How does the coffee grading system shape Kenya's auctions?

The Nairobi Coffee Exchange, known as NCE, is a trading platform set up by the Kenyan government and supervised by the Agriculture, Food and Fisheries Authority. It holds auctions every Tuesday, giving buyers a chance to inspect and taste lots before purchase and letting sellers present coffee to many potential buyers at once. A coffee grading system was introduced alongside the first auction in 1935.

The exchange traces back to the 1930s, when Kenya was a British colony and plantations were mostly British-owned. The Coffee Board of Kenya ran the first auction in 1935, and cooperative rules later required smallholder participation while leaving estate owners in charge of the board. After independence in 1963, plantation land was nationalized and redistributed, and cooperatives received loans of nearly 4 million US dollars to expand the coffee industry.

Kenyan coffee is renowned worldwide for its complex layers of flavor and bright, juicy acidity, and enthusiasts who frequently encounter Kenyan beans have likely heard of an institution called NCE. NCE stands for Nairobi Coffee Exchange, a coffee trading platform established by the Kenyan government and an indispensable part of the country's coffee supply chain. This article will walk you through how NCE operates, its historical origins, and the role it plays in Kenya's coffee industry, while also tracing the institutional changes from the colonial period to independence, and how coffee farmers and cooperatives export coffee to the world through auctions or direct sales.

Kenyan coffee has always been known for its rich layers of flavor and bright, juice-like acidity. For coffee enthusiasts who frequently purchase Kenyan beans, the name of the institution NCE is surely familiar. So what exactly are its functions?

NCE stands for Nairobi Coffee Exchange, translated into Chinese as 内罗毕咖啡交易所. It is a coffee trading platform established by the Kenyan government, under the jurisdiction of the country's Foreign Exchange Management Committee and supervised by the Kenyan Agriculture, Food and Fisheries Authority. In Kenya's coffee supply chain, NCE occupies an extremely critical position.

Every Tuesday, NCE organizes coffee auctions, with its core function being to provide a transparent and efficient trading venue for both buyers and sellers. Here, buyers can inspect and taste the coffee before purchasing, while sellers can showcase their coffee to numerous potential buyers to facilitate sales.

The history of NCE can be traced back to the 1930s. At that time, Kenya was still a British colony, and coffee plantations were mostly in the hands of the British. Under British leadership, the Coffee Board of Kenya was established, and the first auction was held in 1935, along with the establishment of a coffee grading system. Subsequently, a cooperative institutionalization was implemented, requiring smallholder farmers to participate, but this to some extent weakened the smallholders' voice in the industry, as most members of the Coffee Board at the time were local coffee estate owners.

It was not until Kenya gained independence in 1963 that plantation land was nationalized and redistributed. Cooperatives were authorized and received loans of nearly 4 million US dollars to expand processing capacity and build new processing stations. It is precisely because of this that today about 75% of Kenya's coffee land is farmed by smallholders.

Through these years of evolution, coffee farmers or cooperatives currently mainly use two channels—NCE auctions or direct sales—to export coffee to buyers in other countries.

After coffee cherries are harvested, they are sent to processing stations for processing, and then the green coffee beans are handed over to marketing agents. The agents grade all the products and compile them into a catalog, which is then presented to traders who will participate in the weekly auction. Traders can cup the coffee at NCE in advance, and then bid on the coffees they favor at the auction; the highest bidder wins that lot of coffee.

However, after traders pay, the funds do not go directly to producers such as coffee farmers, but first flow to the marketing agents. Only after the agents deduct their agency fees do they pay the farmers or cooperatives for the coffee cherries. Because of this, in earlier years this system was repeatedly criticized by producers and stakeholders, because the process for coffee farmers to receive funds was too long—sometimes they had to wait nearly a year to get paid.

So in 2006, the Kenyan government introduced the "Second Window." Under this legislation, producers could bypass the NCE auction platform and trade directly with buyers. But to this day, 85% to 95% of Kenyan coffee is still sold through NCE. The reason is that dealer restrictions, smallholders' lack of access to external markets, and the deeply entrenched cooperative alliance system mean that the vast majority of coffee still needs to circulate through exchange auctions.

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The above content is compiled by CoffeeHunters, a coffee news website.