After the excitement of a week where prices seesawed on fears of a frost and the realisation that there was no frost, trading in Ethiopia settled down to a more lethargic stance. Many shippers sold as the market approached 230 c/lb but retracted as the market tumbled. Liquidity issues forced the hand of some Washed Arabica long holders into accepting below asking prices and the same can be said for some stale Grade 5 stocks that were released. As the NY market again rocketed on Thursday shippers increased their offer prices in the expectation that it would reach higher levels. Business activity is slow, shippers are still weighed down by high priced stocks, difficult logistics and tight replacement prices. Demand is only sporadic and thin.

On a FOB basis, Grade 2 from the South is above +100 and Grade 5 at -25, Grade 4 are trading at plus double digit differentials.

Ethiopia’s Tedros Adhanom Ghebreyesus has been re-elected as the World Health Organization’s (WHO) head for a second five-year term.

This week the NY market had quite a trading range due to recent weather concerns that never materialised into a serious problem. In this “yo-yo” environment trading is quite frustrating for all, however some business did materialise. Some exporters took the opportunity to sell has the terminal market rallied however a fair amount of business was left undone as the market tumbled in the later part of the week. On a more positive note much more coffee is getting loaded and moved to the port giving hope that this months shipments will supersede April’s poor performance. We expect that the business concluded this week will release some of the space pressures on mills and that throughput will accelerate in the coming weeks. Differentials for Grade 5 at around -25 FOB CAD and Washed coffees from the South attracting differentials well in excess of +100.

The forex rate has been very stable in recent months. The pace of devaluation has slowed down considerably, could it be that the demand for USD has also slowed down? Coffee exports have been at record levels in terms of USD and MT, with the July to April period exceeding USD 1 billion in value; coffee is the biggest foreign currency earner and with the economy slowing down, is the demand for USD lower? I would be surprised that the demand for hard currency from business has decreased but then again, everything is possible…

Forex Birr 51.51 = USD 1

Have a good weekend.

The April Export figures are in, unsurprisingly shipments are sharply down vs April a year ago and the previous month (March 22). A combination of logistical problems (which we have been discussing last couple of weeks) and the terminal market downturn since the latter part of February are reflected in this very poor export performance figure. Export volumes should be increasing month on month not decreasing, we think this may only be a blip since shipping lines have been addressing the lack of vessels calling Djibouti and container availability of the past few weeks. Stocks of Washed coffee held in Addis are still high, exporters have lowered their asking prices however, differentially prices remain very high. Some mills are so congested with with unprocessed washed coffee that are close to gridlock making it difficult to get naturals processed. Business activity remains somewhat muted despite the 16 c/lb in NY move on Wednesday!

Ethiopia’s telcoms giant has started rolling out a 5G network in parts of Addis:

Little change in the forex rate Birr 51.47 = USD 1

Have a good weekend.

We are going to have to discuss shipping again! We thought that things could not get worse but they have. One of the main shipping lines out of Djibouti would normally operate 1 vessel a week however during the whole of April operated 1 vessel and again in May will only operate 1 vessel, with only 2 scheduled for June; this totals 4 vessel in 3 months, whereas we would have expected 4 vessels a month! MSC this week advised shippers that they would have containers to stuff but that they would not be given a booking on a vessel and if containers overstay the allowed time at the port in Djibouti any port demurrage charges would be for the shipper to bear. This is risky both for the shipper and the buyer since the shipper is exposed to open ended demurrage charges and for the buyer since quality will be negatively impacted if containers lay about in Djibouti for weeks on end waiting for a vessel. Alternative shipping lines are available however current freight rates vary wildly between shipping lines which strain costs, particularly in the current upward spiralling cost environment (increasing interest rates, warehouse rates and trucking costs). Furthermore, ocean transit times are once again out of control, we have cargo in transit from Djibouti to Antwerp which was shipped over 8 weeks ago while at the same time, on the same route, with the same shipping line we have cargo arriving within 3 weeks. Planning has become guesswork! In this environment we are bracing ourselves for delays, increased costs and a lot of frustration!

