Tanzania moves to cushion coffee growers

FMCG SUPPLIER NEWS

In2EastAfrica.net - Jul 22nd, 10:07

The Minister for Agriculture, Food Security and Co-operatives, Eng Christopher Chiza, told ‘Daily News’ that the government would assist coffee farmers by providing them with coffee seedlings at subsidised prices. “In principle we have agreed that we should provide them with input subsidies.
 

The funds will be released this season,” he said in an interview. Eng Chiza said the subsidies would be extended to cotton farmers as well in the form of subsidised cotton seeds, fertilizers and insecticides. He said if it would not be possible to provide the whole sum, the treasury would release the funds in instalments.

Coffee prices have slumped worldwide mainly due to increased supply from major coffee producers. In its monthly economic review, the Bank of Tanzania (BoT) said the fall in the prices of coffee was largely due to an expected increase in coffee production in Brazil, Vietnam, Colombia and Indonesia.

The downward trend of coffee prices is not expected to change in the near future as the major producers are expecting bumper harvests. According to the International Coffee Organization (ICO), Brazil, the world’s top Arabica coffee supplier is expected to have a bumper harvest in 2013/14 season.

Similarly, supplies from Vietnam (world’s largest Robusta producer), Colombia and Indonesia are also expected to increase. Coffee prices fell sharply in June 2013, as market fundamentals, combined with an uncertain macroeconomic outlook, drove the ICO composite indicator price to its lowest level since September 2009.

The market remains well supplied with coffee, with total exports for the first eight months of coffee year 2012/13 (October to May) reaching 75.7 million bags, compared with 72 million in the same period last year. Moreover, commodity prices in general declined over the course of the month, mostly due to negative economic news from China and the United States.

Given current price trends, there is a diminishing incentive for farmers to invest in their crops, and the use of inputs such as fertilizers and labour will likely be reduced. This could potentially have a negative impact on production volumes and quality over the next couple of years, resulting in increased price volatility and a less sustainable agricultural value chain.

Earlier, the Director General of the Coffee Board, Mr Adolf Kumburu had earlier told ‘Daily News’ that they had sent a request to the government to consider providing assistance to coffee farmers in the wake of declining prices of the cash crop.

Mr Kumburu said the board was aware of the effects of declining coffee prices to farmers but encouraged them to invest more in coffee in anticipation that the current situation would not last long. “We are encouraging coffee farmers not to despair. Better times are coming,” said Mr Kumburu.

Coffee accounts for about 20 per cent of Tanzania’s foreign exchange earnings and has been the mainstay of the country’s agriculture-based economy since its introduction as a cash crop around 100 years ago.