Report 2021-22

EXECUTIVE SUMMARY

It has been a difficult year for Ethiopia, fighting irrupted in November 2020 in the North of the country and spread southwards over the course of the last 12 months. Today the country appears more unstable than it was 1 year ago as other rebel groups aligned themselves to the Tigray Rebels fighting the Central Government and vying for greater regional autonomy in various parts of the country. Insecurity has spread throughout the country, in one way or another, reaching everyone. This has affected the work in the field to collect data to prepare our Crop Report. Insecurity and the pandemic have hampered our ability to travel to the growing areas, so much so, that our report this year is more of a guesstimate than based of tree observation and scientific approach and rigour! We are relying much more on anecdotal evidence and different stakeholder opinions to reach the figures that we layout in this report.

2020/21 Crop

We had estimated a good crop at 439 K MT and we have not changed that figure. However we now estimate that Carry In stocks were higher by 15 k MT than our original estimate, due to the high Exports between March and September 2021. Indeed every month in this period was a record month; shipments surpassed our estimates by over 40 K MT. Shipments in October continued strong surpassing 20 K MT and in November are also likely to be high. As expected there was less Djimmah quality available and more Lekempti and Washed Sidamos. Weather played an important role in the good volumes and excellent quality of the 20/21 crop. We have made any substantial changes to our estimated Internal consumption or stock figures. We also believe that as a consequence of political instability over the past 12 months both Internal Consumption and Unrecorded Exports (smuggling) have decreased; we have decreased our Domestic Use figure by 11,000 MT. Given strong Exports for October 21 and forecast for November our Carry Out figure as of end September 2021 is estimated at 72 K MT.

2021/22 Crop

We are estimating an even higher crop in 2021/22! Farmers are motivated by improved prices and plantations that have been started in the last few years are coming into full production. Greater liberalisation of internal marketing systems (Vertical Integration) which allows for Exporters to negotiate directly with Agrabes and farmers, by-passing the ECX, have improved prices and services. The international market has also played its role in pushing prices up at farm gate level. The move away from ECX to Direct buying through Private Treaty is now the preferred way for coffee to move from the interior to exporter. The number of registered exporters has exploded to over 600 registered exporters as increasing numbers of importers and manufacturers look at coffee export dollars as a means of enabling access to imported goods for their main businesses. We have an On year in areas like Benchi Maji and other “Djimmah” growing areas which are some of the most productive in Ethiopia. Lastly weather has favoured coffee production this year and regions where we could expect the trees to produce less this year are, on the contrary, up. Prices at the start of the harvest are between Birr 30 and 40 per KG of cherry, which is a very large spread (over 70 c/lb), are a consequence of competition. Production is Estimated at 470 K MT for 21/22 a 7% increase on 20/21.

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November shipments do not disappoint

Once again this season Monthly Exports raise eyebrows. November shipments totalled 25 K MT a new record for the month of November, higher than the quantity shipped in October at a period when normally shipments are decreasing.

Logistics are improving this month of December, container availability seems to be easier and coffee is moving faster from the mills in Addis onto a vessel in Djibouti. We expect that current shipments are lighter than in previous months, but this year has been full of surprises.

Meanwhile the crop is progressing well. In some regions like the South West and West over 70% of the cherries have been picked. In the South (Sidamo, Guji and Yirgacheffe) approximately 50% has been picked. Cherries prices have been increasing since the crop is lower, reaching Birr 50 per kg Cherry, however, contradictorily not all washing stations are working or if open, operating at full capacity due to lack of cash to buy cherries. It does appear that this season will yield a higher proportion of Naturals due to less cash being available at farm gate level. In addition, we feel that shippers have less Washed coffee commitments with overseas buyers this season and this is decreasing the pressure to secure parchment.

The main story about the war continues to be that TPLF continues to be on the back foot since government forces pushed the front back from the doorsteps of Addis Ababa to the border of Tigray region. Rail and road links to Djibouti are no longer under threat of attack since the tide turned in favour of Government forces. Meanwhile, the humanitarian crisis continues unabated with approximately 10 Million people in need of aid, according to the U.N.

 For an explanation on the current situation please follow the link: https://www.bbc.com/news/world-africa-59552888

Birr 48.55 = USD 1

Have a good weekend.

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Focus on 20/21 review and 21/22 prospects

We have been working on our yearly review of the season (20/21) and outlook for the next (21/22) crop. Below we have highlighted our main points.

20/21 Crop review Comments:

  1. Record Monthly Exports since March 2021! Indeed March 2021 to October 2021 (8 months) stand at 235 K MT which opens the possibility to have shipments for the 12 month period March 21 to Feb 22 totalling 5 M bags. The jury is still out, but with only 4 months to go it is looking very possible.
  • There has been a shift in the Disappearance from Domestic Use (Internal Consumption + Unofficial exports) to Exports
  • Political Instability in Ethiopia (and neighbouring countries) did not hamper exports as much as would be expected. Logistics have been difficult due to: a) lack of containers (reduced in number by lower imports and a global imbalance) and b) vessel scheduling nightmare
  • High international coffee prices have acted as a magnet for Ethiopian coffee drawing coffee away from the Domestic Market to Markets overseas

21/22 Crop Expectations:

  1. The crop is expected higher than the 20/21 crop by 7%
  2. Weather during harvesting has favoured quality.
  3. Exports are likely to remain at elevated levels; 5 M bags between March 22 and Feb 23?
  4. There will be a higher proportion of Naturals vs Washed because the crop in West and South West is where the increase in production in bigger and these regions produce more Naturals than Washed; it appears that there is less cash available at farm gate level to purchase red cherry for washed processing, after all the price for cherry has doubled between 2020 and 2021!

Following on from last week’s reports of military victories by Government forces, this week there have not been scant reports on the fighting between TPLF and Government forces.

Birr 48.32 = USD 1

Have a good weekend

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Government Forces fight back

In the last few days the TPLF seems to have been pushed back having lost some of it’s more strategic towns like Shewa Robit, just outside of Addis Ababa and Lalibela, a World Heritage site. These latest victories announced by the Government follow recent gains in securing the road from Addis Ababa to Djibouti. Additionally, China has also weighed in on the Government side, verbalising their support while criticising Western Governments perceived interference in Ethiopia’s internal affairs, denouncing human rights violations. China has also been supplying Government forces with drones. It would appear that the TPLF’s objective of forcing the government to the negotiating table is now further way than it was a couple of weeks ago. Meanwhile the UN has warned that nearly 10 M people are in need of assistance in several regions of the country and that the war is not allowing for food aid to reach those in need.

Meanwhile the harvest continues, price expectations for Washed coffees are high: just below 300 c/lb for Washed Limu and above 300 for Washed Sidamo FOB Djibouti equivalent. We are expecting that the ECX will be more relevant in the coming months as a price discovery mechanism since exporters have been less carefree with their cash in the coffee growing areas and consequently there are fewer Vertical Integration deals. Furthermore, the proportion of Natural vs Washed is greater and since a higher proportion of Naturals find their way to ECX this should push more volumes to the Exchange. In Limu the price paid for cherry has actually decreased as there is less cash to buy cherries than there was a few weeks ago. In Guji and Yirgacheffe, cherry prices remain high around the 40 Birr/kg cherry

Birr 48.05 = USD 1

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