Shippers’ prices ideas when worked as differentials uninspired buyers this week, trading activity has been limited. Although the wide ranges seen on the terminal market over the past few days would normally allow for some business activity, asking prices are simply too high to attract serious interest. Afterall, 200 c/lb FOB when KC is at 250 is not the same as when KC is at 220! It is taking some time for overseas price ideas to be reflected upcountry, in farmgate prices, however soon shippers’ offered prices will start to better reflect the lower KC levels that followed the Russian invasion of Ukraine and the subsequent exit of speculators from the coffee markets.

The BBC reported this week on clashes between Christian and Muslim groups, for more on this please follow the link:

Birr 51.42 = USD 1

Have a good weekend.

We are all aware that shipping has been difficult in the last few months as a direct consequence of the pandemic and due to the more Ethiopian reason of decreased economic activity due to war reducing containerised imports. In the past we have always been able to play one shipping line against another depending on container availability or vessel schedule however, currently all lines are short of equipment (empty containers) and slots on vessels causing inevitable shipment delays. There simply seem to not be enough imports, container availability for exports is very reduced, it will be interesting to see if this tightness will affect the April export figures which we should get in a couple of weeks.

The IMF published this week it’s updated Growth Forecasts for 2022 and 2023 and they paint a grim picture. Actual Economic Growth in 2021 stood at 6.3%, forecast for 2022 is 3.8%, there is an improvement in the 2023 outlook with growth expected to increase to 5.7%. For context the average annual economic growth in Ethiopia between 2000 and 2022 was 8.8%, therefore the current growth forecast for 2022 is 5% lower than the average of the last 22 years. The graph below clearly shows the impact of the pandemic and internal conflict on Economic prosperity on the country.

Source: IMF

For a view on the impact of the crisis of the last 2 years on the lives of Ethiopians we attach this short BBC report:

In a continuation of last week’s slightly bizarre story about Ethiopians queuing outside the Russian Embassy the BCC has more:

Birr 51.40 = USD 1

Have a good weekend.

We all know that Ethiopia has a long and strong tradition of coffee drinking seeped in ceremony; currently the local market is flooded, as overseas buyers remain reluctant to pay up. Again we saw offer prices drop this week and with Thursday’s surge in NY some of the most aggressive ones got hit. However, trading has been far from continuous, many exporters want to sell but do not find buyers willing to meet their price expectations. Even with much improved bid differentials buyers and sellers need NY above 230 to be able to trade in larger quantities.

March inflation rate is reported at 34.7%; this is on the higher end of the recent 30 to 35% range observed in the past 6 months. Food inflation for March was 43.4%, bearing in mind the weight of food costs in the average Ethiopian living expenses it is apparent that living standards are dropping in Ethiopia. With the ongoing conflict in Ukraine food prices are expect to go even higher adding more pressure to an already struggling population.

The drought in South Eastern Ethiopia, including parts of Oromia, is devastating livestock and the incomes of pastoralist communities; according to World Food Program (WFP) 7.2 million people are at risk of becoming malnourished.

The BBC reported earlier this week that dozens of young men were gathered outside the Russian Embassy after rumours started circulating that Russia was recruiting Ethiopians to fight in Ukraine in exchange for large sums of cash! This story is bizarre but clearly indicates that unemployment in Ethiopia is high and the youth is desperate to find any means to earn a living, so much so that they are willing to travel to another continent to pick up arms and risk death in exchange for money…

Birr 51.27 = USD 1

Have a good weekend and Happy Easter to our friends in Ethiopia

Following on from 20 K MT + shipments in February, March exporters reached 27.7 K MT slightly more than March 2021 so on track for another big export year in 22/23. Moreover, mills in Addis are full of coffee and processing at full capacity so we are expecting these strong export figures to continue in April.

Trading remains fairly slow, offers although slightly improved in the raising market of earlier this week were starting to look more attractive however the terminal’s market performance of yesterday and today is once again freezing players out.

Certification bodies and agencies are struggling to renew certificates causing much uncertainty and logistical delays for exporters and importers alike, some pragmatism will be needed to enable normal flow of these coffees from origin to consuming markets.

