The Government in Ethiopia is struggling to keep a lid on price increases, this week the price of fuel at the pump increased by 20%, which prompted the Black rate for the Birr to also accelerate deviating from the official rate, one USD is now worth 96 Birr on the black market whereas the official rate is still 53! In the month, from Aug to Sep, the Birr devalued 13% on the Black market. During the previous 7 months (Jan to Aug) the Black market rate moved 42%.

The harvest in progressing well and more areas have now started picking and processing cherries we expect that in October the crop will be in full swing. Cherry prices are higher than last year but a lot can change between now (harvest) and March 23 (first shipments) in terms of forex rates and international coffee prices.

China has leapfrogged many countries to become the 7th largest buyer of Ethiopian coffee in the year ending July 22, it had been in 33rd place the previous year (20/21). Exports to China totaled 200 k bags in 21/22, and the trend is likely to be maintained in 22/23.

The BBC publish the following report on the renewed efforts of the Ethiopian and Eritrean governments to take the battle to the Tigrayan forces in the North of the country:

Birr 52.58 = USD 1

Have a good weekend.

In a recently published report, Deloitte pegged Ethiopia’s GDP growth for 2021 at 6.3%, higher than the previously estimated 4.0%; no doubt that the Coffee Sector’s contribution was very important. For 2022 Growth is expected lower at 3.8%, with coffee shipments lower this year than last, we expect that the sector’s contribution will be reflected accordingly. Foreign Direct Investment for 2022 is showing an improvement on 2021, up nearly 20% during the first 9 months fiscal year 21/22 vs 20/21. Like other countries around the world Ethiopia is also importing inflation, mostly as a consequence of higher Energy and Food prices. The conflict in Ukraine which is the cause of the current inflationary pressures has also impacted Ethiopia’s food security (Ethiopia imported in 2020 USD 269 M worth of wheat) as supply is compromised. In an effort to mitigate the threat to food supplies,the Government is supporting wheat production with the aim to increase local production by 70%. Furthermore, food imports are no longer subject to Foreign Exchange controls, making it easier to import food.

Focusing on coffee trading activity over the last week, prices for Grade 5 are hovering around 200 usc/lb FOB Djibouti making them very uncompetitive so business has been slow this week. Grade 2 from the South continuous to be offered at prices above 315 c/lb FOB Djibouti.

Eritrea has once again been accused of involvement in the conflict in Tigray, for more on this pls follow the link:

Birr 52.56 = USD 1

Have a good weekend.

Whilst the official Forex rate has remained stable over the past few months, the Black market rate has been devaluing continuously, this week reaching 90 Birr to the USD. We last reported on forex rates in August when the Black Market rate reached 85 Birr to the USD, having lost another 6% in the past 4 weeks. It would seem that by keeping a strong grip on the official forex rate the Central Bank is managing to stem inflation by restricting imports, however the rapid and accelerating devaluation in the Black Market rate should be an omen for those managing the economy.

In other news August exports figures show that shipments are increasingly falling behind 2020 shipments. August 2022 exports reached 25,971 K MT vs 32,015 K MT in August 2021. Since May 2022 shipments have closely tracked the previous year’s shipments at a slightly lower pace (between 1 and 2 K MT slower pace) however the opening of the gap in August to 6 K MT seems a little ominous. Overall, shipments for the 6 month period from March to August is 20 K MT behind the 2021 pace. It is also unlikely that this pace will accelerate in the next 6 months. We shall continue to monitor shipments in the coming months, however it now seems unlikely that yearly shipments (March to February) for the 22/23 period will reach 5 M Bags.

August exports are also below the 4 year average 2018 to 2021 (same as in April), which is also an indication that shipment pace is struggling. There is no question that the 21/22 crop is a large crop (even if it does not match 20/21) however we are very optimistic for the upcoming 22/23 crop. Picking has started in some lower lying areas of Yirgacheffe, Benchi Maji and Limu. Volumes are still small and the harvest will only really start in earnest in October, but indications are for the up-cycle to be reinstated.

The European Union has expressed concerns that fledgling talks between the Government and Tigrayian Leaders are unlikely to yield a resolution to the conflict anytime soon. For the BBC’s take on the latest from the frontline:

Birr 52.52 = USD 1

Have a good weekend.

Much less activity this week as the terminal market moved lower having lost a chunk of the gains made a couple of weeks’ ago. Focus is turning to the upcoming crop and it’s potential. The coming crop in the South (Yirgacheffe and Sidamo) is looking larger than the 21/22 crop which is good news, we are bracing ourselves for a difficult 6 month between now and the new crop being available for shipment. The current crop (particularly in Sidamo) has been disappointing both in terms of volume and quality. Other regions are also expected to yield larger volumes in 22/23, Limu, Benchi Maji and Wellega are all looking good to produce larger volumes in 22/23. Weather wise, the wet and cold season is still ongoing, as a consequence coffee moisture levels are higher than expected.

There were reports this week that some overseas buyers, in disputes with shippers, were withholding payments for shipments made on a Cash Against Documents (in trust) basis. The aggrieved exporters have brought their cases to the Coffee & Tea Authority (CTA) and the regulator has decreed that the buyers in question are suspended from trading with Ethiopia Exporters. These occurrences could have wider reaching consequences for how coffee is traded in the future, specifically what payment terms will be acceptable. In recent years payment terms have been relaxed but if the Government feels that this has negative consequences for local businesses and the Ethiopian coffee sector, payment terms could revert to 100% Letter of Credit, as they were previously.

BBC reports on ethnic attacks in North and Western ethiopia:

Birr 52.50 = USD 1

Have a good weekend

Fighting has resumed along the Southern border of Tigray region. Additionally the Tigray authorities reported that government aircraft bombed a hospital in Mekele in Tigray region. It is a very sad state of affair after so much hope that the conflict was close to a peaceful resolution. The worsening of the conflict in the context of drought and lack of food in the region is of particular concern.

For an in depth read of the current situation and how we arrived at the resumption of hostilities pls follow the link:

This week also saw the docking in Djibouti of the first vessel to have sailed from Ukraine with wheat since the conflict there started in February. The UN Food Programme that bought the grain will be distributing the food to several destinations in the horn of Africa that are currently suffering from drought and on the brink of famine.

Returning to coffee, trading this week was more subdued as the terminal market in NY stalled. Arrivals from upcountry are not in large volumes so shippers are not under great pressure to sell, indeed some shippers are still struggling to find coffee to fulfil previously made commitments. Logistics are difficult but no worse, we are grateful for that!

Small quantities of cherry have started to be picked in the lowlands of Benchi Maji and Bebeka; in Teppi region we expect the harvest to start in 2 weeks time. Initial reports are that the crop in these 3 areas is expected larger than the 2021 crop. Other regions are also showing encouraging signs regarding the size of the crop, such as Limu, however the harvest there is not expected to start until mid-October.

The value of total exports from Ethiopia (Coffee and goods and services) July 2021 to June 2022 was a record USD 4.1 Billion, USD 0.5 B more than the same period the previous 12 months (July 20 to June 21). The country that bought more of these exports than any other is Switzerland, no surprise considering the number of coffee traders based in Switzerland!

Japan is well on it’s way to import 500 k bags of coffee from Ethiopia in 2022, January to July imports stand at over 326 k bags, the same as the whole of 2021!

Birr 52.47 = USD 1

Have a good weekend.