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Kenyan Coffee Earnings to Fall as Global Price Decline

Kenya’s coffee earnings are forecast to decline this year even as output will probably rise at least 37 percent as a drop in world prices curbs revenue, the head of the country’s industry regulator said.

Coffee-export earnings in the year through September may decline 8 percent to 22 billion shillings ($261 million), Wanjira Njeru, the Coffee Board of Kenya’s managing director, said in a June 18 interview in the capital, Nairobi. Production is forecast to increase to more than 50,000 metric tons, Njeru said. That compares with 36,629 tons last year.

“We expect production to increase because farmers are using the money they earned last year to invest in inputs including fertilizer, mostly, and fungicides,” she said. An estimated one-fifth of the crop is smuggled out of the country by middlemen seeking higher prices than those available at the Nairobi auction and isn’t captured in the official statistics, she said.

Kenya produces arabica, which has tumbled 33 percent since the East African nation’s season started in October and touched a two-year low of $1.501 a pound on June 18 on ICE Futures U.S. in New York, on concern that Europe’s faltering economy will curb demand as global supplies climb.

While Europe has traditionally bought about 70 percent of Kenya’s coffee, imports into North Africa, the Middle East, Asia and Russia are growing and the U.S. is boosting purchases of specialty beans, Njeru said. The board is also trying to lift domestic sales through marketing campaigns vying against the widespread popularity of tea, she said.

Kenya, the world’s largest exporter of black tea, consumed 7.6 percent of the coffee it produced in 2010, according to the International Coffee Organization’s website.

Arabica coffee for September delivery gained 1.5 percent to 1.538 a pound by 5:34 p.m. in Nairobi yesterday. Kenya’s benchmark coffee grade sold for an average of $263.34 per 50- kilogram (110-pound) bag at a Nairobi Coffee Exchange auction yesterday, down from $279.86 a bag a week earlier.

To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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