Nairobi, Feb. 8 - Kenya's coffee output in 2006/07 (Oct-Sept) rose 12.5 percent from a year earlier to 54,340 tonnes, the Coffee Board of Kenya said on Friday, adding that a strong local currency had hurt returns.
Coffee exports earned the country 10.1 billion shillings ($142 million) in the year, up 16 percent from 2005/2006.
The board cut output projections for 2007/08 to 42,000-45,000 tonnes from 55,000 tonnes.
Output in 2008/09 could increase to about 58,000 tonnes while earnings were expected to stand at 8.47 billion for this year and 10.8 billion for the next, it said.
"The industry is still reeling from the negative effects of a strong shilling last year to the extent that some players are considering a currency switch," said Louise Njeru, managing director of the regulatory board.
A crop assessment last year indicated that output in 2007/08 could fall to below 42,000 tonnes due to coffee berry disease.
Coffee production in Kenya has been declining from a peak of 130,000 tonnes in 1987/88 as weak prices and mismanagement forced many peasant farmers to turn to other crops.
In order to stem further decline, the government has liberalised coffee marketing to include direct sales instead of a central auction only. Njeru said sales through the so-called "second window" were growing slowly.
"It is not surprising considering the intricate nature of coffee marketing and the fact that most of the players who have positioned themselves for direct sales are new players. However, this is changing as bigger experienced players get involved."
SECTOR REFORM
The government has also written off 3.2 billion worth of debts owed by farmers and established a development fund for affordable credit to egg on the sector, which was once the biggest foreign exchange earner.
Njeru added that 600 million shillings were available to farmers in 2008 from the fund. She said the government had budgeted to spend 641 million shillings in 2007/08 to settle sales arrears. About half of it had been paid off by December.
The board was also working on setting up a Kenyan coffee standard and was developing coffee brands for the different regions they originated from.
Njeru said ongoing political insecurity in the country had hurt coffee growing areas slightly, with some estates facing labour shortages after workers from certain ethnic groups fled violence directed at them by rival communities.
"Our worry is on the security of the coffee and lack of transportation to Nairobi hampered by the current situation for the coffee from the west of Rift," she said.
Ethnic violence that has convulsed the country, mostly the Rift Valley, has blocked major transport routes, including those used to ferry tea and coffee from farms west of the Rift.
The uncertainty wrought by the crisis, which has killed more than 1,000 people and displaced 304,000 others, has however created demand for Kenyan coffee and the country's weakening currency would hike earnings, she said.
Kenya, a small producer contributing 1 percent of total global exports, grows top quality Arabica beans used by roasters around the world to blend with coffees from other origins.
Njeru said the board was pushing growers, many of them peasant farmers, to increase production per tree to 5 kg from 0.5 kg currently. ($1=71.25 Kenyan Shilling)