Capital Ethiopia Newspaper

Coffee Conundrum

Coffee exports were fifty percent below target during the first nine months of the fiscal year and exports are expected to shrink even further. 
Ethiopia had hoped for 1.17 billion dollars from 288,000 tons of coffee export. Kebede Chane, Minister of Trade (MoT), blamed international market instability for the lack of export of Ethiopia’s major cash crop.  According to the Minister, by the time the fiscal year ends this July, they expect coffee exports to meet seventy percent of target goals.
In the first three quarters of the budget year, which is nine months, the country only exported 98,000 tons of coffee or 48 percent of the total target that they hoped to export in one year. The revenue that came from the coffee exports was 66pct of target goals.
“We expect new contracts to increase exports,” Kebede said.
According to Kebede, 23,000 and 33,000 tonnes of coffee contracts have been signed between international buyers and exporters for April and May respectively.
Bean prices went down as the international market for coffee slowed.  The Ethiopian Commodity Exchange (ECX) says this year has been slower than most.
“The washed coffee exchange is the major type of coffee bean that declined on the ECX market,” experts at the exchange told Capital.
According to the Minister, farmers did not play a role in the decline of coffee prices.
“The people who supply coffee beans to the international market are feeling the squeeze,” he said. “Before this price instability occurred, suppliers bought the product for an average price of 1,400 birr for 17Kg of coffee beans,” he added.
He says most suppliers are hoarding the product, waiting for prices to increase on the global market.
“The suppliers have to sell the product if they can at least break even,” the minister advised.
According to the head, other agricultural products like oilseeds are expected to compensate for the unexpected coffee deficit. 
“The other export especially the export of oilseeds is in good condition which can offset the problems we are having with coffee,” he added. 
Recently the exchange has eliminated the plus or minus  5 percent coffee price range which was set to regulate against price fluctuation.
Experts said that even though the export of other agricultural products increases, it is difficult to earn the foreign currency that is expected from coffee.
Coffee’s slowdown is expected to affect hard currency especially next fiscal year, which starts July 8. Information obtained from coffee exporters indicated that Harar Coffee, which is a high premium coffee, is the only product that is being sold at adequate prices. Washed Coffee products have seen reductions in demand and price.
Experts said that excluding the international coffee market’s instability, the new law issued in the beginning of the budget year also discouraged exporters from buying coffee beans on the international market.
The coffee law, endorsed in July 2011 imposed time limits for coffee exports after they were purchased from the exchange.
“Now exporters are waiting until a deal is in place with another buyer before they purchase the bean from the exchange,” experts said.
Previously exporters would buy the bean even if they did not have a contract in place.  Now if they wait too long they risk seizure of their coffee from government authorities.
Ethiopia earned a record 841.6 million dollars from the export of nearly 200,000 tonnes of coffee in 2010/2011. Lower output from the sector giants Colombia and Brazil and higher demand from India and China contributed highly to the growth.
Africa’s biggest coffee producer intends to boost its agricultural output by 2015, raising coffee to 700,000 tonnes from 300,000 tonnes, under a five-year economic development plan launched last year.