African coffee producers suffer from low prices

February 6
4:00 AM 2016

African coffee producers are facing rough weather amid falling prices and rising competition from Brazil. The coffee prices are poised to fall further this year as increased production from Brazil is putting more pressure. 

The world's biggest coffee producer and exporter Brazil is witnessing rising production. The coffee production in Brazil may increase to 52 million of bags with 60-kilogram each from 43.2 million bags in 2015, according to nation's supply agency Conab. The current crop is on higher note on a two-year cycle. 

Bloomberg reports that Africa Fine Coffees Association predicts the coffee prices may fall further considering the high output in Brazil. From early 2015, the average price in New York market fell 40 percent to US 120 cents per pound. However, El Nino weather condition is affecting some coffee growing countries. 

Abdullah Bagersh, Chairman of the Africa Fine Coffees Association, said: "Brazilian production is quite high for the coming season. So there is no shortage of coffee and therefore the market can't support high prices. Could prices go lower? Yes, of course because we have seen lower prices than where we are now. So we cannot discount that the market cannot go lower."

Low quality beans are reducing coffee prices at Nairobi auction. It's estimated that coffee prices fell about nine percent. The 50-kilogram bag was sold at Sh22,644 on Tuesday from Sh24,644 in last week. Nairobi Coffee Exchange (NEC) said that despite price drop, the demand for good quality coffee was high, as reported by Business Daily.

Though El Nino is impacting some nations, it's not that big to impact the overall coffee prices. Some countries such as Colombia suffered coffee crop losses upto 90 percent due to El Nino. Africa accounts for 10 percent of global coffee production. It was 20-30 percent during 1970-90s, according to World Coffee Research. 

Africa's largest coffee growing nation Ethiopia is expecting 45 percent rise coffee exports in 2016. The government is providing incentives and support to coffee growers. The coffee exports of Ethiopia are expected to reach 260,000 tons for 2016. The government's incentives help farmers achieve the export target, according to East African Business Week.

Ethiopia recorded $780 million revenues from 184,000 tons of exports. The domestic market is also very strong for coffee consumption. According to World Bank's report, the coffee segment contributed almost half of Ethiopia's gross domestic product (GDP).

African farmers are focusing on specialty beans to hedge against price fluctuation and keep up their market share in the global coffee market. The commodity market is more mature in the US and Europe. Specialty is the growing on in the global market. In matured markets also, specialty is still growing. 

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