It is normal that things slow down as we approach Christmas and the end of the year, but it really is dead on the Ethiopia business side! Minimum registration prices put grade 5’s into plus differentials which holt any chance of buying whereas industry seems to be focused on everything but buying! Time to take stock, reflect on the past 12 months and what the next year will bring. 2022 was difficult for Washed coffees and 2023 is looking even harder, with reduced availability and high prices. Naturals were much easier to trade in 2022, good availability and good quality, aided by a buoyant market that peaked in February as many shippers were hoping to get short; it all worked out very nicely, for both shippers and their customers. What will 2023 bring? we expect Naturals availability to be good, however with farmer price expectations not being met we could see some resistance at farmgate level to part with produce. Upcountry stock build up is a very real possibility over the next 12 months.

Inflation soared in the first 6 months and stabilised around 35% in the second half of the year. The birr has remained very steady vs the USD losing around 6% over the 12 month period.

The 2 year conflict between Government forces and Tigray rebels has ceased and a long lasting peace deal in looking increasingly likely; this is the single most positive thing that 2022 brought Ethiopia and allows us to look at 2023 with hope that the misery of the past 2 years will give way to prosperity for all Ethiopians.

Birr 53.27 = USD 1

Happy Holidays!

Following our trip to the Southern coffee producing regions of the country last week, this week we travelled to Djimmah to asses the harvest there. The picture in Djimmah is very similar to the South, washing stations working under capacity or simply closed. Production is generally good but the proportion of the crop that is being Washed is very much reduced, we expect that as much as 50% less coffee will be washed this year compared to what we would have expected in a “normal” year. Again we saw many Washing Stations having idle drying tables, only one fermentation tank being used out of a dozen, parchment very thinly spread on drying tables. Washing station owners are buying less cherries for washing and farmers are happy to sell less, processing the crop themselves at their homesteads and producing natural coffee to sell at a later date. Weather is favourable for the harvest, some rain at night and plenty of sunshine during the day. Overall, we expect good quality for both Washed (Grade 2) and Naturals (Grade 4 and 5), our concerns are very much skewed to the reduced Washed volumes being produced. The coming few weeks will be crucial, however we have little confidence that the production of Washed Coffees will increase substantially, currently our thinking is that more washing stations will stop receiving cherries for processing and that Washed Coffee availability will become increasingly compromised.

The peace negotiations are progressing well and the prospects of Ethiopia being welcomed back into the fold of Western Governments and subsequent resuming of finance agreements is increasing. This could result in an easing on the tight forex controls that were imposed on shippers during the conflict with Tigray rebels. Currently shippers are keeping around 30% of the USD they receive from export sales, however a return to the 70% level is increasingly voiced and even expected by some exporters. This would assist shippers in importing goods and reduce coffee export loses since the margins on imported goods continue to be very healthy.

Paradoxically, in West Oromia, instances of insecurity are not abating, for more on this please follow the link: https://www.bbc.com/news/live/world-africa-62845613?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=639193d86967ef5dc539a172%26Ethiopia%20party%20calls%20for%20arming%20of%20Oromia%20civilians%262022-12-08T08%3A26%3A25.498Z&ns_fee=0&pinned_post_locator=urn:asset:8ace0c50-356a-4554-b838-4a5a70005377&pinned_post_asset_id=639193d86967ef5dc539a172&pinned_post_type=share

Birr 53.13 = USD 1

Have a good weekend.