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Local vs Global: What the Ethiopian Market Paradox Means for Green Coffee Buyers

International prices crashed but local cherry prices are slow to follow. Understand why this is happening and how this will affect the production of fully washed Ethiopian coffee.

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Ethiopia Coffee Season Chart 

Harvest: October to February 
Pre-contracting: December and January
Sales period: mid-January to early May
Shipments: Eight on schedule from March to June 
Ethiopia Coffee Season Calendar Dates⎪Algrano

How’s Coffee Production Coming Along in Ethiopia?

Ethiopia Coffee Beans⎪Algrano
The Ethiopian coffee harvest season started in Jimma, Limmu and Kaffa in October. Yirgacheffe, Aricha, Guji, Shakiso and Sidamo picked up in early November. Uraga, Hambela and Halo Beriti followed at the end of the month.

News from Ethiopian coffee exporters is very positive on the weather front. “In May and June, the rain wasn’t satisfactory. But this didn’t affect our course of action. It picked up from August and all the way up to now in the Yirgacheffe districts,” says Takele Mamo of Konga Coffee.

>> Learn More About Yirgacheffe Coffee and History.

“About 90% of the regions saw wonderful weather conditions,” reported Robel Kidani of Lulo Coffee (photo), who just came back from a field trip to Sidama, West Arsi, Guji and Yirgacheffe. He expects this to be mostly a good crop year with the exception of the Gedeb district due to little rain.

Ethiopia Coffee Production 2022-2023⎪Algrano

The official coffee production USDA forecast is very similar to last year’s: 8.25 million 60kg bags, “only” 100,000 more than in 2021-22. But Biniyam Aklilu of Nardos Coffee and Gujoo Trading suggests that this extra production will come mainly from higher altitudes. 

“There could be an increase [in coffee production] in some highland coffee areas. But not that much in lowland areas,” he says.  

As Mebrahtu Aynalem of Boledu Coffee puts it: “The weather is really nice. There is enough rain for the cherries. The quality is really nice. Everything is nice. Except for the cherry price.”

What’s the Coffee Cherry Price in Ethiopia Now?

Ethiopia Coffee Production 2022-2023⎪Algrano
The price of Ethiopian coffee cherries varies from region to region. This October, prices started at around 50 birrs in regions like Jimma and 65 birrs in Yirgacheffe. That is the equivalent of US$5.70/kg and US$7.40/kg farmgate!*

“Usually, the cherry price wouldn’t go above 1 dollar in the initial phase of the harvest,” explains Takele. “This year it was at 1.20 USD. Had it not been for the drop in international prices it would shoot up to 80 birrs,” he speculates.

>> To Know What Has Changed, Check Previous Coffee Harvest Reports from Ethiopia.

This jump is similar to what we saw last year and the year before. And the reasons are many:

  • The commodity price boom in 2020 and 2021
  • Inflation and cost of living crisis
  • Market distortion caused by the Tigray war
  • The explosion of the number of exporters since the establishment of vertical integration, which increased local competition and speculation 
  • The introduction of the Minimum Registration Price

*1 American dollar = 52.6 Ethiopian birrs in October 2022

What Is Vertical Integration?

It’s the name given by the Ethiopian Coffee and Tea Authority (ECTA) to a supply chain scheme approved in 2021.

The new regulation means that exporters can buy coffee directly from agrabes (ie. aggregators or small washing stations), bypassing the Ethiopia Commodity Exchange (ECX).

What Is Inflating Local Coffee Prices in Ethiopia?

Cherry Coffee Prices in Ethiopia⎪Algrano
So why are domestic prices high despite the international market price crash? It’s a coffee price paradox. And though it’s not exclusive to Ethiopia, there are reasons peculiar to the country.

Coffee is the main source of dollars in Ethiopia. The currency is used to import profitable goods into the country. This is why exporters used to sell coffee so cheaply in Ethiopia. They profited from imports, not exports.

The conflict in Tigray slowed the Ethiopian economy and starved the country of dollars. Coffee, a safe path to foreign currency, became even more valuable. 
As the value of the dollar increased, stocking up on coffee also became a good investment. In December 2021, one dollar was worth 48 birrs. In September 2022, it’s worth 52.50. Everyone wanted coffee. 

>> Media Coverage on the Tigray War.

