All

For the first time ever there is no Lekempti coffee and only 150MT of Djimmah coffee in ECX warehouses waiting to be sold, in total only 500 MT of Naturals are waiting to be sold at ECX warehouses. The reason is clear, agrabes will not bring coffee to the market while price ceilings are in place, this impasse has to be resolved soon or the pace of shipments will continue at the very low levels of recent months or fall even further. Furthermore, the National Bank of Ethiopia has stopped allowing registration of 2019/2020 crop coffee which had lower Minimum Registration prices than 2020/21 crop coffee so unless the NY market rallies strongly we see registrations for Washed coffees also stopping since there is little appetite for Sidamo 2 or Yirgacheffe 2 at around +100 FOB.

The Government forces continued their offensive against the leadership of Tigray region forces adding more victories to the initial taking control of the northern region territory. Tensions with neighbouring Sudan continue but little fallout to report.

Birr 39.33 = USD 1

Have a great weekend

All

A short business week in Ethiopia with Christmas on Thursday. Business activity was further diminished by the small volumes traded at ECX. The main problem seems to be with lower quality (grade 5) price levels established by the Coffee and Tea Authority (C&TA). These are +/- 10 cents/lb below where they were trading before Maximum prices were introduced at ECX. Middlemen do not accept these reduced price levels and are shying away from delivering their stocks to ECX warehouses. Since prices are set weekly, we could see the C&TA review these this weekend to encourage more volume. As with Minimum Export Prices, these Maximum ECX prices do not appear to be well thought out, the price differences between grades do not make much sense and further blur the situation. Exporters are keen to sell has the crop is plentiful and larger in volume and improved in quality vs 2019/20 however the C&TA Maximum and Minimum price setting policy is hindering the normal flow from the interior to shippers’ warehouses.

Politically the country is stabilising following the turmoil in the North of the country in late 2020, however there is a sense of simmering unrest, due to both internal and external pressures.

USD 1 = Birr 39.28

Have a good weekend.

Happy New Year, may 2021 be a little more predictable than 2020!

In attempting to address Exporters’ sourcing problems the Coffee and Tea Authority (C&TA) has allowed shippers to sell coffee between themselves increasing liquidity in the internal market, we see this as a positive move allowing those exporters that have coffee but no export market to offload excess stock and free cash while permitting short shippers to tap into an alternative supply to fulfil commitments. Meanwhile at ECX, volumes on offer are smaller when compared to this time in previous years. Traders are still upset with the C&TA meddling with prices, in particular capping the maximum price coffees can fetch at ECX. ECX Warehouse stock levels remain low when we would expect these to be building up. The problem with delayed shipments continues with no end in sight… A further consequence of diminished activity internally is a reduction in offers from shippers, particularly in lower grades (Grades 4 and 5).

National Bank of Ethiopia Minimum Registration prices for Exports (also set by the C&TA) remain too high for Washed Qualities buyers, bid levels are around 30 cents below offered levels.

USD 1 = Birr 39.20

Have a good working week, and Merry Christmas to our Ethiopian friends.

All

The Coffee and Tea Authority is continuing with their ECX Maximum price policy, however price limits have been increased so there is less tension between collectors (Agrabes) and the C&TA. Export Registrations of Washed Coffee are very disappointing so the pressure is on for the C&TA to reduce minimum registration prices for grade 2 coffees from the South. Volumes at ECX are still reduced and shippers continue to struggle to cover shorts established long ago and in many instances rolled over. Some of the larger exporters have stopped offering for nearby shipment not wanting to increase their very short positions. Several donor organisations are limiting their support to Ethiopia over concerns of Government actions in the North of the country so we expect that pressure is mounting on Exporters bring in foreign currency to alleviate the shortfall in overseas remittances from international partners.

Unknown assailants attacked a village in North Western Ethiopia and it seems that a massacre has taken place. This comes the day after the Prime Minister toured the area, therefore it is an obvious conclusion that this occurrence is linked to the PM visit and the recent fighting in Tigray region. It always was a real concern that having stabilised the main cities in Tigray, the security forces would be facing guerrilla warfare and terror attacks. We expect that these strikes towards civilians will only strengthen Central Government resolve to subdue Tigray fighters. Peace in Ethiopia is not assured in the near term.

The harvest is entering its closing stages, cherry prices range between 20 and 27 Birr per kg, a considerable variation in prices and depending on the area. In Yirgacheffe  areas competition is strong, whereas in other areas coffee is starting to dwindle and there is less demand.

Birr 38.94 to the USD

Have a nice weekend, stay safe over the festive period.

All

In early 2020 the Coffee and Tea Authority introduced Minimum Registration Prices for export coffee, now we have Maximum Sales Prices at ECX! Consequently Agrabes stopped selling coffee at ECX! It is easy to understand why, one day you are selling at 1,900 and the next the price is capped at 1,300! In recent weeks ECX prices have been driven upwards on tight supply and huge demand, both for Export and by Internal Demand, Exporters complain that the ECX price is too high but I am not sure that capping the price is going to help exporters…

Exports in November decreased as is normal for this time of the year, however the pace of sales is much lower viz a viz 19/20;  the period May to November 2020 is 46 k MT behind the same period May to November 2019:

 20/2119/20
May           25,967           28,449
June           25,790           29,294
July           19,015           26,512
August           19,995           30,279
September           14,443           23,696
October           13,018           19,966
November           11,964           18,328

(Export figures in MT)

Meanwhile registered sales of Washed New Crop 2020/21, for shipment first quarter 2021, is very low as a direct consequence of the high Min Prices for Sidamo and Yirgacheffe, these grades cannot be registered below 220 c/lb; Limu seems quite reasonable at around +50 FOB equivalent. Steady business for Lekempti and other Naturals for both current and new crop this week.

