USDA has posted its annual reviews of coffee production in Kenya, Uganda, Tanzania and Ethiopia. The Kenyan report notes that record and near-record prices ‘have increased interest in producing and exporting high-quality Kenyan coffee’, with investments being made in improved varieties and production practices. USDA projects exports of 725,000 60-kg bags in marketing year (MY) 2012 and 800,000 in MY 2013.  This will still be below the 900,000 60-kg bags achieved in 2008/09.

According to USDA, Kenyan ‘AA’ beans will continue to be exported to the European market, where they ‘benefit from a small niche market in the premium retail trade but, reportedly, play a much more important role in blending to improve the general quality of retail coffee’. Efforts are under way to increase the production of AA-graded beans, while reducing costs and meeting ‘the many environmental and social certification requirements’.

In terms of marketing, USDA reports that Kenyan producers are questioning the value-added role of the various government-related agencies. This is reportedly leading to an increase in direct sales by producers. USDA reports a number of Kenyan government initiatives including:

• the introduction of a debt waiver for growers;
• the establishment of a coffee development fund;
• restructuring of coffee institutions;
• the full liberalisation of coffee marketing through the introduction of direct sales;
• the development of national coffee standards as a benchmark code of practice for producers to promote sustainability certification;
• the launch of a Kenyan mark of origin.

Opportunities for local blending using Kenyan, Tanzanian and Ugandan beans are currently being explored. In this context, the USDA country report for Tanzania notes that ‘European coffee traders source Tanzanian robusta beans to blend with Kenyan AA coffee beans’, however there is currently only limited intra-regional trade in Tanzanian robusta beans. Tanzania is also working to raise quality standards to Kenyan levels, although the report suggests that ‘equality may be some years away.’

In Tanzania, coffee sales largely take place through the Tanzanian Coffee Board auctions. For Tanzania, Japan is the main market for arabica coffee bean (53%), followed by Europe (22%) and the USA (17%). In contrast, 89% of Tanzanian robusta bean sales are to Europe. Average prices on arabica bean sales to Japan were reportedly 23% higher than average prices on sales to Europe, but only 1.6% higher than average sale prices to the US. The highest price of all in 2011, however, was on a small volume of sales (1.65%) to South Africa, where average prices were 9% higher than sale prices for Japan. High export levels are expected for 2013, with high prices reportedly driving an ‘astronomical’ take-up of new varieties of seedlings with ‘greater disease resistance, productivity and quality’. Ninety per cent of production takes place on smallholder farms (involving some 2 million Tanzanians).

USDA’s report on Uganda notes that Europe provides the market for 80% of Ugandan robusta and 90% of its arabica coffee production. Uganda’s other major market for robusta beans is South Sudan. High prices have allowed Uganda producers to buy additional inputs and expand production. Following a drop in 2010 in 2012 and 2013, Ugandan coffee exports are projected to exceed the levels reached in 2009, reaching some 3 million 60-kg bags. 

East African total coffee production and exports (’000 60-kg bags)

Source: USDA, May 2012, see reports below

Africa’s largest coffee producer, however, is Ethiopia. Ethiopia is the sixth largest coffee producer in the world, and its production is largely smallholder-based (95%). USDA’s report notes little progress in disease management and input usage, although production is expected to increase slightly following good rains. A further increase in production is projected for 2012/13. The spread of root rot in some regions is overhanging the sector, as is the increased commercial attractiveness of producing khat (a stimulant) for regional markets.

According to the report, while coffee accounts for 25–30% of total Ethiopian export earnings, about half of all coffee produced is consumed locally, with a small informal trade to neighbouring markets. Six of Ethiopia’s top 10 export destinations are in the EU, accounting for 59% of exports in MY 2010/11.

Ethiopia’s coffee trade is highly regulated by the government, with all export coffee business requiring licences. Exports in MY 2011/12 are lower than normal due to a dispute over packaging practices designed to reduce the dangers of disease transmission, which had previously closed the Japanese market to Ethiopian coffee exports. This dispute led to hoarding and government export bans on individual companies.

In 2008, the Ethiopian Commodity Exchange (ECX) was established. It now handles 90% of coffee exports.  However, its trade in coffee allows little scope for product differentiation for single-origin coffees, with cooperatives and farmers producing single-origin coffee trading on their own account. The ECX is now working with Starbucks to find ways of addressing this shortcoming.

Ethiopian arabica coffee production and exports (’000 60-kg bags)

Source: USDA, GAIN Report ET 1202, 15 May 2012