Despite the global financial crisis, Rwanda’s coffee exports to the United States (US) will not be affected, Coffee Development Authority (Ocir-café) has revealed.

Alex Kanyankole, Managing Director Ocir-café, said that the country had exported all its consignments to the US market prior to the crisis. The US market consumes about 20 percent of Rwanda’s coffee exports.

Coffee prices fall
Kanyakole, however, also said that Rwanda’s coffee prices have in the last month, due to the global financial crisis, fallen by 23 percent.

A pound of coffee is selling for USD 1.17 (Rwf645.2) compared to USD 1.53 (Fwf843.7) per pound in the pre-crisis period.

There are also reports that prices in other regional coffee markets such as Nairobi and Bujumbura, have taken a hit from the crisis, falling regularly after drops in the New York market.

Kanyankole’s comments come after emerging reports that the crisis in the global financial markets is expected to have a direct effect on coffee supply.

On the US market, coffee prices, like other commodities, have been affected by the current financial turmoil. But it is expected to sustain the prices at the current levels during the coming winter months as demand is likely to outweigh supply.

According to the International Coffee Organisation (ICO), it is projected that credit restrictions and lack of liquidity caused by the crisis could lead to a reduction in supply while it is expected that the forthcoming winter season will help sustain demand.

According to the monthly ICO newsletter, Nestor Osorio the Executive Director ICO, said that while coffee fundamentals remain in a tight balance, the price outlook in the short run is likely to continue to be dominated by the instability of world financial markets.

He added that though there is likely to be a change in consumption, the effect of the financial crisis on unemployment and consumption in importing countries cannot be assessed yet. 

The dollar has continued to strengthen in relation to the currencies of many exporting countries, while commodity prices in general are falling.

The current crisis in the financial markets appears to be having further repercussions on the coffee market, especially in view of the credit restrictions and lack of liquidity affecting major trade operators.

Credit restrictions also affect producers, who are likely to be forced to reduce their expenditures on investment and maintenance, with a possible reduction in the supply of coffee in the medium term.

According to statistics from ICO, exports by all exporting countries during August totalled 7.4 million bags, down from 8.1 million bags in July.

Exports during the first 11 months of coffee year 2007-08 (Oct 2007-Aug 2008) fell by 4.5 per cent to 86.6 million bags from 90.7 million bags for the same period in coffee year 2006-07.

Inflation levels are also going up in exporting and importing countries.

Possible solutions
Kanyakole said that Rwandan coffee exports will be affected if the crisis persists.

He added that in order to increase on coffee export earnings, the country is focusing on specialty coffee production that has less defects.

Kanyakole continued that the strategy is to concentrate on quality production which will continue to secure quality prices and premium.

Rwanda has emerged as producer of specialty coffee, producing some of the world’s top grades.

Rwanda projects to produces about 28,000 tonnes of coffee this year, 15,000 tonnes above last year’s production.

Apart from 20 percent market share for Rwandan coffee exports, Europe takes 50 percent, Asia and the rest of the world taking about 25 percent.

The balance of about five percent represents the domestic market consumption.

The coffee sub-sector employs more than 500,000 people in Rwanda, with an average of 170 coffee trees per farmer.
The country seeks to collect USD100million (Rwf 55.1 billion) from 35,000 tonnes of coffee exports by 2012.

Rwanda has started laying down the plans to achieve the anticipated goal by adding value to the cash crop using manure and planting new coffee plants.

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