Rwandan coffee farmers can expect to reap big this season as prices on the international market shoot up on the back of low supply from the world’s leading coffee producer, Brazil.

 In response to prevailing market conditions, the National Agricultural Export Development Board (NAEB) moved fast to revise upwards the indicative farm-gate price (the minimum price payable to farmers) to Rwf200 from Rwf142 per kilogramme. The country’s coffee season started this month.

The increase in the local farm-gate price follows a price surge in January on international market.

In January, the monthly average of the International Coffee Organisation (ICO) composite indicator price started hovering above $3.9 per kilogramme of Robasta—the highest in four months. 

Coffee prices on the international market had plummeted to as low as $2.66 in August, as Brazil and other major producers flooded the market.

"The recent publication of official Brazilian production estimates for crop year 2014/15, which is due to start in April, suggests that output could fall for the second consecutive crop year, giving an initial forecast of between 46.53 and 50.15 million bags. 

This uncertainty over 2014/15 crop, exacerbated by notably dry weather in some coffee producing regions, has given support to coffee prices,” the ICO says in its January 2014 report.

Dr Ndambe Nzaramba, the deputy director-general in charge of exports and market operations at NAEB, said demand for coffee is also bouncing back as the economies of major consumers in Europe start to emerge out of a financial crisis.

"Unlike last year when the industry did not perform well, we are predicting a good result this year with annual total production increasing to more than 25,000 tonnes,” George William Kayonga, NAEB director-general, told The New Times on the sidelines of a coffee research symposium in Kigali on Monday.

Changes in demand

Last year, the demand for coffee declined by almost 18 per cent globally, leading to a sharp fall in prices to as low as $2.66 per kilogramme of processed coffee beans.

"We are beginning to see steady global financial recovery. That means that demand for exports, including coffee, is likely to increase with impressive market prices,” Nzaramba said.  

Coffee is arguably the second most traded commodity, after oil, worldwide and is vulnerable to price fluctuations caused by economic conditions from major consumer countries and supply from producing nations.

Rwanda’s earnings from coffee exports went down last year, receiving just about $50 million in the first 11 months of 2013. 

Coffee accounts for between 12 and 17 per cent of the country’s total exports.

 Figures from NAEB indicate that the capacity of coffee washing stations also decreased from 60 per cent in 2012 to 50 per cent in 2013.

Experts have advised that unless stakeholders focus more on quality and quantity, the industry might continue to stall.

In Rwanda, coffee is grown on 42,000 hectares of land. 

Currently, more than 400,000 smallholder farmers produce coffee with nearly all the product exported. Europe continues to be Rwanda’s main market for its coffee.

NAEB head of coffee production unit, Celestine Gatarayiha, said the board had agreed with all the stakeholders to revise the farm gate prices whenever necessary, in conformity with the international market developments.

Farmers happy

Vedasite Ntaganda, a coffee farmer in Nyanza District, said the new prices will encourage farmers to grow more coffee.

"We hope the prices are sustained and keep going up, otherwise price fluctuation is the biggest challenge we are facing,” Naganda said.

Philip Murengezi, another coffee famer in Huye District, told this newspaper that the new prices will help in improving the quality of coffee. 

Clay Parker, the sustainability director at Rwanda Trading Company, said the new prices should be followed by improved quantity and quality.

"It’s very important that farmers take this opportunity to produce more, while addressing quality,” Parker said.

NAEB is working with stakeholders to boost quality, especially by putting more emphasis on our field schools, coffee washing plants, and most importantly, deploying agronomists to work closely with farmers on best farming practices,” he said.