Minimum Registration prices decline, at last!

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The situation in the Tigray region of Northern Ethiopia is worrying world leaders that expressed concern about the conditions of the civilian population and many refugees mostly from Eritrea. There have been several reports of Eritrean Army excursions into Tigray in recent weeks that have targeted the vulnerable residents of the region. The Ethiopian authorities deny that there is any Eritrean involvement, however we know that early on in the armed struggle between the Ethiopian Army and the Tigray Peoples Liberation Front (TPLF) fleeing National Army soldiers took refuge in Eritrea and that Eritrea has weighed in on the side of the National Government shelling Tigray from position in Eritrea. With several Tigray leaders now arrested or killed during the conflict, the region is at the mercy of National Government and its friends. Humanitarian aid is desperately needed as hunger has set in among the local population.

Map

Meanwhile the Minimum Registration Price for Washed coffees has finally come off this week, declining 20 cents per lb for Yirgacheffe2 and Sidamo 2; prices are still too high to attract a rush to buy and register sales but at least it is a step in the right direction. Exports normally increase in the first few months of the year and this sort of measure will certainly help to boost business.

Birr 39.40 = USD 1

Have a good weekend.

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Exports continue to disappoint

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We cannot say that it comes as a surprise but the December 2020 export volumes once again are below expectations; May to Dec 2020 exports are 25% below same period in 2019, unless the pace of Exports picks up significantly in the first 4 months of 2021, we shall see exports for the 12 month period May 20 to April 21 below 4 Million bags. Current sales pace Oct to Dec 20 versus our own Coffee Ithaka estimate are running behind by 6%. We have been commenting over the past few weeks and months on the slow pace of sales and this has been confirmed by actual exports since October. We are not sure what the effect the May elections will have on coffee flow from the interior to ECX and on to vessels but hopefully it will accelerate the pace of exports during the first quarter of 2021. We should also consider that the 2020 crop is higher than the previous crop and therefore more coffee is available for export from January onwards. In addition the crop came in early so coffee will flow earlier through the pipeline to Addis. Moreover, we believe that there still are many rolled over contracts that need to be shipped. Meanwhile, shippers are eager to sell, lower grade Naturals are easier to move because of more reasonable Minimum Registration Prices whereas Grade 2 Minimum Registration Prices remain still too high to attract any serious activity.

May to Dec         142,949         190,712         156,332
  20/21 19/20 18/19
May           25,967           28,449           26,142
June           25,790           29,294           27,082
July           19,015           26,512           17,928
August           19,995           30,279           23,694
September           14,443           23,696           17,557
October           13,018           19,966           17,674
November           11,964           18,328           13,263
December           12,757           14,188           12,992
January            16,570           11,166
February            17,456           16,199
March            26,949           20,739
April            25,135           21,809
TOTAL          276,821         226,245
(Ethiopia Exports in MT)

Forex: Birr 39.38 to the USD (the Birr actually appreciated to the USD, even if only marginally).

Have a nice weekend.

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Standstill in the internal and external markets

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For the first time ever there is no Lekempti coffee and only 150MT of Djimmah coffee in ECX warehouses waiting to be sold, in total only 500 MT of Naturals are waiting to be sold at ECX warehouses. The reason is clear, agrabes will not bring coffee to the market while price ceilings are in place, this impasse has to be resolved soon or the pace of shipments will continue at the very low levels of recent months or fall even further. Furthermore, the National Bank of Ethiopia has stopped allowing registration of 2019/2020 crop coffee which had lower Minimum Registration prices than 2020/21 crop coffee so unless the NY market rallies strongly we see registrations for Washed coffees also stopping since there is little appetite for Sidamo 2 or Yirgacheffe 2 at around +100 FOB.

The Government forces continued their offensive against the leadership of Tigray region forces adding more victories to the initial taking control of the northern region territory. Tensions with neighbouring Sudan continue but little fallout to report.

Birr 39.33 = USD 1

Have a great weekend

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Christmas week if you follow the Ethiopian Calendar

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A short business week in Ethiopia with Christmas on Thursday. Business activity was further diminished by the small volumes traded at ECX. The main problem seems to be with lower quality (grade 5) price levels established by the Coffee and Tea Authority (C&TA). These are +/- 10 cents/lb below where they were trading before Maximum prices were introduced at ECX. Middlemen do not accept these reduced price levels and are shying away from delivering their stocks to ECX warehouses. Since prices are set weekly, we could see the C&TA review these this weekend to encourage more volume. As with Minimum Export Prices, these Maximum ECX prices do not appear to be well thought out, the price differences between grades do not make much sense and further blur the situation. Exporters are keen to sell has the crop is plentiful and larger in volume and improved in quality vs 2019/20 however the C&TA Maximum and Minimum price setting policy is hindering the normal flow from the interior to shippers’ warehouses.

Politically the country is stabilising following the turmoil in the North of the country in late 2020, however there is a sense of simmering unrest, due to both internal and external pressures.

USD 1 = Birr 39.28

Have a good weekend.

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Internal market liquidity woes

Happy New Year, may 2021 be a little more predictable than 2020!

In attempting to address Exporters’ sourcing problems the Coffee and Tea Authority (C&TA) has allowed shippers to sell coffee between themselves increasing liquidity in the internal market, we see this as a positive move allowing those exporters that have coffee but no export market to offload excess stock and free cash while permitting short shippers to tap into an alternative supply to fulfil commitments. Meanwhile at ECX, volumes on offer are smaller when compared to this time in previous years. Traders are still upset with the C&TA meddling with prices, in particular capping the maximum price coffees can fetch at ECX. ECX Warehouse stock levels remain low when we would expect these to be building up. The problem with delayed shipments continues with no end in sight… A further consequence of diminished activity internally is a reduction in offers from shippers, particularly in lower grades (Grades 4 and 5).

National Bank of Ethiopia Minimum Registration prices for Exports (also set by the C&TA) remain too high for Washed Qualities buyers, bid levels are around 30 cents below offered levels.

USD 1 = Birr 39.20

Have a good working week, and Merry Christmas to our Ethiopian friends.

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