. According to USDA, Tanzanian coffee production in marketing year (MY) 2013/14 will reach a record level of 1.2 million 60-kg bags, giving rise to exports of 960,000 bags. This represents more than a doubling of Tanzanian coffee production since MY 2011/12, and an 83.6% increase in total exports over that period. The strongest production growth has been in robusta coffee.
While Japan is the main importer of Tanzanian arabica coffee, Italy is the main importer of robusta coffee, where it is extensively used in espresso coffee. In 2012/13, the importance of the EU market increased to 50.69% of total exports, up from 32.63% in 2011/12, in the context of a 33.5% increase in Tanzania’s exports. USDA considers that “opportunity exists for Tanzania’s specialty coffee market if production and processing are improved.”
Tanzania adopted a strategy for the country’s coffee sector 2 years ago. The Tanzanian Coffee Industry Strategy 2011–21 places particular emphasis on improving the efficiency of the coffee chain, enhancing the marketing of premium coffees (increasing premium coffee sales from 35 to 70% of exports) and diversifying export markets.
In Uganda, arabica coffee production in MY 2013/14 is projected to increase slightly, but will still be almost 20% below production levels in 2011/12, while robusta production is expected to be 21.7% higher than in 2011/12. Total coffee production is projected to be 13% higher than in 2011/12, consolidating production gains made in 2012/13, while export gains will be similarly consolidated, increasing by 13.3%.
Country-to-country trade data drawn from the Global Trade Atlas show that the EU remains the main market for Ugandan coffee, accounting for between 75 and 79% of exports.
Uganda’s National Coffee Policy, due for endorsement by parliament, focuses on “increasing productivity; restoring and increasing area under coffee; and creating an enabling policy environment”.
East African coffee production for marketing years 2011/12 to 2013/14 (60-kg bags)
|MY 2011/12||MY 2012/13||MY 2013/14|
Source: USDA GAIN Reports for Kenya, Tanzania and Uganda, 3 June (see details below)
In Kenya, USDA reports that arabica coffee production is projected to recover from lower levels in 2012/13, taking it to 4% above production in 2011/12, with exports also recovering to 1.6% above 2011/12 levels. Kenya continues to market its coffee primarily through an auction system, but with some direct sales. According to USDA, Kenya’s high-quality coffee is in demand “for blending with other varieties from other countries”. According to reports on the website Agrimoney.com, Kenyan beans have been receiving prices of up to 290 US cents/lb – considerably higher than New York arabica futures prices (138.86 cents/lb in mid June 2013).
In 2011/12, 70.1% of Kenyan coffee exports were sold on EU markets. The Coffee Board of Kenya is also in the process of finalising a National Coffee Development strategy. The Kenyan strategy focuses on increasing productivity, developing the domestic market, increasing value addition, promoting the reintroduction of robusta coffee and supporting the growing of coffee in the region west of the Rift Valley.
According to Agrimoney.com, “African producers are sheltered somewhat from the international market weaknesses” by their low cost of production and government support measures.
While the coffee sector in East Africa continues to thrive despite challenges at the international level, renewed efforts are required to improve the sector’s competitiveness, through investment in new technology to improve production and processing efficiency. Particular attention needs to be paid to investment in modern processing equipment by cooperatives, and to take-up of new production technologies by smallholder farmers to improve yields (especially in areas less vulnerable to climate change). This may require supportive government initiatives.
The continued dependence on a limited number of export markets, despite policy commitments to diversification, remains a matter of concern. The countries will need to deal with shifting patterns of global demand, in terms of both geographical origin and type of product – for example, the growing demand in developing countries for robusta coffee.
Given the limited success to date of national market diversification efforts, a concerted strategy for the whole region, repositioning the EAC coffee sector in response to these shifting patterns of global demand, may yield greater benefits. A regional approach may be able to mobilise more resources, achieve economies of scale in developing new marketing strategies (particularly for quality-differentiated and value-added coffee products) and allow more cost-effective instruments of support to be established to assist with necessary investments to improve competitiveness.
In this context, the Caribbean regional rum programme – which was driven by the private sector but supported by governments – could potentially hold some important lessons on the design and scope of such a regional approach to repositioning the sector.
The scale of the potential markets being targeted (e.g. in China) also needs to be borne in mind, since these markets are large enough to escape the narrow confines of intra-EAC competition on coffee markets.