Coffee Earnings Surge Despite Volume Dip

Coffee sales at the Nairobi Coffee Exchange (NCE) reached KSh 35.6 billion in the 2024/2025 financial year, marking a KSh 10.1 billion increase from the previous year. This growth occurred despite a decrease in the volume of coffee traded, with 673,844 bags sold compared to 693,610 bags in the 2023/2024 financial year. The higher earnings are primarily attributed to improved prices for premium grades, particularly AA and AB, and a stable foreign exchange rate.

Henry Kinyua, a prominent coffee value chain expert, noted a significant shift in coffee grade distribution, indicating an improvement in overall coffee quality. Premium Grade AA coffee sales increased to 25 percent of total sales from 19 percent, while Grade AB rose substantially to 37 percent from five percent in the year under review.

Historical Context and Ongoing Reforms

Kenya's coffee sector, once a cornerstone of the economy, has faced numerous challenges over the years, including declining production from a peak of 150,000 metric tons in the 1980s and 1990s to between 60,000 and 70,000 metric tons in 2025. These challenges have been linked to outdated farming techniques, inefficiencies within the cooperative system, climate change impacts, and limited access to financing.

In response, the Kenyan government has initiated comprehensive reforms aimed at revitalising the sector and doubling production within three years. A key component of these reforms is the Direct Settlement System (DSS) at the NCE, which aims to ensure farmers receive at least 80 percent of their coffee's value directly, bypassing intermediaries. The DSS, managed by Co-operative Bank, is now fully operational.

Policy and Governance Shifts

The Coffee Bill 2024 and the Co-operative Bill 2024 are central to entrenching governance, transparency, and accountability within the sector. These legislative changes aim to address weaknesses in oversight and empower millions of Kenyans who rely on cooperatives for their livelihoods.

Under the new marketing regulations implemented in 2023, the Capital Markets Authority (CMA) now regulates the NCE and licenses brokers. The Coffee Directorate, under the Agriculture and Food Authority (AFA), is responsible for developing, promoting, and regulating the coffee industry, including issuing licenses for independent coffee cupping laboratories, warehousemen, buyers, and movement permits. County governments are now responsible for licensing coffee millers.

Stakeholders and Testimonies

Alliance Berries Ltd emerged as the leading broker in the 2024/2025 financial year, trading over 247,166 bags valued at KSh 13.2 billion. Kirinyaga Slopes followed with 96,404 bags worth KSh 5.2 billion, and New Kenya Planters Co-operative Union (KPCU) sold 92,909 bags at KSh 4.8 billion. Ibero Kenya was the top buyer, purchasing 179,110 bags for KSh 9.3 billion.

NCE Chief Executive Officer Lisper Ndung'u has urged farmers to increase the production of quality grades to maximise returns in the upcoming 2025/2026 season. She also encouraged farmers to continue utilising the Nairobi Auction for competitive prices.

Challenges and Implications

Despite the positive financial performance, the sector faces ongoing challenges. The United States Department of Agriculture (USDA) forecasts a 6.3 percent decrease in Kenya's coffee production for the 2024/2025 marketing year, projecting 750,000 bags (60 kilograms) due to stagnant harvested areas and yield decline. This decline is partly attributed to the disruption of input and extension support programs previously provided by de-licensed marketing agents due to the 2023 reforms.

Milling delays and congestion at processing facilities have also impacted cumulative sales volumes in the 2023/2024 marketing year. Climate change, characterised by erratic weather patterns, increased pests and diseases, and rising production costs, continues to pose significant threats to coffee farming, particularly for smallholder farmers.

Timeline and Next Steps

The coffee annual year in Kenya begins on October 1st, with harvests typically occurring in two seasons: between October and December, and April and July. The government's goal is to increase average yields from less than two kilograms to 20 kilograms per bush, and expand acreage to achieve a tenfold increase in output.

Preparations are also underway to introduce a digital platform for the Nairobi Coffee Exchange, allowing real-time bidding by international buyers. This move aims to enhance transparency and secure better prices for farmers by dismantling cartels.

What to Watch

Stakeholders will be closely watching the full implementation of the Direct Settlement System and the impact of the new Coffee Bill 2024 and Co-operative Bill 2024 on farmer livelihoods and overall sector efficiency. The effectiveness of government initiatives to boost production and address climate change challenges will also be critical for the sustainable growth of Kenya's coffee industry.