24 February 2014

Tanzania: Coffee Remains Crucial Crop Despite Low Output

Photo: Rwanda Development Gateway
Coffee beans.

LOW production capacity of coffee farmers in the country denies them opportunity to harness fully the global demand that could lead to increased income generation.

Official figures from the Tanzania Coffee Board (TCB) shows that the annual coffee production capacity is around one million bags compared to 50 million bags produced in Brazil alone.

For example, production capacity of a single coffee farmer in Mbinga is between 15 to 100 bags, while in Moshi it is around five bags only.

"Our production capacity is still low to bring about greater impacts into the global market currently dominated by giant producers from South America," said Mr Adolf Kumburu, the TCB Director General. Brazil is the world's largest producer of Arabica coffee beans, accounting for about a third of global coffee production of about 130 million bags per year.

Estimates from commodities analysts over coffee output in Brazil ranged as high as 60 million bags of coffee for this year's harvest, though Brazil's government crop unit Conab forecasted a crop of 46.5 to 50.2 million bags.

For Tanzania to bring about impacts into the global market there is a need to enhance production capacity to at least 30 to 40 million bags annually, the situation that would see farmers' earnings increasing.

He also trashed reports that middlemen were taking the lions share in coffee business, saying high transport costs of ferrying the consignments from production to the market has been slashing farmers income.

According to a recent survey, some Tanzanian coffee farmers may receive as low as 50 per cent of the auction price for the coffee that they produce.

More generally, it is estimated that coffee farmers receive an average 65 per cent to 70 per cent of the FOB price. The main on sequence of this low share of income for coffee farmers is that coffee farming is currently not an economically profitable activity.

Similarly, fluctuating coffee prices in the world market, has been impacting negatively on the export earnings and contribution to economic growth.

If price deterioration persists, revenues from the mainstream coffees are expected to decline as well with the overall income also falling.

However, he remarked that good quality coffees were still fetching higher prices. The situation has led to dramatic social conditions, raising unemployment and in some distinct cases even to hunger and starvation.

Coffee is not just a drink. It's a global commodity. As one of the world's most traded products coffee industry employs millions of people around the world through its growing, processing and trading.

Coffee has been one of the country's largest export crops contributing approximately more than 200bn/- to export earnings and provides employment to some 400,000 families.

The resulting market imbalances coupled with low price elasticities of demand have led to the same downward pressure across a broad spectrum of commodities, albeit less dramatically than for coffee.

But while the coffee trade is vital to politics, survival and economies of many developing nations, the industry's pricing and futures are decided in conference rooms and on stock exchange floors in some of the world's wealthiest cities.

As the single most important tropical commodity accounting for almost half of total net exports of tropical products, coffee has become emblematic of the problems faced by all developing countries' agricultural commodity exports.

Further, coffee industry faces various challenges including low productivity, insufficient farm gate Prices due to non optimal functioning of the internal marketing system business environment, under exploited quality potential as well as threats from climate change.

Tanzanian coffee belongs to the Colombian group. Tanzania, Africa's fourth-largest coffee producer after Ethiopia, Uganda and Ivory Coast, produces mainly Arabica and some robusta coffee.

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