Yearly crop servey
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.
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.
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.
- 2019/20 crop (off-year)
The crop was forecast lower than the previous crop by 5% and ended up being even lower at 402 K MT (we had estimated 411 K MT). Split between Washed and Natural 20% and 80%, due to the sharp decline in production in the South where a higher % of the crop is washed viz-a-viz other producing areas of Ethiopia. We also revised down our carry out stocks by approximately 155 K bags to just over 1 Million bags, which is the lowest carry out stock figure in past few years. The pace of sales at ECX has been very low this 2020 Calendar year lagging behind 2019 by 30% in volume. Exported volumes started to lose pace from July and we expect this trend to continue until 20/21 crop coffee starts to come to market in earnest (from December onwards at ECX and March onwards FOB). Quality has also been disappointing due to excessive rain during the maturation period and wet weather post-harvest. Sundried qualities had many defected beans (blacks, mouldy and sours) and in the cup the coffee was found to be Earthy, Musty and Phenolic. Exports were consequently also lower than the previous 12 month period by 3%.
- 2020/21 (on-year)
We are expecting a greatly improved crop in 20/21 both in terms of quality and quantity. Production is expected about 9% higher than in 19/20; the weather in the last 12 months has been much more beneficial for quality, harvesting started early and the weather post-harvest (so far) has been much more conducive to producing better quality coffee. Particularly Djimmah quality is expected to show big improvements viz-a-viz 19/20. The estimated split Washed to Natural is 19% to 81% reflecting the pick up in production in the more Natural growing areas of the West (Wellega, Illubabor and Djimmah). We also expect more volume of Natural from the South. Notwithstanding the usual political issues that plague this part of the world and the current global pandemic, we expect that the pace of sales from farmers to agrabe and on to the ECX to be constant and steady. The time that Agrabes are permitted to hold coffee unsold at ECX warehouses has been extended from 30 to 60 days which could cause some disruption however increased volumes will pressurize coffee to change hands along the value chain. The harvested started much earlier this year (compared to 2019) and we are already seeing New Crop Washed coffees trading at ECX, in December we expect much more coffee to be available. Cherry prices started from a much higher level this season compared to last. However, these seem to be stable at around 20 Birr/kg Red Cherry.
The introduction of a minimum price caused some disruption to the flow of coffee to Export markets. However, after a few weeks with far too high Minimum prices and consequently no sales registrations, the powers that be, lowered prices and more normal trade resumed. New Crop Minimum registration prices have again been set at overly optimistic levels however we expect that a happy balance will be struck at some point in the coming weeks.
The General Election that was postponed from 2020 to 2021 due to the pandemic is expected in June 2021. We pray for a rapid and satisfactory solution to the current conflict in the North of the country and a peaceful election in the summer of 2021.
- 2021/22 (off-year)
The 2021/22 crop is projected, under normal conditions, at 435,277 MT (7.26 M bags) and the weighted production probability is 403,088 MT (6.72 M bags).
- 2018/19 crop (on-year)
The 2018/19 crop is revised to 426,987 MT (7.12 M bags), which is 10% higher than the 2017/18 crop. Washed and sundried production estimates are revised at 63,674 MT (15%) and 363,313 MT (85%), respectively.
Disappearance has remained fairly constant with end of year 2018/19 stocks increasing by approximately 0.5 M bags. However, the composition of these stocks is heavily skewed towards Naturals from the Western region.
Southern coffee stocks are at minimal levels; disappearance during the 2018/19 season has been very good due to falling differentials, in particular for Washed coffees, which reached levels below Colombia.
- 2019/20 crop (off-year)
The 2019/20 crop is estimated to be 411,119 MT (6.85 M bags), which is 4% lower than the 2018/19 crop. The volume of washed and sundried production is estimated at 57,866 MT (14%) and 353,254 MT (86%), respectively.
Coffee harvesting has started in some areas of the South-Western region during the second half of August 2019. Coffee harvesting is expected to peak in November 2019 for most coffee producing regions, and more than 90% of the crop will have been harvested by December 2019. Harvesting of the 2019-20 crop will be completed on February 2020.
Farmers along Guji, Sidamo and Yirgacheffe area started picking and selling red cherry during late September. Most coffee washing stations of Southern region have completed maintenance of pulping machines and construction of coffee drying beds before mid-September 2019. Coffee washing stations started processing washed coffee in late September.
The report highlights the discrepancy between the ECX prices and FOB prices for the same qualities. The authorities have indicated that they wish to address this discrepancy by forcing shippers to sell at a price that is higher than the price paid at the ECX. A new regulation is to come into force that gives the Coffee Liquoring Unit (CLU) authority to stop shippers from exporting when they cannot prove that the sales price is above the ECX price paid for the coffee they are wanting to ship.
In November 2019 there will be a referendum in Southern Ethiopia, to decide on splitting the Southern Region into 2 smaller Regions, granting limited autonomy to the people of these areas. This could be a reason for the downstream flow of 2018/19 stocks, meaning that the remaining coffee will be in the hands of exporters, as farmers and akrabis (local traders) prefer having cash to holding stocks in times of instability. 2
In May 2020 there will be elections in Ethiopia. Whereas we hope that this exercise is peaceful, past elections have brought some disruption to the normal flow from farmer to exporter. If farmers and akrabis feel that there will be security problems, this would imply a faster than normal coffee flow from local players to exporters. On the other hand, if there is instability in coffee producing areas after the elections there could be disruption to the normal flow from up-country to export during the second half of the year.
- 2020/21 crop (on-year)
The 2020/21 crop is projected, under normal conditions, at 478,690 MT (7.98 M bags) and the weighted production probability is 449,121 MT (7.49 M bags).
▪ The 2017-18 crop is revised slightly higher to 388,645MT (6,477k bags), still 3% lower than the 2016-17 crop.
▪ The 2018-19 crop is estimated at 437,267MT (7,288k bags), 13% higher than 2017-18crop. The volume of washed and sundried production is estimated at 67,994 MT (16%) and 369,273MT (84%) respectively.
▪ Harvesting is estimated to peak between the 22nd of November and the 22nd of December across the major coffee producing regions (South and West), and about 99% of country production will be harvested by the middle of Jan 2019. This represents a move of 21days earlier in harvesting pace vs. 2017-18.
▪ The majority of washing stations in the southern region (Sidamo / Yirgacheffe qualities) opened at the close of October and could have opened even earlier if unrest had not held delayed the governments decision to grant operating permission.
▪ Challenging drying conditions across the first four weeks of operation (SH Oct/FH Nov) mean that monitoring of drying conditions remains vital for the rest of the season and early qualities of washed may be deteriorated.
▪ Rumoured big shorts already taken on in the Export market for Unwashed Gr 4’s, which was undersupplied in 2017/18 could see early season pricing at ECX high and a squeeze on supply. Based on patterns of this year, depending on the size of the short this could spill into the Djimma complex, which is often blended into Sidamo when supply is inadequate.
▪ The change in regulation enacted in 2016/17 and ratified in October of this year mean that many exporters have taken up the opportunity to engage with certification at the washing station level most obviously in the West.