Kenya has two distinct coffee trading systems: the auction system and the ‘second window’, Kenya’s direct trade system.
Direct trade between farmers and international buyers has become more popular in Kenya’s coffee industry in the last decade, but this system remains underutilized.
While auctions, traders and commodity exchanges remain critical in the world’s coffee supply chain, the direct coffee trade does offer something unique: the chance to communicate and negotiate more closely between the buyer and the producers on the best price for the coffee commodity on offer.
This was best captured during a recent signing of a direct coffee trade pact between the giant Gusii Coffee Farmers Co-operative Union (GCFCU), an umbrella of twenty-eight primary coffee co-operative societies spread across the two Gusii counties of Kisii and Nyamira, and a South Korean coffee buying and marketing company, Goodbeans Company.
Leading a high-powered delegation to the Union to seal the deal, Goodbeans Director, Mr Kang Sunggyu, disclosed that he was impressed with the coffee farming practices in the Kisii region and looked forward to receiving top-cream coffee from the region for the South Korea coffee consumer market.
The Union’s CEO, Dr Robert Mainya and Goodbeans Company Director, Mr Sunggyu, signed the direct coffee export deal in the presence of the Kisii County Executive Committee (CEC) Member for Agriculture, Mr Esman Onsarigo.
Sunggyu, who was accompanied by the Chairman of the Presidential Task Force on the coffee sub-sector in the country, Prof Joseph Keyah, an official from the South Korean Embassy in Kenya, Ms Park Soyoung and Ms Jane Mbagara, Goodbeans Company Manager, said he looked forward to giving local coffee farmers hope in their coffee farming enterprises through payment of good prices for their coffee produce.
“I am excited and impressed with coffee production activities in the Kisii region and look forward to ensuring small-holder coffee farmers in the region reap fruits from their coffee produce.
This will be through good prices for their produce courtesy of this direct trade agreement signed between our company and the Gusii Coffee Union on behalf of the primary coffee co-operative societies affiliated to the Union,” Sunggyu disclosed.
Sunggyu observed that the region was one of the best and most strategic coffee production destinations based on coffee husbandry practices displayed at the small-holder farm level.
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He clarified that his company would facilitate periodical shipping of coffee produce consignments to the South Korean market.
He added that the initiative would not pressure the farmers and producers regarding specific volume targets to be met before the consignment is dispatched to the market.
Instead, he will adopt a flexible consignment packaging based on the farmers’ volumes delivered to the Union.
Onsarigo expressed optimism that the direct coffee export deal will turn around the struggling coffee sub-sector to ensure farmers from the region who had technically abandoned the crop for alternative economic activities switch back to full-time coffee farming.
“The signing of this direct coffee export deal between our giant Union and business friends from South Korea, is not only a milestone to the Kisii County Government but also a turning point for the coffee sub-sector in the region,” stated Onsarigo.
He said the move would stir health competition in the local coffee marketing chain, leading to good premiums for small-holder coffee farmers who have been held at ransom by middlemen and brokers in the coffee marketing chain.
Dr Mainya assured the Goodbeans Company team that the Union, in collaboration with the County Government of Kisii, will ensure they get quality coffee beans for the export market in South Korea through fast-tracking of good crop husbandry and agronomic practices which meet international standards in the global coffee export market.
“I wish to assure our trade partners from the South Korea based Good Beans coffee buying company that as a Union management, we will take it upon our selves to ensure the coffee beans we offer for export to the international coffee market in South Korea meets quality and international standards, set out in the international trade treaties,” assured Mainya
The GCFCU CEO argued that, with the new opportunity, poor crop husbandry practices, previously witnessed among local coffee farmers due to poor premiums on their produce, will be a thing of the past as it will awaken all stakeholders in the coffee production chain in terms of quality coffee production and international marketing best practices.
Dr Mainya observed that, over the last decade, coffee farmers, not only from the Kisii region but across the coffee growing zones in the country, coffee farmers gradually abandoned the crop and became unproductive in favour of other quick cash economic activities as the crop became unproductive, amid exploitation by brokers who directly bought their coffee produce at throwaway prices.
“There is no doubt that coffee production has dropped drastically from an average of 130,000 metric tonnes during the bumper harvest realized during the 1987 and 1988 crop season,” stated Mainya.
Prof. Keyah lauded the direct coffee export deal, describing it as a game-changer in the local coffee production and marketing chain landscape that, for decades, remained a preserve of the middle-men and brokers to the disadvantage of small-holder coffee producers who continued earning peanuts from this lucrative crop.
“The direct coffee export deal signed today between the Gusii Coffee Union and our friends from Goodbeans Company in South Korea marks a major milestone in the history of the coffee industry in the country since it will free the farmers from the chains of brokers in the coffee marketing chain,” said Keyah.
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He noted that there has never been a moment when a buyer and producer come together at a round table to discuss coffee pricing and marketing issues.
This is why most coffee farmers in the country remain in the dark about what happens with their produce at the coffee trading auction, where brokers take charge of the whole process.
Prof Keyah disclosed that the direct export of coffee to the international coffee market destinations was one of the recommendations made by President Uhuru Kenyatta’s Government to reform the struggling coffee sub-sector in the country to its former self to enhance profitability among small-holder coffee farmers.
South Korea’s coffee industry is ranked the eleventh largest in the world, with an estimated annual consumption of about 512 cups per capita and over 110,000 coffee cafes, making it a lucrative and booming market for Kenyan coffee produce.
It is equally important to note that South Korea is the fourth largest buyer and consumer of Kenyan coffee after Belgium, Germany, and the United States.
According to the Kenya National Bureau of Statistics (KNBS) Export reports, Kenya earned 213 million dollars from coffee export from January to November 2021, an improvement from 196 million dollars reported in 2020.
