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Demand for Cash Crops is Booming: How KenyanSACCOs Can Take Advantage of the Opportunity

4 min read

The market prices for tea and coffee have been steadily rising in the last three years, with the global market sectors projected to increase from USD 142.1 billion in 2019 to USD 148.5 billion in 2022; exemplifying their crucial role to the economic growth of developing countries through different agricultural ventures. Agribusiness is a key contributor to the economy, why most African governments continuously offer subsidies to farmers.

SACCOs must grab the opportunity to derive their membership from tea and coffee farmers to increase their financial strengths and support them. Cash crop farming is the main source of income for many farmers in Kenya, most of who happen to be affiliated to different SACCOs countrywide.

With the gradual resuscitation of tea and coffee sectors, and the crops’ farming promising more, farmers are looking to build a new generation of financial services through savings and investments.

Tea and coffee industries have undergone harsh economic times, having experienced the worst in the past, especially during the heat of the pandemic. Moreover, the crops’ global prices have also previously been hitting below the expected heights, prompting innovative measures to curb the plagues. However, realizing the potential of the agricultural industry, the Kenyan government has embarked on more collective reform measures to revamp tea and coffee sectors, increasing the prices of the crops per kilogram in the recent three years.

SACCOs should now be more concerned about two principal issues when venturing into tea and coffee farming in the country:

•   How is Kenya Battling Tea and Coffee Plagues?

The Kenyan government has revitalized tea and coffee sectors—the good times began in 2019 despite the COVID-19 pandemic hit on local, regional and international trade. While 2019 turned out to be one of the best years for coffee and tea farmers, most Co-operative Societies have now felt the positive impacts in the agribusiness, where the crops’ global prices have begun to surge.

The Kenyan government has joined hands with global tea and coffee farmers to scale the crops’ market potentials; the government allocated more funds in 2019, a Kshs 3B budget to resuscitate the two sectors. The resultant effect on the sectors was an increased auction of each product price per kilogram between January 2019 and July 2021.

SACCOs should be motivated by these new tea and coffee prices, especially in reference to the presidential speech on Mashujaa Day in June this year; the price of Kenyan tea increased by nearly 42% in the last one year against the minimum global price of 3 dollars, the highest ever recorded in the last five years.

Similarly, coffee auction prices have been fluctuating, with the highest value per kilogram recorded in January 2021 at Ksh 100, from Ksh 25. Therefore, farmers and SACCOs should grab this opportunity to realize another productive year, 2022, despite the pandemic’s squeeze.

•   Price Fluctuations Should Not Leave Farmers Poorer.

Every time global market prices per kilo of coffee and tea fall, most farmers are left desperate and poorer, as they lose their meagre sources of income. Market price fall has forced many farmers in Central, Eastern, Rift Valley, Nyanza and Western regions, not to sell their produce at more than 3 dollars a kilo in the global market, with these negative effects reverberating across the regions.

During such periods, farmers receive paltry earnings that result in despondency, where the situation have forced some of them to replace the crops with more productive ones such as avocados and macadamia. Even then, the Central region is cited among the most fertile lands for growing coffee in the country and as a leading producer.

Yields are considerably higher on the estates of Kirinyaga due to the more intensive use of pesticides, fungicides, fertilizers, herbicides and irrigation. However, smallholder farmers only use fewer artificial inputs and practice mulching to control run-off and weeds.

Way Forward

Across the board, care about the future of the tea and coffee sectors should be given, since previous failures have had effects which are more far reaching than is ordinarily realized.

As SACCOs, the attainment of the Sustainable Development Goals (SDGS) and the objectives of the country’s National Development Plans all necessitate provision of well-responsive, secure and consistent financial services to all persons, especially the poor rural farmers, most of who are SACCO members.

Many SACCOs derive their membership from tea and coffee farmers, a possible trigger of systemic instability that can affect other SACCO’s financial sources.

Currently, farmers are directly exporting their produce externally to Netherlands, United States and Denmark, unlike the traditional selling through the Nairobi Coffee Exchange.

The Kenyan government has instituted regulatory reforms in the sector, coming up with a new law that seeks to improve farmers’ earnings and enhance the crops’ contribution to the economy.

Coffee is among Kenya’s major foreign exchange earners, contributing about 6% of the total export earnings and 0.3 % of the country’s gross domestic product (GDP).