Farmers shut door on private coffee  millers, marketers

If recent developments in the coffee industry are anything to go by, the future of private coffee millers and marketers hangs in the balance.

Coffee farmers in the country have been gradually locking out these players by carrying out their own milling and marketing, either individually or through farmer-owned initiatives such as the Kenya Coffee Cooperative Exporters (KCCE) group.

This move is literally driving private marketers and millers out of town, creating anxiety and uncertainty among the players who have been active participants  in the sector since 2006.

Despite the positive role played by the private millers and marketers in ending the monopolistic era of the coffee auction and expanding the market, farmers have accused the firms of underhand dealings.

The millers and marketers are accused of manipulating milling losses and grading of coffee.  Milling losses refer to coffee lost during milling.

A case in point is the giant Othaya Coffee Cooperative Society, which reported milling losses of between 25 to 35 per cent when their produce was being processed by private millers.  But since 2010, when the society started doing its own milling, losses went down drastically. 

“When we started our own milling our milling losses went down to between 16 and 22 per cent. An example is P1 grade, which has a maximum milling loss of 16 per cent,” said Mr Newton Nderitu, the chairman of the Othaya Coffee Cooperative Society. 

This means that millers had been bagging up to 19 per cent of coffee from Othaya farmers in the name of milling losses.

Millers and marketers have also been accused of misrepresenting grading figures. For instance, if a cooperative produces 2,000, 50kg bags of AA coffee, only half (1,000 bags) is graded appropriately while the other half (1,000 bags) is graded as AB.

With the current price of $400 for a bag of AA coffee and $280 for a bag of AB coffee, this means the miller would pocket $120 per bag for all the 1,000 bags misrepresented as AB.

At a conversion rate of Sh85 to the dollar, the miller can make Sh10 million simply by misrepresenting grade quantities.

“Farmers have been losing a lot and that is why I feel they should have full control of the whole value chain,” said Mr Nderitu.

Another accusation against millers and marketers is their use of expensive loans and advances to commit farmers.

Most millers offer farmers advances and input loans at the rate of 10 per cent interest. This is double that of government funds such as Stabex, which stands at 5 per cent.

The former coffee board, now a directorate, has been blamed for failing to put in place regulations to protect farmers and prevent the cartel-like operations of coffee intermediaries.

Political support for the drive to have farmers control all processes has seen some county governments in the Mt Kenya region push for centralised milling and marketing of all coffee produced in their counties.

An example is Nyeri county, where Governor Nderitu Gachagua, who has been pushing for the county’s production of about 43 million kilogrammes to be milled at the Sagana mill by KCCE. This drive has been successful to some extent as about 85 per cent of coffee from the county is milled through the local cooperative. This has made millers to lose substantial ground in Nyeri’s coffee production.

Marketers too have lost out since 40 per cent of the county’s coffee from the last season was sold through direct marketing mainly by KCCE, while 59 per cent went to the coffee auction.

“By next year we are targeting that all coffee from Nyeri County will be sold under one roof,” said Mr Michael Mungai, the training and capacity building manager at KCCE.

This is bad news to marketers because Nyeri County is one of the largest coffee producers in the country.

SH 2.5 MILLION FOR LEASING MILL

In Meru, coffee cooperatives early this year leased the KPCU mill for their own milling. The county government provided Sh2.5 million for leasing the mill for one year.

Meru Governor Peter Munya says centralised milling of Meru coffee is meant to eliminate cartel-like middlemen and intermediaries and make it easier to brand Meru coffee, carry out value-addition, and market the produce.

In Tharaka Nithi county, farmers have built their own centralised mill. This has already seen Nyambene plant, which relied heavily on coffee from the region, go into receivership in July.

In Baringo, the county government in July unveiled plans to build a Sh50 million milling plant with the assistance of Korean  partners. 

Millers and marketers have not taken these developments lying down and have sought to counter them with battles in and out of court.

In August three millers went to court to stop several coffee societies in Nyeri County from releasing payments to farmers over a Sh118 million debt. The debt was allegedly for farm inputs to farmers.

Millers and marketers have also been accused of giving bribes to influence decision-making in the societies to prevent the push to lock them out.  Hecklers have been hired to disrupt society meetings and even threaten elected officials with a vote of no-confidence should they support the single marketing initiative being pushed by county governments. 

However, private millers and marketers still have a window to operate as most coffee cooperatives do not have the capacity to start their own milling or marketing and have to continue using their services.

 Observers have noted that millers and marketers may need to change their tact in order to stay relevant. They can focus their attention on large scale coffee estates, or even buy their own coffee farms and do their own production.

Some have also advised these intermediaries in the coffee value chain to be more open and transparent with farmers if they wish to remain in their good books.

“If millers were truthful and transparent then this problem would not be there,” Said Wachira Mwago, the chairman of Baricho coffee farmers’ society in Karatina, which is currently milling coffee through KPCU.

Baricho is one of the societies in the country that have resolved to continue using the services of Millers and marketers.

But even with the new opportunities opened by farmers having more control over the value chain, farmers will