SCAA's Webinar on Ethiopia Commodity Exchange

The Specialty Coffee Association of America (SCAA) Executive Director, Ric Rhinehart and Vice President (and co-owner of Counter Culture Coffee), Peter Giuliano held on January 26, 2010 an hour long webinar on the recent developments at the Ethiopia Commodity Exchange (ECX). The purpose of the webinar was to provide information to SCAA members and non-members about the state of ECX and SCAA's advocacy efforts to help increase the quality and traceability of Ethiopia's Specialty grade coffee.

This webinar marks the culmination of the eight-month long joint effort by the SCAA and ECX. Last year, at SCAA's 22nd annual exposition held in Atlanta, GA (April 15-19, 2009), ECX's CEO, Eleni Gebre-Madhin pledged to address the concerns of the Specialty coffee roasters and importers and to work with the SCAA to that effect. Accordingly, soon after the exposition, a joint workforce composed of SCAA representatives ECX management and experts has been formed and tasked with helping ECX to create a "Second Window" that is specifically designed for Specialty coffee trade. In addition, Mr. Rhinehart and Mr. Giuliano, have also been actively lobbying on behalf of SCAA and spent several months by closely working with ECX executives.

Understandably, many small to medium-sized roasters and importers have been anxiously awaiting for the outcome of this unprecedented lobbying effort. The general anticipation among SCAA members and, arguably, the most desired outcome when it comes to smallholder coffee farmers, was that ECX would create an alternative to the commodity exchange, where traceability and buyer-grower relationships are all but abolished by the new coffee law that paved the way for ECX's coffee trade.

During the webinar, Mr. Rhinehart and Mr. Giuliano talked about ECX and Ethiopia's coffee at the back drop of historic perspectives and further explained the recent changes made by ECX, including the building of 14 new grading stations, calibrating Ethiopian cuppers and Q graders, ECX management's "absolute commitment to listening to SCAA concerns, and others. Finally, they discussed the newly created ECX platform, which they referred to as "especially important provision for specialty coffee", i.e. the addition of a Direct Specialty Trade (DST):

"DST is a new program with traceability and 100% price transparency" said Mr. Giuliano adding, "It offers great incentive for farmers to produce high quality coffee" because it guarantees higher income for producers since all transactions are recorded, producers see the receipts, and the ECX requires that they receive 85% of the sale price. "The ECX takes responsibility for preserving identity of coffee by origin, farm, and grade and guarantees the final product."

Despite the best efforts by SCAA's leaders to sell ECX, some of the attendees of the webinar were observed expressing frustrations and confused. Some of them said, in twits and blog entries, that they didn't understand what exactly has changed while others expressed their excitements with the "85% guaranteed return to growers" caption.

Some in the audience attributed this confusion to the information overload and what appears to be a "politically correct" presentation. But, a closer look at the DST Concept paper and other related documents, which are all posted on ECX's website, also reveals that the praised DST may not be, after all, what some of the webinar participants had hoped for.

In the next article, I will try to make sense of the intricacies of the said DST and also do some fact-checking on some of the key information provided by ECX and SCAA. Particularly, I will explore the following questions:

1. How does DST work? Can importers/roaster use DST to directly trade with smallholder coffee farmers?
2. Can ECX really guarantee a return of 85% of the FOB price to coffee farmers? If so, how?
3. Who benefits from DST?  Will there be losers and winners or is it an all out win-win-win situation? Or is it all the same?

Stay tuned.