Rwanda: Why Govt Set a Fixed Coffee Farm Gate Price

Unlike the common practice where the National Agricultural Export Development Board (NAEB) would set a farm gate price, the minimum price at which coffee cherries must be bought from farmers, it has set a fixed price this time around.

According to a communique issued by NAEB on February 23, 2023, the fixed price for a kilo of good quality coffee cherries is Rwf410 for the current season.

With farm gate prices, farmers have the possibility to get higher prices for their produce, in case there are buyers.

For instance, on February 11, 2022, NAEB announced that quality coffee cherries had to be bought from farmers at a minimum price of Rwf410 a kilo, an increase of 65 per cent from Rwf248 a kilo in the previous year.

Claudine Uwineza, a coffee farmer from Nyamasheke District, Western Province, told The New Times mid-February that such a price was by far exceeded -- some farmers sold their produce at almost double that -- as coffee factories scrambled to get the produce from them. This situation resulted from the increase in coffee prices in the international market.

But, with the fixed price, such a possibility is excluded.

Fulgence Sebazungu, the president of the Rwanda Coffee Cooperatives Federation (RCCF), told The New Times though farmers do not know which factors were considered while determining the fixed coffee price, it is low compared to the increased cost of production for this crop.

"I used to pay between Rwf800 and Rwf1, 000 to a worker to take care of my coffee a day in 2020, but that cost rose to at least Rwf1, 500 a day currently," he said, adding that fertiliser prices are also high.

Again, he said, coffee is mostly grown for the export market, adding that prices of commodities that farmers need for their consumption such as rice, beans, and potatoes, went up on the market.

For him, setting a minimum coffee price was preferable as some farmers could get higher prices from factories that want enough supplies to meet their demand, and that would make the coffee industry competitive.

Meanwhile, NAEB said, using the classical price calculation, the estimate of farm gate price would be Rwf330 a kilo of coffee cherries.

Factors for current price

Normally, before every coffee harvesting season kicks off, NAEB said, it publishes the coffee farm gate price on behalf of the Government of Rwanda.

When calculating coffee farm gate price, NAEB said it bases on the main aspects including coffee production cost, indicating that so far, the production cost is Rwf177 a kilo of coffee cherries, which has been in place since 2017.

Other reasons factored in are the cost of coffee processing and transportation, the coffee price at the New York commodities market, and exchange rates (including the value of the Rwandan franc versus that of the US dollar).

NAEB showed that coffee prices at the international market have recorded a downward trend, from $5.6 a kilo in early February 2022 when the Rwf410 coffee farm gate price was published, to $3.6 a kilo in January 2023 - the lowest point within a year period. This implies a reduction of 35.7 per cent coffee price drop on the international market.

However, it indicated that after hitting the lowest point, the trend started in an upward direction, with a kilo of coffee being traded at $4.6 a kilo on the international market stands, as of February 22, 2023.

NAEB indicated that according to the National Institute of Statistics of Rwanda (NISR)'s February 2023 data, annual average inflation, the overall increase in prices of goods and services was 15.3 per cent between January 2022 and January 2023.

It pointed out that rural people, including coffee farmers, were the most affected by the global crisis caused by the war between Russia and Ukraine, as well as the Covid-19 pandemic because they are the ones who experienced the highest goods and service price increase.

Considering all those factors, NAEB stated, it was recommended the coffee price for farmers remain at Rwf410 a kilo of cherries, fixed.

According to NAEB's December 2022 report, revenue from Rwanda's coffee exports increased by 34 per cent to more than $105 million (about Rwf114 billion) in 2022, from more than $78.3 million (about Rwf85 billion) in 2021.

AllAfrica publishes around 500 reports a day from more than 100 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.