The weather continues to be humid and is getting colder as “winter” approaches. Rain stops coffee from drying or remaining at optimal moisture levels, and makes roads impassable. Quality concerns are ongoing with many samples rejected for earthy, musty cups. Meanwhile shipments, while not completely at a standstill, are much lower than what they should be; particularly considering the sales done when NY rallied in February and again in April. Indeed as the NY rallied in late February to 190+ and then again in April to 200+ shippers sold, however contracts remain unshipped as intrinsic quality is lacking with cup defects that originate in poor preparation and wet weather conditions.

Natural stocks held in warehouses in Addis remain high, coffee is stuck, not moving out to be exported. The reason remains the same, poor quality, buyers are not approving Pre-Shipment Samples and since quality issues are widespread (the whole crop is compromised) the problem is not easily solved!

There were fresh rumours of devaluation this week however as of today the Birr Official Rate remains at roughly 50% the Black Market Rate as follows:

Birr 54.28 = USD 1

Have a good weekend.

There was a change of head of department at the Ministry of Agriculture in the past few days. The incoming team is putting increased pressure on the Coffee and Tea Authority (CTA), Millers and Shippers to accelerate shipments and increase USD flows to the country. Commercial mills are full of coffee that is stuck, not being shipped due to poor quality that is not meeting overseas’ buyers quality expectations. So previously made contracts, when prices were higher (when NY was higher and Minimum Registration Prices were higher), remain unshipped and instore addis warehouses bringing the normal flow to a grind. To make matters worse, the very wet weather in Addis and upcountry is impeding the movement of coffee from growing areas to Addis for processing due to poor roads becoming impassable and coffee absorbing air moisture further deteriorating quality. All very bleak at the moment…

The wet weather has been beneficial to the lower coffee growing areas, however at higher altitudes (in areas like Guji and Yirgacheffe) heavy rain has knocked off the first flowers and had a negative impact on crop potential for 23/24. Something to monitor in coming weeks.

Minimum Registration Prices were increased earlier in the week by the CTA by 1 to 3 c/lb depending on quality category.

Forex Birr 54.26 = USD 1

Have a good weekend.

Heavy rain has been reported throughout the coffee growing regions of Ethiopia and Addis Ababa, with mixed blessings for the coffee industry. On the one hand the rain is greatly benefiting the crop on the tree, on the other hand, transportation of coffee of the current crop from the growing areas to Addis for processing is severely hampered by deteriorating roads. Stored coffee stocks are also absorbing air moisture which is not doing the already very compromised quality any favours.

Signaling that export registrations continue below expectations the Coffee & Tea Authority decreased minimum registration prices this week to the lowest levels in 3 months.

April export figures were below March’s. This in itself is not surprising since the 5 year average also follows this trend, however it was the lowest April in 6 years and when we look at the 6 month period November 22 to April 23 every month is below average and most months recording the lowest export volume in the last 5/6 years. Overall shipments are very disappointing, Ethiopia stats start the year in July; comparing the 10 month period July 22 to April 23 (180 K MT) to same period in 21/22 (230 K MT), shipments are down by 50 K MT, on average this represents a 5 K MT monthly decline in shipments; we expect this will continue in May and June. If we are correct in our assessment of the situation, shipments will drop by 1 M bags between 21/22 and 22/23 (July to June) from 5 M bags to 4 M bags.

Exports of coffee in the 9 month period June 20222 to March 2023 totaled USD 897 M with Horticultural products still far behind at USD 514 M; However, the far more liberalised Horticultural sector is outperforming Coffee in other aspects; horticulture export earnings growth rate is outpacing the Coffee sector’s and if the current trend continues the Horticulture sector will become more relevant in the years to come.

Violence continues to sporadically plague the country:

Birr 54.22 = USD 1

Have a good weekend.

Another short week in Ethiopia (with 2 holidays) with little to report on the trading side, as the NY market is well below the highs seen in mid April, shippers’ offers go unanswered. Shippers are starting to deliver on the sales concluded in February, quality remains a concern but is improving (slightly). Shipments still moving at a slow pace, next week we should have official April export figures which will enlighten us better on first quarter business activity. The Coffee & Tea Authority this week decided to reduce Minimum Registration Prices by a couple of cents to just off the lowest prices for 2023, a clear sign that registrations have wavered in the last couple of weeks and a reflection of the lower terminal price.

Forex has been kept at an artificially low level. Since August the Birr has moved from 52 to 54 to the USD, so a less than 4% devaluation in 8 months; however the gap between the Official Rate and the Black Market rate continues to grow, in August the BM rate was 85 and currently it is at 102 corresponding to a 20% devaluation vs the greenback . For now Government’s policy makers continue to insist on trying to control inflation with tight controls on forex rates, however inflation continues to run at around 35% and the economy is stalling. Is this making the best of a bad situation? Exporters seem to have given up on a devaluation in the near future, however most of the current crop continues to be upcountry in the hands of middlemen and mostly, held by farmers.

Negotiations between the OLA (Oromo Liberation Army) and the Government have ended without an agreement:

In other news the UN has halted the distribution of food aid:

Forex Birr 54.19 = USD 1

Have a good weekend.