Coffee dealers in dilemma of honouring contracts

Thursday November 11 2021
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Official data show Rwanda produced 20,958 metric tonnes of coffee over the past. PHOTO | CYRIL NDEGEYA


Dealers are unable to honour contracts with export clients due to rise of coffee prices in global market.

The dealers say they signed contracts while prices were low, but the rise means farmers are now demanding more.

According to coffee processors, the scramble for the little coffee volumes available in the market caused farm gate prices to more than double to between Rwf500 and Rwf600 from Rwf248 from around April this year.

This left exporters paying more to get volumes committed under existing supply contracts even when prices did not adjust accordingly.

Margins offered by the buyers remained unchanged in most instances even after coffee prices on the international markets rose significantly to between $5 to $5.5 from $3.9 in June, according to market players.

“The reason is that many local processors like small firms and cooperatives don’t have much powers to push for renegotiations on price adjustment under the contracts signed when prices were low. Many accept to pay so as to not spoil existing relationship with clients,” said Ernest Nshyimyimana, managing director of Dukundekawa, a local coffee processing firm for 1,193 coffee farmers in Gakenke District.


Aaron Rutayisire, a local coffee roaster, however says exporters were able to claim higher margins based clauses in the contracts allowing them to adjust prices based on prevailing prices on international markets, alongside variations in transport and shipping costs.

“That helped us to claim an increase from $8 to $9 a kilo of roasted coffee, and made profits which allowed them to pay farmers higher margins. It takes understanding each other,” he said.