Coffee prices at the Nairobi exchange shot up for the second week in a row helped by a drop in supply from Brazil, the worlds biggest producer.
A dry spell in Brazils coffee growing belt has raised fears of a global shortage of the commodity, in part helping to reverse a slump in prices which a few months ago had dropped to five-year low.
At the Nairobi Coffee Exchange (NCE), the price of a 50-kilogramme bag jumped to Sh17,680 ($208) during Tuesdays auction, compared to Sh14,790 ($174) last week.
Production in Brazil is coming down following the bad weather, creating high demand for the commodity in the world markets, said NCE chief executive Daniel Mbithi.
He noted that recent supply of good quality coffee had also helped to drive up prices, urging farmers to take advantage of the high demand to release their stocks to the market.
This is one of the best offers in the recent days, and growers should seize the opportunity in order to earn more from their crop, said Mr Mbithi.
The high price comes at a time when stakeholders in the industry are raising concerns over the declining volume of coffee output.
Speaking at Strathmore Business School in Nairobi this week during the forum on revitalising the coffee industry, Coffee Board of Kenya acting managing director Isabella Nkonge said that the trend was worrying as production has dropped from 170,000 tonnes in the 1980s to an average of 50,000 tonnes currently.
The country is losing $270,000 million (Sh30 billion) annually as a result of the drop in production, which is a lot of money in foreign exchange, said Ms Nkonge.
More than 90 per cent of locally produced coffee is exported, raking in Sh12.4 billion in the past financial year.
A stalemate between the County governments and coffee marketers last month caused postponement of one of the weekly auctions, as governors seek to gain control of production and sale of the crop in their jurisdictions.
The total acreage under coffee has so far more than halved from 110,000 to 50,000 acres, with the production per bush of the cash crop having declined to two kilogrammes from 10 kilogrammes at independence 50 years ago, according to coffee board.
The price of the Arabica coffee, the worlds high quality variety, has been dropping in recent years because of bumper harvests in South American countries of Brazil and Colombia.
It is anticipated that the global outlook for 2013-2014 season will be 150,465kg, with consumption estimated at 144,423kg as per a report by the America Department of Agriculture.