What Is the Minimum Registration Price?

Created by the Ethiopian Coffee and Tea Authority (ECTA) in 2020, it’s a price reference based on contracts submitted by exporters to the National Bank of Ethiopia (NBE).

Exporters submit contracts daily. The ECTA then fixes a minimum price for the next day according to the global weighted average contract price for different regions and grades.

If exporters sell coffee below the minimum price, they might suffer legal action from the Ministry of Trade.

Takele paints a vivid picture of the local market distortion. “In the previous season, there were people buying a farsola of coffee, that is 17 kg of primarily processed coffee or 14.5 kg of green, for 7,000 birrs.”

According to the exporter, that kind of coffee yields a quality of around 83-85 points on the SCA scale. “With an exchange rate of 48 birrs per dollar, that is a very high final price.”

We calculated it. It’s around US$10,00/kg of green coffee. Such high prices create expectations that linger beyond a remote price crash. “In Ethiopia, the New York price is not something people follow closely or use to base their activities on,” Takele says about the different reality lived by farmers on the ground.

Ethiopia Green Coffee Bean Supplier⎪Algrano
All this is to say that domestic coffee prices remain high in Ethiopia because farmers expect international prices to go back up. If they don’t sell, exporters need to offer more money. 

But if exporters pay more, buyers won’t accept their offer price down the line, arguing the market has crashed. The result is a standstill. No one buys, no one sells.

How Are High Prices Affecting Exporters?

Best Ethiopia Coffee Exporters⎪Algrano
“The cherry price increased by 60%-100% last year but so did everything else,” says Robel. The government admitted inflation of around 34% but my experience suggests that everything got at least 100% more expensive.”

Exporters are being extremely cautious and making bets for the coming weeks. “We used to buy coffee every day. Now, we wait for opportunities,” says Takele. “We’re buying when the time is right. It’s like a hit-and-run but in the positive sense.” 

Speaking from Guji, Biniyam worries that many agrebes are still buying cherry at “unrealistic prices” and would expect the domestic price to drop to 40 birrs “but that’s unlikely”. He summarises the paradox: “The problem is that the prices in the local and international markets don’t match”.

Ethiopia Coffee Exporter ⎪Algrano
The pressure of international prices is starting to trickle down though. “Last week it was 62 birrs. Now it’s going from 58 birrs to 60 birrs. We expect it to go down to 50 birrs. We’ll start making offers to our buyers with that as a benchmark,” suggests Mebrahtu.

Biniyam also suggests that exporters are focusing on grade 1 coffee to reduce their risk of not finding buyers. 

But if quality is the way forward, farmers in sought-after regions like Arbegona, Bensa, Gerra and West Arsi (all heavily featured in Ethiopia's 2022 Cup of Excellence) are likely to hold their coffee for longer.

>> Find 86+ Ethiopian Coffees on Algrano.

When Should Roasters Start Buying Coffee?

Fully Washed Ethiopian Coffee⎪Algrano
Coffee roasters and green buyers should start indicating interest in Ethiopia to their exporters and the Algrano team as soon as possible. We are closely in touch with our partners on the ground and can help you secure your coffee.

This is particularly important for Fully Washed coffees. When trade comes to a halt, farmers sundry their cherries on the farm and washing stations have fewer cherries to process. This reduces the production of washed coffees.

All exporters we spoke to expect to see less washed Ethiopian coffee on the market.

>> Pre-order Samples of Fully Washed Ethiopia Here.

If Mebrahtu’s (left on the photo) projections are right, prices should have stabilised by January 2023. Once that happens, buyers tend to rush all at the same time (roasters and traders alike). So please don’t leave your orders to the last minute.

Best Ethiopia Coffee Exporters⎪Algrano
Lastly, this is not a season to look for the cheapest deal. In 2021, for example, roasters could find a washed grade 2 Sidama for under US$5.00/kg. This year, we are seeing the same coffee hit US$8.60/kg or more if certified. 

This might drop but not at the speed of the C price. We’ll check in again in January 2023, when we start getting more concrete offers - and long-awaited fresh crop samples.

Luiza Furquim is the Head of Content at Algrano. Originally from Brazil, she worked as a reporter in Sāo Paulo before moving to the UK, where she became a specialty roaster.

Luiza Furquim, Head of Content at Algrano.

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