Highlights from the USAID internal
document:
·
During the current 2012/13 MY, Ethiopia exported large
volumes of coffee as a result of huge stocks carried over from last year’s
production. The large export volume, however, failed to generate a
proportionate increase in foreign exchange earnings due to a substantial
decline in international coffee prices.
·
The major reason for the increased volume of coffee exports
in this marketing year is the removal of the new Ethiopian government directive
launched in November 2011 requiring coffee traders to ship coffee in bulk
containers rather than using the traditional 60 kg jute bags.
·
Khat (Cata edulis)
is increasingly competing with coffee for farmlands particularly in the eastern
part of the country in the Hararge region.
·
Almost all Ethiopian coffee farmers don’t use fertilizers
except on commercial farms.
·
An interesting new development in Ethiopian major cities
regarding coffee consumption is the emergence of small roadside stalls selling
coffee to passer by customers. The small roadside stalls serve coffee in a
traditional manner.
·
The main reason for establishing ECX was to eliminate the
huge number of middlemen involved in coffee distribution and to enable coffee
farmers to benefit from prevailing market prices. Coffee sold through ECX is
considered as commodity coffee and will not get the possible premiums of being
organic coffee. ECX’s board members are GOE officials, providing them an
opportunity to have a regulatory hand in the coffee marketing process.
--------
Ethiopia's 2013/14 Crop Seen 0.4%
Higher – USDA Attache
Andrea
Thompson
June 10,
2013
Belfast
(CoffeeNetwork) Ethiopia's 2013/14 crop is projected 0.4% up at 6,350,000 bags
as opposed to 6,325,000 bags the previous year, according to the USDA attache. The Ethiopian traditional coffee production and farm
management system is characterized by limited use of fertilizers and pesticides
coupled with manual coffee cultivation and drying processes.
During the current 2012/13 MY,
Ethiopia exported large volumes of coffee as a result of huge stocks carried
over from last year’s production. The large export volume, however, failed to
generate a proportionate increase in foreign exchange earnings due to a
substantial decline in international coffee prices.
Production
Coffee production is important to
the Ethiopian economy with about 15 million people directly or indirectly
deriving their livelihoods from coffee. Coffee is also a major Ethiopian export
commodity generating about 25% of Ethiopia’s total export earnings. Ethiopia is
the largest producer of coffee in Sub-Saharan Africa and is the fifth largest
coffee producer in the world next to Brazil, Vietnam, Colombia, and Indonesia,
contributing about 7 to 10% of total world coffee production. Ethiopia is the birthplace
of Arabica coffee and produces mostly Arabica coffee. Coffee has economical,
environmental as well as social significance to the country.
Despite Ethiopia’s immense potential
for increasing coffee production, average per hectare yield remains very low at
0.72 MT per hectare. Three major factors cause low coffee production:
1. Khat (Cata edulis) is
increasingly competing with coffee for farmlands particularly in the eastern
part of the country in the Hararge region. It is a fresh leaf that is chewed as
a stimulant in many towns in Ethiopia and in neighboring countries. Khat is
developing a growing demand in major Ethiopian towns and countries such as
Somalia, Kenya and Yemen; those countries import Khat from Ethiopia. Khat is a
crop with relatively high resistance to drought, disease, and pests. It can be
harvested three or four times a year and generates better income for farmers
than other cash crops including coffee. Several small scale farmers in the
Hararge region have switched from coffee production to Khat production. The
fact that coffee farms are being changed into Khat farms has offset newly
planted coffee farms in other regions resulting in a very marginal increase in
overall size of area planted to coffee during the current MY.
2. The Ethiopian coffee farm
management system and the agronomic practices are traditional. Moreover,
extension services provided to small holder farmers are inadequate.
3. GOE doesn’t have a specialized
institution that provides extension support for coffee production.
Ethiopian coffee farmers and traders
claim that their coffee is organic, but their coffee is not certified by an
international organic commodities certifying agency. Ethiopian coffee is in
high demand in the international market, and it is specifically valued for its
special aroma and distinct flavor.
Almost all Ethiopian coffee farmers
don’t use fertilizers except on commercial farms. The Ministry of Agriculture
(MOA) doesn’t encourage the practice of applying fertilizer in coffee farmlands.
