Large shippers have slowed down activity considerably

Larger shippers are really struggling to acquire, mill and ship coffee. Most have slowed down their operations to a trickle compared to the peak shipment months leading up to June. This is coinciding with a considerable decrease in import activity and consequent reduction in the availability of containers in Addis Ababa. It is fortunate that March to July were very higher export months allowing a higher than usual share of the crop to be shipped. The ongoing fighting in Ethiopia is starting to slow down economic activity, negatively impacting imports and inflation is once again gaining pace.

As mentioned, the fighting between Tigray forces and the National Army supported by local militias continues unabated, the latest as reported by the BBC:

https://www.bbc.com/news/live/world-africa-47639452?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=61277d6eb19a573a6ec3821f%26Tigray%20fighters%20accused%20of%20killing%2035%20in%20Amhara%262021-08-26T12%3A08%3A43.715Z&ns_fee=0&pinned_post_locator=urn:asset:0dfd5510-0845-4cc7-9c31-d7860b2ab9a0&pinned_post_asset_id=61277d6eb19a573a6ec3821f&pinned_post_type=share

Middlemen sitting on coffee are starting to get a little restless, as shippers are not willing to pay the equivalent of 200 c/lb FOB for Naturals; nevertheless there is no indication that agrabes are settling for anything close to commercially viable prices. If in a few weeks’ time NY terminal market remains below recent highs, when roads are less waterlogged and the next crop starts to ripen, there will be a shift in priorities and we expect that middlemen will release their last stocks at more reasonable prices.

Birr 45.27 = USD 1

Have a good weekend.

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Arrivals in Addis from upcountry slowing down fast

Hi

With little coffee arriving from upcountry and the ongoing good shipment pace, stocks in Addis are starting to look depleted. Much less coffee is arriving in Addis due to seasonality, rains making roads unpassable and high price expectations of agrabes impeding trade. Middlemen having sold most of their stocks are now holding out for high prices in the knowledge that shippers are short and volumes available in Addis are very much reduced. In light of this we expect in August to record lower shipments than in July and June, but it is in September that we expect a more significant drop in pace of exports. Offers from exporters are hard to come by and the few that offer are asking for high prices that are not viable in a declining terminal market. Weatherwise, the current colder and wetter weather is normal for this time of the year.

As normal the Birr continues to devalue at a steady pace to the USD, however basic necessities’ price inflation is very high and some are questioning the relevance of the current forex policy.

Birr 45.05 = USD 1

Have a good weekend.

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July exports, lower than June but still a record July

July 2021 exports just shy of 30,000 MT. March to July 2021 exports total 158 k MT vs 123 k MT same 5 month period in 2020. This means that Ethiopia has exported over half a million bags more of the 2020/21 crop than at this point 12 months ago of the 19/20 crop. At this rate exports will top 5 M bags by Feb 2022! We expect the pace to tapper over the coming months, the peak is over and coffee arriving in Addis is currently down to a trickle. The wet weather has made roads impassable and terminal market volatility disrupted the steady flow of coffee from agrabe to shipper. Not to mention the ongoing and worsening logistical situation. If things are bad in the Far East and in Brazil, imagine how Africa is coping with challenging logistics! Not very well, believe me.

Anyway we should not complain, pace of exports so far this 20/21 crop have been good, we foresee many challenges going forward due to difficult logistics, market volatility and an increasingly uncertain security situation. However, the past few months have been positive for the Ethiopian coffee supply chain, if the flow slows down a little now it is to be expected. Trading has slowed down considerably, not many shippers have coffee to sell and sourcing in the interior is is difficult as agrabes continue to ask for sky high prices.

Birr 44.78 = USD 1

Have a good weekend.

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Tough logistics

All

A lot has happened on the terminal market in the last 3 weeks, all said and done, we are now roughly 20 cents higher than we were before the frosts and subsequent panic that saw the market travel from 155 to 213 and back to around 175 today.

In Ethiopia this has stopped trading altogether there is nothing arriving in Addis from the growing areas. Middlemen that already sensed they had the upper hand on shippers before the July shenanigans have stuck to demanding around 200 c/lb FOB equivalent for Grade 4 and 5 coffees. Shippers cannot absorb these loses so have stopped buying and consequently coffee arriving in Addis is down to a trickle. After 4 months (March to June) of record exports we now bracing ourselves for record defaults and delays!

Logistics are a disaster, there are no containers in Addis, it takes us a minimum of 2 weeks to get an empty box to stuff. Afterwards coffee lies waiting for weeks to get a slot on a vessel, there are continuous vessel cancellations and slots are starting to resemble gold! To add to our many logistical woes trains on their way to Djibouti have had to return to Addis mid-journey due to violence in the Afar region that lies Northwest of Addis and has to be crossed to get to Djibouti.

In light of these challenges expect delays and traders tearing their hair to fulfil delivery deadlines and to cover commitments.

Birr 44.57 = USD 1

Have a good weekend.

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