The Nairobi Coffee Exchange (NCE) manages the auction of all coffee produced in Kenya. Nairobi Coffee Exchange is Kenya’s only coffee auctioneer. Although this is a very important part of the country’s coffee supply chain, it has been criticized by producers for a variety of reasons. Follow us for more information on why this is the case and for more details on NCE.
The Nairobi Coffee Exchange (NCE) in Kenya
Breaking the Kenyan Coffee Value Chain
After harvesting the cherries, farmers take them to a local washing and pulp station, often known as a “factory” among Kenyan producers.
Here, the coffee is processed and dried before being transferred to a dry mill. Then, in the dry mill, before milling, grading and storage, it is assigned a unique tracking number (also known as a “return number”).
The green coffee is then delivered to a marketing representative, who prepares a catalog for a large number of them. The catalog is then passed on to merchants who will participate in the next weekly auction.
Upon payment of the price of coffee, the warehouse worker where the coffee is stored (known in Kenya as the storekeeper) issues a coffee order. This is the document that gives the official ownership of the coffee to the buyer.
However, this money does not go to the farmer, but to the marketing representative. The agent then briefly reduces their costs. Farmers or cooperatives are then responsible for paying for coffee, but this process is sometimes delayed. As a result, the system is frequently criticized by manufacturers and other stakeholders who work more in the supply chain.
What does Nairobi Coffee Exchange do?
The Nairobi Coffee Exchange, in addition to operating the trading floor, also manages all the coffees to be auctioned on the sample room.
The Nairobi Model Chamber of Commerce contains about 9 kilograms of each item that will be auctioned next Tuesday. This 9 kg is divided into 250 g packages. These items will then be sent as pre-auction samples to potential and potential buyers.
When the day of the auction arrives, each piece is displayed with its turn number (assigned to the dry factory) along with the number of pieces, grade, number of bags, total weight in kilograms and manufacturer name.
Each piece has a reserve price that is tied to the price of C as well as the grade and quality of the coffee. This reserve price is set by the seller or marketing representative. However, depending on how the buyers evaluate the coffee in the trading class, the bid price may not reach this price. For example, if the price is 220 Kenyan shillings (Sh), but bids start at Sh100 and only reach Sh160, the auctioneer may accept the price as a “bid”. After the auction, the buyer who made the bid will negotiate with the auctioneer.
At this point, it is likely that a price below the pre-determined reserve price will be accepted. At the end of the transaction, the Nairobi Coffee Exchange prepares a document detailing and recording the coffees to whom, from which auctions and at what prices. This is distributed to marketers and buyers for transparency.
Nairobi Coffee Exchange: Is this the future of Kenyan coffee?
Nairobi Coffee Exchange is Kenya’s only coffee auctioneer; But some manufacturers believe that the NCE process is ultimately inappropriate.
This is for a number of reasons, but the two main criticisms are the length of the process and the lack of transparency.
Producers are often unstable financially, and waiting up to a year to pay only exacerbates this problem.
Likewise, with the auction system, most of them do not know the price paid until the full sale time, and this gives them little opportunity to negotiate.
However, another major concern is that the price of coffee sold through the NCE is consistently underestimated.
Many claim that better pricing can be achieved through direct trading models.
Some producers say that even when they produce better quality coffee, prices are not reflected in the NCE.