Birr 38.48 vs USD

Have a good weekend.

All

Ongoing limited supply to ECX with Djimmah 5 trading at around 175 c/lb FOB equivalent; FOB buyers are bidding around 95 c/lb and the local market is paying 350 c/lb, so it is no surprise that shippers do not have anything to sell and that coffee is not arriving at ECX warehouses. Any coffee that is around is finding it’s way to the local market illegally but the incentive is too great. Volumes of Naturals at ECX are pitiful, yesterday 166 MT of Sundried (all grades) were offered; we do not expect to see any meaningful quantities of Djimmah type until February and Lekempti/Sidamo (Natural) until March so local tightness is likely to continue for a few more weeks.

Minimum registration prices for New Crop Sidamo 2 is over 220 c/lb FOB, which is too rich for most standard Sidamo 2 buyers. The Coffee and Tea Authority (CTA) does not seem to understand that there are different qualities of Sidamo 2 and that most will only find a market if traded at much lower levels; in time we believe that this minimum registration price will be reviewed to better reflect levels where larger buyers and standard quality is tradable.

Ethiopia appears to be much more peaceful this week although there remains a heavy military presence in Tigray region.

Birr/USD = 38.34

Have a gd wkend.

All

Government forces have taken the main town in Tigray region, Mekelle, however the TPLF leadership have not been arrested which was the main justification for launching the offensive in Tigray. For now the region is stable and not as tense has in the previous month of November. The focus seems to have moved to aiding the displaced population that are in need of food and other basic necessities.

Exports continue to disappoint, during the 6 month May to October 2020 vs same period in 2019 volumes are down by 40 k MT or 25%. If you only look at the last 4 months, the drop is even greater at 34% between 2020 and 2019. This poor pace of shipments is expected to continue until the New Crop starts to be exported which could be early 2021 as the harvest was early and the weather conditions post-harvest favour parchment drying. Quality wise indications are that the crop is good and better than 19/20 quality. Reported cherry prices are still very high, as much as 27 Birr per kg in Yirgacheffe.

Birr 38.20 = USD 1

Have a good wkend.

All

Government forces appear to control most of Tigray region and are poised to take the regional capital having surrounded it this week. All attempts at mediations by African leaders have been rejected by the Central Government that feel they have the upper hand and can resolve this rebellion my military force alone. Tigray leaders for their part, facing arrest and imprisonment, must feel they have little to lose by prolonging the standoff. We can only hope that the confrontation has a swift and peaceful resolution. Meanwhile there are over 40,000 refugees in Sudan fleeing the conflict.

The rest of the country is peaceful and life continues more or less as normal. At ECX, prices for current crop Naturals remain elevated even if the volumes are reasonable, as a consequence of intense competition between shippers that still need to cover shorts. New Crop Sidamo is trading at 220 c/lb FOB equivalent and New Crop Limu not much lower at 210 c/lb FOB Equivalent. Meanwhile, cherry prices paid at washing stations in the South (Sidamo, Guji and Yirgacheffe) vary between 19 and 25 Birr and 20 and 25 Birr in Limu.

Birr 38.01 vs the greenback

Have a good weekend.

All

Notwithstanding the conflict in the North of the country Ethiopian Coffee business continues at great pace; the NY market rally has made differentials more attractive and shippers have been able to register some sales in the past few days. At ECX the volumes on offer have increased as the New Crop harvest is in full swing and possibly as a consequence of these more turbulent times that we live in Ethiopia these days. Shippers are very eager to execute their commitments, getting coffee on vessels and be paid. You certainly get the feeling that the conflict is affecting all aspects of Ethiopian life and shippers decisions.

Meanwhile there is very little news from the conflict zones; again rockets from Tigray were fired at Amhara towns. In Addis the Government has arrested scores of influential and prominent Tigray military leaders and other persons, while at the same time freezing bank accounts and assets. An estimated 30,000 civilians have fled Tigray to Sudan to escape the conflict.

So far the pace of shipments is very disappointing, reflecting the poor 19/20 crop, May to Sep 2020 shipments are 33 K MT (25%)  lower than same 5 month period in 2019:

USD 1 = ETB 37.85

Have a peaceful and restful weekend.

All

The ongoing fighting in Northern Ethiopia between Ethiopia National Army and forces loyal to the Tigray People’s Liberation Front (TPLF) has reportedly resulted in many civilian casualties. Amnesty International is reporting that there has been a massacre in a Western town  of Tigray region carried out by forces loyal to the TPFL following a defeat by Government troops in a nearby area. The conflict is turning increasingly brutal as Government forces appear to be gaining the upper hand in the conflict. The TPLF has decreed that all Tigray people must join the forces that are loyal to the political party to fight against the National Army which has been mobilised to Tigray to remove the TPLF from power in the Northern region.

Focusing on coffee, below we compare the ECX sales Year to November 6th over 3 years The figures speak for themselves, overall the sales at ECX are down by 30% in 2020 vs 2019:

Furthermore Exports are also very disappointing, below we compare export figures over the last 3 years:

 20/2119/2018/19
May           25,967               28,449           26,142
June           25,790               29,294           27,082
July           19,015               26,512           17,928
August           19,995               30,279           23,694
September           14,443               23,696           17,557
October                19,966           17,674
November                18,328           13,263
December                14,188           12,992
January                16,570           11,166
February                17,456           16,199
March                26,949           20,739
April                25,135           21,809
         105,210             276,821         226,245
Ethiopia Green Coffee Exports (MT)

Birr 37.75 = USD 1

Have a good wkend