Coffee and tea farmers in East Africa will see a sharp reduction in earnings in the remaining months of this year, following a drop in world prices of the two commodities and the continued political turmoil in Egypt, one of the top buyers of the region’s tea.
At the same time, latest data from the International Coffee Organisation (ICO) shows that reduced prices internationally have pushed the ICO composite indicator — which tracks the prices of coffee — down by 7.4 per cent, the lowest level since September 2009.
Tea and coffee exports make up the bulk of foreign currency inflows to the governments of Kenya, Uganda, Rwanda, Tanzania and Burundi.
Kenya’s Central Bank (CBK) warned on Tuesday that the unrest in Egypt and the Syrian conflict — which is threatening to draw in the larger Middle East — as well as the Eurozone crisis, posed a threat to agriculture exports from the region.
Coffee and tea regulators in the region also say poor weather conditions could significantly change the fortunes of the agriculture sector that employs more than 60 per cent of the region’s workforce.
Kenya’s coffee prices fell to a low of $2.73 per kilogramme in May from $3.96 per kilogramme in January, and the ICO said that commodity prices in general have been on a downward trend mostly due to negative economic news from China and the US.
The organisation said that given current price trends, there is a diminishing incentive for farmers to invest in their crops, and the use of inputs such as fertilisers and labour will likely be reduced.
“This could potentially have a negative impact on production volumes and quality over the next couple of years, resulting in increased price volatility and a less sustainable agricultural value chain,” said the ICO.
Rwanda earned $69.5 million from coffee in the year ended June 2013, against the target of $74 million, while tea earnings were $63 million against the projected $69 million, reflecting the fluctuating prices internationally.
Norman Mutekanga, the strategy and business development manager at the Uganda Coffee Development Authority, said the prices will likely stay low due to the high production expected from major coffee-producing nations.
In countries like Indonesia and Brazil, the largest producers of coffee, a record year of production of around 48 million bags is expected while production in Vietnam is forecast to be around 24 million bags.
The Eastern African