We are all aware that shipping has been difficult in the last few months as a direct consequence of the pandemic and due to the more Ethiopian reason of decreased economic activity due to war reducing containerised imports. In the past we have always been able to play one shipping line against another depending on container availability or vessel schedule however, currently all lines are short of equipment (empty containers) and slots on vessels causing inevitable shipment delays. There simply seem to not be enough imports, container availability for exports is very reduced, it will be interesting to see if this tightness will affect the April export figures which we should get in a couple of weeks.

The IMF published this week it’s updated Growth Forecasts for 2022 and 2023 and they paint a grim picture. Actual Economic Growth in 2021 stood at 6.3%, forecast for 2022 is 3.8%, there is an improvement in the 2023 outlook with growth expected to increase to 5.7%. For context the average annual economic growth in Ethiopia between 2000 and 2022 was 8.8%, therefore the current growth forecast for 2022 is 5% lower than the average of the last 22 years. The graph below clearly shows the impact of the pandemic and internal conflict on Economic prosperity on the country.

Source: IMF

For a view on the impact of the crisis of the last 2 years on the lives of Ethiopians we attach this short BBC report: https://www.bbc.com/news/av/world-africa-61196572

In a continuation of last week’s slightly bizarre story about Ethiopians queuing outside the Russian Embassy the BCC has more: https://www.bbc.com/news/av/world-africa-61192801

Birr 51.40 = USD 1

Have a good weekend.

We all know that Ethiopia has a long and strong tradition of coffee drinking seeped in ceremony; currently the local market is flooded, as overseas buyers remain reluctant to pay up. Again we saw offer prices drop this week and with Thursday’s surge in NY some of the most aggressive ones got hit. However, trading has been far from continuous, many exporters want to sell but do not find buyers willing to meet their price expectations. Even with much improved bid differentials buyers and sellers need NY above 230 to be able to trade in larger quantities.

March inflation rate is reported at 34.7%; this is on the higher end of the recent 30 to 35% range observed in the past 6 months. Food inflation for March was 43.4%, bearing in mind the weight of food costs in the average Ethiopian living expenses it is apparent that living standards are dropping in Ethiopia. With the ongoing conflict in Ukraine food prices are expect to go even higher adding more pressure to an already struggling population.

The drought in South Eastern Ethiopia, including parts of Oromia, is devastating livestock and the incomes of pastoralist communities; according to World Food Program (WFP) 7.2 million people are at risk of becoming malnourished.

The BBC reported earlier this week that dozens of young men were gathered outside the Russian Embassy after rumours started circulating that Russia was recruiting Ethiopians to fight in Ukraine in exchange for large sums of cash! This story is bizarre but clearly indicates that unemployment in Ethiopia is high and the youth is desperate to find any means to earn a living, so much so that they are willing to travel to another continent to pick up arms and risk death in exchange for money…

Birr 51.27 = USD 1

Have a good weekend and Happy Easter to our friends in Ethiopia

Following on from 20 K MT + shipments in February, March exporters reached 27.7 K MT slightly more than March 2021 so on track for another big export year in 22/23. Moreover, mills in Addis are full of coffee and processing at full capacity so we are expecting these strong export figures to continue in April.

Trading remains fairly slow, offers although slightly improved in the raising market of earlier this week were starting to look more attractive however the terminal’s market performance of yesterday and today is once again freezing players out.

Certification bodies and agencies are struggling to renew certificates causing much uncertainty and logistical delays for exporters and importers alike, some pragmatism will be needed to enable normal flow of these coffees from origin to consuming markets.

Birr 51.19 = USD 1

Have a good (long) weekend

There are increasing offers from Ethiopian shippers, the last flurry of trading in February (before the invasion of Ukraine and subsequent drop in terminals prices) was a while ago and shippers are returning to the market. However, offer levels remain at levels too high to generate much business, one feels that eventually lower prices (below 2.00 $/lb for grade 5 and 3.00 $/lb for grade 2) will start to be offered. Only 2 weeks ago grade 5 was offered at 2.15-2.20 and now offers are at 2.00-2.05. Meanwhile trading is limited, coffee that is processed and shipped is leaving room for more trading to occur so in the absence of a rally in NY origin prices will have to adjust.

Volumes traded through the ECX are small since the trend to sell coffee through private treaty (between Agrabes and Shippers) continues to gain traction. Shippers are still very long Washed parchment having been caught out by the drop in terminal market prices and the change in financial rules that reduced the proportion of USD that exporters can retain to purchase imports, squeezing their margins. Naturals are mostly in the hands of Agrabes and Farmers who will release their stocks to the market over the coming 8 months or so. The previous crop (20/21) shipped mostly between March 21 and Feb 22 was well exported depleting internal stocks so there is room for build up in these, slowing down the pace of internal trading and subsequent exports.

During the first quarter of the year the Birr has barely lost any value vs the greenback, 3% during the quarter; however the black market rate has been devaluing at a much more accelerated pace, having gone from 60 to 68, losing 13%. This discrepancy does not bode well for the value of the Birr going forward and with inflation at around 33% since the start of the year, any steeper Central bank devaluation will really be felt by the average person in the street.

The BBC seems hopeful that the fighting in the North of the country may be showing signs of receding https://www.bbc.com/news/world-africa-60943889 while at the same time Amnesty International and Human Rights Watch accuse Militia aligned with the Military and the Military itself of atrocities.https://www.bbc.com/news/world/africa?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=624ebd63aea8d714b7409c19%26Tigray%20war%20crimes%20probe%20%27unhelpful%27%20-%20Ethiopia%262022-04-07T11%3A03%3A59.063Z&ns_fee=0&pinned_post_locator=urn:asset:53f08a82-a4ce-4689-870e-2bdfb43b94e4&pinned_post_asset_id=624ebd63aea8d714b7409c19&pinned_post_type=share

Birr 51.11 = USD 1

Have a good weekend

In a rather bizarre twist, the Coffee & Tea Authority decided this week to increase considerably the Minimum Registration Prices. Why would you do that in a declining terminal market? Minimum registration prices have been irrelevant in the past few months as bids, offers and traded levels far exceeded these. However with the recent decline in terminal levels, the usual brisk trading activity for this time of the year has greatly reduced, asking prices have been above levels that buyers are prepared to pay. Naturally sales registration in March were low, so why increase the minimum price that you can register a sale? Furthermore, shippers´ warehouses are full of parchment that remains mostly unsold and increasing the price that coffee can trade is hardly going to improve trading…

Below the minimum registration prices and NY close for day before publishing the weekly minimum registration price:

A severe consequence of draught and war is famine and this seriously affecting the population in the North of country, the BBC report: https://www.bbc.com/news/world-africa-60861900

Birr 50.99 USD = 1

Have a good weekend