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Coffee's Premium Prices Fail to Filter Down to Farmers

Commodities: Kenya beans often sell for $12.99 a pound in the U.S., but farmers take home just a penny. Reasons include corruption, world glut.


NYERI, Kenya — Twice a year, farmers on the slopes of Mt. Kenya send some of the world's best coffee to market. Americans pay $12.99 a pound for Kenyan coffee, but the farmer takes home only a penny.

Despite the popularity of coffee, and consistently strong profits for U.S. corporations like Starbucks, growers around the world are going broke, nowhere more so than in Kenya.

The reasons range from local corruption that has robbed farmers of precious pennies to ill-advised World Bank projects that have glutted the world market, driving down prices.

The story is told in the journey of the java bean from the Kenyan highlands to specialty coffee shops in the West, its price marked up step by step until that tall cappuccino costs $3--more than most farmers here make from coffee in a month.

Industry Shrinking

Kenya is one of the oldest coffee producers, tracing the first plants back to 1893, yet represents only 2% of the world market. Coffee was Kenya's leading export crop before 1989, but except for some boom years in the mid-1990s, the industry has been sinking--despite its reputation and the fact that its coffee garners among the highest prices on the international market.

Because of its "bright acidity"--the industry term for tangy taste--"Kenyan coffee has always been the model of consistently high-quality coffee," said Dan Cox, president of Coffee Enterprises, an independent testing firm in the United States.

"It's the difference between buying a Chevy and buying a BMW."

Although coffee is the world's most-traded commodity after petroleum, farmers in Kenya's coffee-growing region of Nyeri, 65 miles north of Nairobi, have been losing money on coffee for the last three years.

They can no longer afford to give their plants the care required for top quality beans, instead choosing to plant red beans and corn between the 8-foot-high coffee bushes. Many have abandoned coffee entirely.

"Coffee is very hard work, pruning the bushes, spraying them, and you have to hire people to help you harvest," said Joseph Wahome, 27, who is planting beans and potatoes among his 120 coffee bushes. "It is not worth it at these prices."

The third-generation coffee farmer used to take pride in growing 1,500 pounds of top quality beans a year, but the corruption he sees around him has dampened his spirits.

Wahome is part of a cooperative of thousands of members and a dozen processing plants, which supplies farmers with fertilizers and anti-fungal sprays. Wahome takes his coffee berries to a nearby factory, where the fruit is stripped away and the seeds, or beans, fermented. After being dried in the sun, the raw beans are shipped to millers for final processing.

The cooperative takes the pale green beans to an auction run by the Coffee Board of Kenya. A sample of each lot is graded, roasted and tasted by board officials and the exporters who bid every Tuesday in downtown Nairobi.

When a lot number appears on the computerized board above the auctioneer, more than 80 exporters push buttons to make their bids. The product of six months of a farmer's life is sold in less than 45 seconds. In recent weeks, Kenyan AA coffee has fetched an average $1.50 a pound at auction. Not long ago, exporters paid up to $10.

But after the board and the cooperative deduct taxes and fees, farmers get a penny a pound. The growers say the cooperative officials, who did not want to be interviewed, remain wealthy.

"Every year they have a new car, and we go two years without being paid," said Wahome.

Nyeri farmers say that last year some of them went to a meeting of their Riko Cooperative to demand better accounting and were met by hired thugs backed up by police. They say the thugs beat up the organizers, set their homes on fire or uprooted their coffee plants. No arrests were reported and the farmers haven't tried to organize since.

Phone calls to Riko's offices, as well as a visit there, failed to produce any official willing to be interviewed. But the spokesman for the Coffee Board of Kenya, charged with running Kenyan coffee's central auction system, was less reticent.

"Corruption is the biggest problem," John Checkar Irungu said. The board deducts 20% of the auction price for taxes and milling charges, and the farmer ends up with 10%, he said.

"The problem is not with the farmer, not with the Coffee Board, but with the bad management at the cooperative," Irungu said in an interview.

The Coffee Board, although having no direct control over the cooperatives, is looking for ways to pay farmers more directly to avoid "diversions" of payments, he said. But the proposed changes have met with stiff political resistance, he added.

U.S. policy is in part to blame for the crisis in coffee-producing nations like Kenya, said John Talbot, a sociology professor and coffee expert at Colby College in Portland, Maine.

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