The pandemic seemingly remains under control in Ethiopia, the focus on tackling the virus is concentrated in a few hotspots in Addis. The Ethiopian economy is also slowing down, construction appears to be adversely affected as well as other drivers for the previous price disparity between ECX prices and FOB prices. Coffee shippers heavily invested in the import of construction materials, etc. were prepared to give up to 1/3 of the USD value of lower quality coffees to access the foreign currency needs to import goods. In addition the minimum price regulations, which set a weekly minimum price, only really allow for coffee to be sold when NY rallies strongly during a short period of time. If we add to these 2 factors the uncertainty of future demand in consuming countries as a consequence of Covid 19, we have the reasons for lower volumes traded at ECX of Natural coffees and lower than expect sales to overseas buyers at FOB level. At 8thMay ECX traded volumes of Naturals were 15% lower than at the same date in 2019. Sidamo Naturals have the sharpest decrease however Djimmah volumes are also down, overall sales of Naturals at ECX are down by 9,000 MT at that date.

Below we chart the weekly minimum registration price for Djimmah 5 and Lekempti 5, these prices were decreased below 100 c/lb for the first time since minimum prices were introduced in March, however, these remain well above tradable levels on the export market. We believe something will have to give in the coming weeks and months to spirt flows at ECX and the FOB market. The Birr continues it’s steady devaluation vs the USD however the pace of devaluation will limit this factor as a driver for sales, we need the terminal market price sharply up or the internal prices (ECX and Minimum Registration Prices) to decrease.

Birr 34.10 = USD 1

by Charles Seara Cardoso

Turbulent times for the government, internally many political groups are unhappy with a potential delay to the elections due to Covid 19;  on the external front Sudan and Egypt have both voiced their discontent with the recent statement put out by the administration that the Nile damn will start to be filled in a few weeks’ time. The pandemic continues to progress in Ethiopia however at a seemingly very much reduced pace when compared to other countries. The authorities are focusing their attention on a few clusters in a few areas of the country. Shipments continue to flow out of Addis without any major disruptions, there are a few minor problems at the port, however by and large, operations are normal. Business continues slow, buyers still not fully engaged in forward shipments, interest continues to be focus on nearby deliveries.

Minimum registration prices dropped this week having been put up last week, the pattern is very much a zigzag, however we believe that the volume of registrations this week remained low so it will be interesting to see whether the minimum prices are put up for next week.

Below we take a broad view of ECX sales over the last 3 years, New Crop coffee up to 8th May. The sales of the 19/20 crop are noticeably below the last 2 years, the reasons are mostly due to the reductions in both Natural and Washed from the Southern coffee producing areas Sidamo, Guji and yrgacheffe not coming up for sale at the exchange. We know that the crop is down in the South however not down by the approx. 50% less volume coming to ECX. Vertical Integration is obviously attracting decent volumes away from the Exchange, however we believe that we shall still see some volumes from the South coming to the ECX, if for no other reason that the crop was delayed this season.

Birr is at 33.80 to the USD, the devaluation vs the greenback has been a fairly constant 0.3% per week since the start of 2020.

by Charles Seara Cardoso

A quick update on the pandemic in Ethiopia, where confirmed cases has risen to 191, the focus seems to be on the borders with Somalia and Djibouti where the virus appears to be more widespread. It is difficult to say if the relatively small numbers of confirmed cases is because the virus is being kept in check or if many cases are simply not being registered. At face value the situation in Djibouti appears to be worse, with 1,133 reported cases out of a population of just under 1 M people. There is little disruption to shipments of Ethiopian coffee due to the pandemic, nevertheless we are experiencing delays in shipment due to the usual Ethiopian issues, power cuts, poor quality, lack of liquidity, etc…

Tensions between Egypt and Ethiopia because of the damming of the Nile are once again in the limelight as Ethiopia announced that it will start to fill the damn in August.

Prices at ECX increased during the month of April as shippers continue to cover previously established shorts, prices for lower grade Washed coffees from Teppi and Bebeka  have increased approx. 20 c/lb and are being mixed in with Southern coffees to be shipped as Sidamo 2. Natural coffee prices at ECX have also increased in the last 2 weeks by approx. 10 cents as shippers come under increasing pressure to fulfil commitments,  this could be the reason behind the Coffee & Tea Authority increasing Minimum Registration Prices of last week, which has stifled business this week. Below we track the Minimum Registration Prices over the last few weeks.

The zig-zag pattern in the minimum registration prices is probably a result of the dynamic between the volumes registered (or lack of them) and the desire to achieve high prices! There appears to be very little consideration for movements (or lack of them) in the C market. Let’s see what the C&T Authority come up with for next week.

The Birr is currently traded at 33.63 to the USD.

by Charles Seara Cardoso