Report Highlights: 

FAS/Nairobi forecasts an increase in Kenya’s coffee production to 900 thousand bags in the marketing year (MY) 2014/2015 partly due to an ongoing expansion program by the Government of Kenya (GOK). Increased adoption of improved varieties by farmers, and higher global coffee prices are also expected to boost production and exports. Legal and institutional reforms are also being implemented in the sector.

Production: 

Kenya produces mild Arabica coffees from commercial cultivars that are predominantly of bourbon heritage. Coffee is grown by both smallholder and large scale farmers, with the former currently contributing about 55 percent of the total production. There are two seasons in a year, the main season, also referred to as the “Main or Late Crop” flowers in March/April and is harvested between September and December and marketed beginning January to July. The second season, also referred to as the “Fly or Early crop” flowers in October/December and is harvested between April and June and marketed beginning September to December. In the last two decades, coffee farming has faced severe competition from real estate developments and other enterprises in both rural and peri-urban areas. 

Starting 2013, the GOK, with the support of the European Union (EU) rolled out a coffee expansion program targeting the traditional growing regions in Central and Eastern Kenya and new areas in Rift Valley, Coast and Western Kenya. Several county governments have also prioritized coffee rehabilitation in their development plans. FAS/Nairobi forecasts that these interventions, coupled with good weather, will lead to an increase in production and exports in MY 2014/2015. 

Consumption: 

Coffee Board of Kenya (CBK) estimates domestic coffee consumption at about 3 percent of the national production. Due to low incomes, coffee is out of reach to a large section of the population and most prefer tea. However, in recent years, consumption growth has been strong at 15-20 percent annually attributed mainly to an increase in middle class and expatriate population. Numerous trendy coffee houses have opened in the urban areas with the more established brands expanding their operations and increasing their footprint in the country. In addition, CBK and industry associations have initiated domestic coffee consumption promotional activities including barista training. Post projects that the strong growth in domestic consumption will be sustained. 

Stocks: 

Coffee stocks in Kenya are held by the millers, marketing agents, and exporters. Individual large scale farmers and co-operatives may also hold stocks in form parchment coffee. CBK has substantially revised upwards coffee stocks in a new initiative to update coffee industry statistics. The revision appears well supported by production, import and export data. 

Marketing: 

In-country coffee marketing logistics are handled by individual farmers, co-operatives, millers, warehousemen, and marketing agents. Over 85% of the coffee is sold through auctions at the Nairobi Coffee Exchange (NCE), a spot market. The rest is sold through direct sales under contracts that must be registered with the CBK.

Trade: 

Though a relatively small producer, Kenya is still an important producing country due to its consistently high quality mild Arabica coffees. Exports shipments occur in December to July for the main crop and in August to December for the fly crop. GOK does not impose any tax on coffee exports from Kenya. The main destinations for coffee exports from Kenya are Germany, Belgium, United States, and Sweden. Kenya is also the main logistics hub for the Eastern Africa and all the main international coffee traders are represented in the country.

Policy: 

The GOK does not run any price support or a direct subsidy programs for coffee farmers or other value chain players. 

On the regulatory front, Kenya has devolved agricultural functions to the counties in line with the new constitution. It is not yet clear though what kind of policies the respective county governments will come up with. However, all coffee producing counties are reportedly keen on taking over some of the regulatory functions that were previously undertaken by CBK. Some of the counties have also set up new coffee milling and marketing entities. 

At the national level new agricultural laws, the Agriculture, Fisheries and Food Authority (AFFA) and the Kenya Agricultural and Livestock Research (KARL) Acts are currently being operationalized. The Acts, once fully operational, will repeal the numerous commodity specific laws and merge several regulatory and research agencies including CBK and Coffee Research Foundation (CRF). However, the future of the Coffee Development Fund (CoDF), a specialized coffee financing agency, is not stated in new laws