The distinction of Coffee Advance Revolving Fund

Barely two weeks ago, the Ministry of Finance gazetted the much awaited regulations to operationalise the access of the promised Coffee Cherry Advance Revolving Fund by the coffee farmers. The funds had been delayed for over a year since the president pledged the Sh3 billion that would help facilitate in reducing the cost of coffee production especially among small-scale farmers.

The coffee sector in Kenya have been in a crisis since 1990s with more than 40 percent decline in coffee production to the current range of below 50,000 tonnes. This has minted considerable poverty to many farmers to a point that many have abandoned coffee farming for its huge investment risks. Those who persisted in hope of future better returns have had to contend with poor living income to support their families.

Some analysts have questioned the economic viability of coffee farming in Kenya specifically due to its small-scale nature on plots below a hectare and high costs of production due to expensive labour and farm inputs. Instructively, coffee farming is practiced in high altitude areas where mechanization is impossible due to topography. According to Kalro (Kenya Agricultural and Livestock Research Organisation), the average cost of production for an Arabica coffee variety is Sh52.30/kg. Currently, the national productivity stands at 3kg/tree which is way below the 15kg/bush potential. If we were to use these statistics to calculate the cost of producing coffee per hectare which on average can have 1350 bushes, this gives us Sh 211,815.

This have made Kenyan coffee farmers compete unfavorably with their counterparts in Brazil and Colombia who produce their coffee cheaply since their farms are larger and mechanization is possible due to flat terrain. The high coffee production also from these countries have impacted prices negatively at the international markets. Reviews of the global coffee markets indicates that the current coffee price crisis is caused by major imbalances between supply (production) and demand(consumption).Whereas coffee production has been increasing at an annual rate of 3.6percent, its demand has been increasing by a mere 1.5 percent.

It is against this background that the presidential taskforce on Coffee Reforms headed by Prof. John Keiyah recommended on the establishment of the fund. This will facilitate farmers meet their financial obligations after harvesting as well as effectively support other production activities such as pruning and application of agrochemicals. Previously, farmers had to wait for months after harvesting to receive payments which would expose them to high interest loans of as much as 20 percent interest rate from SACCOs.

The fund will be managed by the new Kenya Planters Co-operative Union and individual farmers or estate owners can access the money as long as they are members of a registered cooperative and member of new KPCU respectively.

Farmers will access credit of up to 40 percent of the prevailing average sales price at the Coffee exchange or Sh 20 per kilogram of cherry delivered.

The writer is programmes office, Eco-Ethics Kenya.