Business & Economy

East Africa could produce record coffee output in 2015/16

East Africa could produce a record coffee crop in the 2015/16 season (October -September). According to the US department for agriculture (USDA), the region’s three largest producers’ output of Arabica and Robusta coffee beans is forecast to rise to 12.46mn 60-kg bags, up 3.2 percent from the previous year.

Ethiopia, sub-Saharan Africa’s (SSA) largest producer, will lead the surge with outturn rising to 6.51mn bags, owing to favourable weather and increased investment in coffee farms, which will drive higher yields. Tanzania’s coffee outturn is also expected to rise to a record high of 1.2mn bags, reflecting improved crop management techniques, good weather, and the beginning of the ‘on’ cycle of the Arabica crop. Uganda is also expected to see its coffee production recover to 3.8mn bags, returning it to 2013/14 levels following severe dry weather in the 2014/15 season. However, Kenya’s outturn of Arabica beans will remain flat at 900,000 bags, owing to structural constraints, such as the loss of coffee plantations to real estate development (shrinking the area planted from 170,000 ha to 110,000 ha) and low prices, which have driven farmers into more lucrative cash crops.

Total exports for the region are forecast to climb to 9.08 million bags, up 5 percent from the previous year. Tanzania is expected to lead the growth as exports will surge 24 percent to 1.2mn bags, although volumes could be constrained by rampant smuggling in the Kagera region (which produces a quarter of total production) to Uganda, as farmers search for better prices. It is estimated that at least one-third of Kagera’s 10,000 tonnes of coffee is being sold across the border. Ethiopia’s exports are set to rise to 3.52mn bags, just ahead of SSA’s historically largest exporter, Uganda, whose exports will remain at 3.5 million bags. Although Ethiopian coffee exporters are expected to sell some beans on the local market to capture higher local prices, the Ethiopian government tightly regulates domestic sales in order to ensure that over half of its production is exported.

The Ethiopia Commodity Exchange (ECX) has also simplified its grading system, reducing it from ten to five grades. This should help to boost exports as it is in line with international standards and more difficult to manipulate by buyers seeking to divert supplies to the domestic market. In contrast, Kenya’s exports of its fine Arabica beans will remain flat at 860,000 bags, mirroring its static output. Exports could be further undercut by the Kenyan government’s goal of doubling domestic coffee consumption from 5 percent to 10 percent of national output over the next three years, supported by rising disposable incomes and a growing coffee culture in Nairobi.

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