Use of pesticides on coffee farms is also inadequate. There are only a limited
number of farmers who use pesticides despite the presence of Coffee Berry
Disease (CBD), Coffee Wilt Disease (CWD), and root rot disease in major coffee
growing areas.
Consumption
Ethiopians are heavy coffee
drinkers, ranked as one of the largest coffee consumers in Sub-Saharan Africa.
Nearly half of Ethiopia’s coffee production is locally consumed.
Coffee supplied and traded in the
local market usually has a lower quality. Coffee on the local market is mainly
coffee destined for export through the Ethiopian Commodities Exchange (ECX)
market but was rejected for failing to meet ECX’s quality standards. In spite
of the fact that coffee supplied to the local market has low quality, the price
of coffee in the local market is usually higher than export prices. As a result
of this price disparity, some coffee shops in most large cities have started
mixing coffee with barley grain to get more profit.
An interesting new development in
Ethiopian major cities regarding coffee consumption is the emergence of small
roadside stalls selling coffee to passer by customers. The small roadside
stalls serve coffee in a traditional manner. They have emerged and flourished
in Ethiopia’s major towns, growing very popular among coffee consumers who are
frustrated by the escalating price of coffee and the deteriorating quality of
coffee served in cafes and coffee shops. Unlike regular coffee shops, the small
roadside stalls pay neither VAT nor house rents making their cost of serving
coffee much lower and more competitive than the regular coffee shops. The
exorbitant local coffee prices have also pushed some consumers, particularly
those residing in non-coffee growing areas, to boil and drink the skin of a
coffee grain as a substitute for normal coffee.
Trade
Coffee is still Ethiopia’s number
one export item. It accounts for 45 to 50% of Ethiopia’s total export earnings
but, its share of total export earnings has gradually declined in recent years
as a result of increased exports of other commodities such as gold, flowers,
Khat, textiles, and leather products.
In MY 2012/13, Ethiopia exported an
increased volume of coffee to the international market. However, the revenue
generated from this large volume of coffee exports hasn’t increased
significantly as a result of reduced international market coffee prices. The
major reason for the increased volume of coffee exports in this marketing year
is the removal of the new Ethiopian government directive launched in November
2011 requiring coffee traders to ship coffee in bulk containers rather than
using the traditional 60 kg jute bags.
Coffee traders usually prefer the
traditional 60 kg jute bags because the bags help to maintain the identity of
Ethiopian coffee. In addition, coffee traders also lack both material and
financial capacity to export coffee in bulk containers. The directive had
therefore negatively affected export volumes in MY 2011/12 as many coffee
traders refrained from exporting coffee and held large stocks in their
warehouses. It is those stocks that were carried over from MY 2011/12, which
are being exported in the current MY. The export data presented in the PSD
tables includes estimated informal trade across the border.
Stock
Coffee stocks are primarily held by
coffee cooperative unions and the ECX. Most cooperative unions have their own
stores whereas ECX established about ten coffee warehouses; most of these
warehouses are leased from private owners near production areas. The Government
of Ethiopia (GOE) has recently endorsed a directive that dictates severe
penalties for hoarding coffee in individual coffee exporter warehouses. Private
exporters are only allowed to store coffee not exceeding 500 tons. A trader who
wants to store more than 500 tons should first sign a written contractual
agreement with an importer. This regulation is, however, not applicable to
local cooperatives and the ECX.
Marketing
GOE established the Ethiopia
commodity Exchange (ECX) to handle the marketing of agricultural commodities
like coffee, sesame, and beans. Nearly all coffee is sold on the ECX floor
either directly through organized coffee producer’s cooperatives or middle men.
ECX is a public market facilitating institution that was established in 2008
with the help of USAID. ECX’s board members are GOE officials, providing them
an opportunity to have a regulatory hand in the coffee marketing process. The
main reason for establishing ECX was to eliminate the huge number of middlemen involved
in coffee distribution and to enable coffee farmers to benefit from prevailing
market prices. Coffee sold through ECX is considered as commodity coffee and
will not get the possible premiums of being organic coffee. Ethiopia mainly
exports green beans with only a very small amount of roasted beans. Ethiopian
coffee is currently 70-80% unwashed or sun dried and 20-30% washed coffee.
Unwashed coffee commands a lower price in many markets including the US. The
image of washed coffee being somehow "cleaner" is strong in the US.
Some countries specifically require unwashed coffee for better and richer taste
especially in the Japanese market.
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By Andrea Thompson