Birr 51.19 = USD 1

Have a good (long) weekend

There are increasing offers from Ethiopian shippers, the last flurry of trading in February (before the invasion of Ukraine and subsequent drop in terminals prices) was a while ago and shippers are returning to the market. However, offer levels remain at levels too high to generate much business, one feels that eventually lower prices (below 2.00 $/lb for grade 5 and 3.00 $/lb for grade 2) will start to be offered. Only 2 weeks ago grade 5 was offered at 2.15-2.20 and now offers are at 2.00-2.05. Meanwhile trading is limited, coffee that is processed and shipped is leaving room for more trading to occur so in the absence of a rally in NY origin prices will have to adjust.

Volumes traded through the ECX are small since the trend to sell coffee through private treaty (between Agrabes and Shippers) continues to gain traction. Shippers are still very long Washed parchment having been caught out by the drop in terminal market prices and the change in financial rules that reduced the proportion of USD that exporters can retain to purchase imports, squeezing their margins. Naturals are mostly in the hands of Agrabes and Farmers who will release their stocks to the market over the coming 8 months or so. The previous crop (20/21) shipped mostly between March 21 and Feb 22 was well exported depleting internal stocks so there is room for build up in these, slowing down the pace of internal trading and subsequent exports.

During the first quarter of the year the Birr has barely lost any value vs the greenback, 3% during the quarter; however the black market rate has been devaluing at a much more accelerated pace, having gone from 60 to 68, losing 13%. This discrepancy does not bode well for the value of the Birr going forward and with inflation at around 33% since the start of the year, any steeper Central bank devaluation will really be felt by the average person in the street.

The BBC seems hopeful that the fighting in the North of the country may be showing signs of receding while at the same time Amnesty International and Human Rights Watch accuse Militia aligned with the Military and the Military itself of atrocities.

Birr 51.11 = USD 1

Have a good weekend

In a rather bizarre twist, the Coffee & Tea Authority decided this week to increase considerably the Minimum Registration Prices. Why would you do that in a declining terminal market? Minimum registration prices have been irrelevant in the past few months as bids, offers and traded levels far exceeded these. However with the recent decline in terminal levels, the usual brisk trading activity for this time of the year has greatly reduced, asking prices have been above levels that buyers are prepared to pay. Naturally sales registration in March were low, so why increase the minimum price that you can register a sale? Furthermore, shippers´ warehouses are full of parchment that remains mostly unsold and increasing the price that coffee can trade is hardly going to improve trading…

Below the minimum registration prices and NY close for day before publishing the weekly minimum registration price:

A severe consequence of draught and war is famine and this seriously affecting the population in the North of country, the BBC report:

Birr 50.99 USD = 1

Have a good weekend

Coffee is not changing hands, stakeholders with coffee stocks, whether farmers, middlemen or exporters, are sitting on them! Why is this happening? In 2 words: Finance and Price.

Shippers that own expensive Washed parchment that has tied up their cash, cannot find an overseas buyer willing to pay 100 over plus. In an environment of high prices, restricted access to finance and stocks that are not moving, shippers are finding themselves paralysed. There will be a quantity of washed Grade 2 coffee sold above 350 c/lb FOB and this coffee is getting shipped. However, the price paid to farmer for cherries is higher than what is currently achievable in the FOB market, as a consequence trading has ceased. It is clear to us that overseas buyers of Washed qualities are looking to buy, however not ready to pay the shippers asking prices.

Shippers that are short Naturals (Grade 4 and 5) at below 200 c/lb FOB cannot cover from local middlemen without incurring substantial losses. This last point is supported by current asking prices for Grade 5 prices between 215 and 220 FOB Djibouti LC (Grade 4 at 240 c/lb). In the lower grade space (Grade 4 and 5) there are delays in shipments as exporters struggle to cover sales registered in February (at what now look like very good prices) because middlemen had got used to ever increasing coffee prices. Agrabes and farmers are in for big shocks, the market will not pay the expected prices, and as much as the Birr is expected to devalue vs the USD, the decline will most likely be slow and steady. For now stock holders of Naturals will wait to sell, time is on their side, after all we are in March and very little of this crop has been shipped so far.

There are stocks at processing mills in Addis but shipments in March and April will most likely be lower than we could otherwise have expected were it not for the scenario outlined in the previous paragraphs.

Birr 50.95 = USD 1

Have a good weekend.