Logistics under pressure

We mentioned last week that container availability in Addis was a concern, disrupting planned shipments. This week, most of us have seen pictures of a huge 400 metre long container vessel stuck across the Suez Canal this week, blocking vessels from entering (in case you haven’t below is what it looks like). Shipping lines have been quick to inform customers of the situation and warning of delays. So here we go, expect delays, on top of the usual delays and most likely increased costs…

ECX Sales January to December were down from 240 k MT in 2019 to 171 k MT in 2020 a drop of nearly 30%; the graph below shows this broken down in Naturals and Washed coffees (for the 3 year 2018, 2019 and last year 2020):

Export figures support a drop in availability of coffee between 2019 and 2020; July to Feb (8 months) exports 19/20 = 167 k MT and 20/21 = 119 k MT a drop of nearly 30%. Of course we would need to consider variations in stocks and volumes traded outside ECX (Vertical Integration, Farm Exports and Coop Exports) however it is uncanny that the decrease in numbers of ECX sales and Exports are by the same proportion. If we take this extrapolation a little further we can state that the crop decreased by around 25-30% from 18/19 to 19/20 !?!

Forex Birr 41.06 = USD 1

Have a good weekend.

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Covid is rearing its ugly head again

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We have not mentioned the pandemic and what is happening in this regard in Ethiopia for a number of weeks now. With elections scheduled to take place in a few weeks time it seems appropriate to take a closer look at what has been happening in the country with regards to Covid. The number of cases is once again increasing having initially had a peak last summer. From the following chart it is clear that cases have been growing since the start of 2021. Sadly, anecdotal evidence (i.e. conversations with our partners in country) also suggest that the death rate is increasing. For now, it does not appear that the increase in cases is having an impact on coffee flows; in fact the lack of availability of some shipping line containers in Addis is of more concern and the main reason why shipments are delayed.

Source: World Health Organisation (WHO)

Having described the violence in Tigray region as ethnic cleansing last week, the USA is now planning to send a US Senator to the country to convey the concerns of the US Government to the Ethiopian PM.

On the coffee front, trading has been subdued this week, with the market in NY rather choppy not helping local exporters get any sense of direction as to where prices are heading. The Coffee and Tea Authority appears bullish having increased registration prices on Tuesday by a couple of cents/lb.

Birr 40.20 = USD

Have a good weekend.

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February shipments still very low

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The Government remains concerned about the slow pace of exports; the export figures for February, continue to perpetuate the slow-paced trend of the last 8 months and confirm the lower production in 2019/20. The higher crop figure 2020/21 still not being translated into higher exports. For now we remain at 75% of the previous year’s exports (for the 10 Months May to Feb), however 20/21 pace is starting to accelerate, in Feb 2021 exports were 80% of the 2020 Feb exports. We expect that this will continue, and by May 21 monthly exports should be above the 2020 monthly figures. For this to materialise we need the authorities to reduce Minimum Export Prices for registration purposes for Washed coffees, particularly for Sidamo 2. However, we are not going to reach 4 M bags exports during the May 20/April 21 period and will record around a 20-25% drop in exports vs the previous 12 month period 19/20. In fact we are looking at the lowest export figures in the last 5 years!

(Exports in MT)

Registered Sales’ volumes for the last week in February and 1st week in March were very high, particularly Naturals (grades 4 and 5); since then shippers have been focusing on buying grade 4 and 5 coffee to fulfil these commitments. Volumes at ECX are increasing as a consequence of prices having been allowed to increase. Quality wise, our expectations for improvements versus the previous crop are materialising. We look forward to better quality, less defects in the green and cup, as the season moves on.

On the political front things are a little complicated for the country’s leadership. Following a visit to the Tigray region, the US Ambassador to the country called for an independent investigation to verify the genocide allegations being levied on the Government and its allied forces. This is a developing story and could have more far fetching implications for the Government and the country.

Birr 40.20 = USD 1

Have a good weekend.

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Quieter week

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All in all a quieter week on the coffee trading front. Shippers are focusing on executing their increasing commitments. Higher Minimum Registration Prices and a decreasing terminal market in NY taking the wind out of “selling” sails! New crop quality is generally good. In the South we are expecting a higher proportion of Naturals to be produced vs last crop due to larger crop that exceeded washing capacity. So expect more Sidamo 4 and even high grade Naturals, than last year.

We have discussed the struggle that shippers are having in acquiring Grade 4 and 5 coffees at ECX at the moment, because:

  1. Following a smaller crop in 19/20, carry-over stocks are low;
  2. New Crop is just now starting to flow from farmgate to warehouse
  3. ECX Maximum price policy has discouraged Agrabes to commercialise their produce through ECX
  4. New regulations that allow for Vertical Integration of lower quality coffees
  5. Increase in the number of companies interested in shipping coffee

As Vertical Integration takes hold less coffee will come to ECX and shippers will increasingly struggle to acquire coffee in the volumes they were accustomed to in the past. There are some big changes taking place in the ranking and positioning of stakeholders in the coffee value chain, adapting to this changing environment is key t o succeed!

On the political front, Ethiopia came in for a lot of criticism over reported atrocities carried out in Tigray by Eritrean soldiers that are moving around the region since the conflict there in late 2020. It will be critical for Ethiopia to have a “good” election in the middle of the year to reinstall  confidence in the eyes of international partners.

In other news, Egypt and Sudan are discussing a defence alliance clearly designed to square off any Ethiopian moves that could be construed as hostile to the 2 countries.

Birr 40.15 = USD 1

Have a good weekend.

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