The period March to September was frenetic with huge shipments, many logistical challenges and mired with the pitfalls of trading in a rising market. The waters are much calmer now, with little to offer shippers are focusing on readying the most recent sales and laying the ground for the upcoming crop. There is much to prepare, the ECX became a secondary market to Direct Buying from agrabes in 20/21 and the number of shippers exploded into the hundreds. Our pool of suppliers has mushroomed as a consequence, we have bought from dozen of shippers that had not exported a bean of coffee until this season. It has been a steep learning curve for us and our suppliers.

The next crop appears a tad delayed but we are still expecting a good crop in most growing areas. We are working on our crop report 21/22, but have to admit that the current instability in the country is posing many difficulties to travel and to properly carry out surveys.

Fighting in the North of the country continues, however it is very difficult to get accurate reports on what is happening on the ground. Both sides state that they are open to talks but there is little evidence to suggest that this will happen anytime soon.

Birr 46.93 = USD 1

Have a good weekend.

All

It seems that the new Government in Ethiopia has as a priority to deal with the crisis in Tigray, launching a large scale military offensive this week. For the BBC’s take on the issue please follow the link: https://www.bbc.com/news/world-africa-58869970

Meanwhile the September Export numbers show a decline in shipments vs August, as expected, and this reducing seasonal trend is likely to continue for the coming 3 months. Shipments have been heavily skewed towards the first half of the shipment year so the pace of sales for the period Sep to Feb is also likely to decrease more than usual. Warehouses and processing mills are looking very empty, only dwelling stocks remain in Addis unprocessed and unsold, recent spikes in the terminal market having flushed out much of the remaining stocks.

On the logistics front, finding containers to stuff is getting harder, whenever a vessel leaves Djibouti it seems to have dozen of our containers since there are so few calling Djibouti. Our shipments pile up at the port until a vessel finally comes and then it all loads! Timelines from PSS approval to FOB are getting longer all the time, not even the reduction in shipments has helped. With the economy stagnating because of the fighting, imports are lower and consequently the number of available containers is also reduced.

New crop has started in a few areas like Benchi Maji. Limu area is expected to start second half October. Cherry prices are all over the place ranging from 20 to 30 Birr/kg. However we only expect to get a meaningful cherry price level once the harvest gets underway in earnest, in November.

Birr 46.66 = USD 1

Have a good weekend.

Minimum Registration Prices set weekly by the Coffee & Tea Authority (CTA) have been irrelevant for the past few months; as the terminal market rallied exporters were able to find plenty of eager buyers at ever increasing flat prices. Infused by the 10 cent move last Friday, the CTA decided to up the prices that shippers can register new export sales and then the market lost everything it had gained the previous week. It has now become difficult for shippers to sell Washed coffee in particular, as Yirgacheffe 2 and Sidamo 2 Minimum Registration prices are 266 and 257 USC/LB FOB Djibouti, too high to find buyers. Natural Grade 5 coffee is still attractive at around -30/35 FOB but was more attractive below 40 under!

Logistics continue to be a struggle, usual lack of containers and slots on vessels with the added frustration of erratic schedules thrown in the mix making any sort of planning impossible; We remain optimistic that the situation will improve as the peak shipment period is behind us. However, declining imports could reduce further container availability…

Prime Minister Abiy appointed his Cabinet and included in his team 3 Ministers chosen from opposition parties. The hope now is that the new government can resolve the conflict raging in the North of the country, tackle inflation and return the country to the previous rapid economic growth path experienced before the Tigray conflict began.

On a lighter note, Ethiopia’s Sisay Lemma won the 2021 London Marathon held last weekend in the streets of the UK’s capitol city.

Birr 46.44 = USD 1

Have a good weekend

Stakeholders’ focus is turning towards the imminent new crop which is just around the corner, all coffee growing regions are expected to start harvesting in October. The crop in the South is looking very good, particularly in the higher growing areas, where farmers are expecting an improved crop viz-a-viz the 2020 crop. It all bodes well for both quality and quantity. This in turn is putting pressure on agrabes and shippers to move along the value chain the remaining stocks from the current 20/21 crop and with a little help from the terminal market culminated with increased export sales towards the end of the end of the week. Insecurity is still very much of concern, some growing areas have imposed night time curfews to try to curb lawlessness.

The official forex rate continues to slowly and steadily decline, however with soaring inflation it is not surprising that the black market rate is nearly double the official rate.

Several regions that had not been able to hold elections in June due to insecurity finally managed to hold a ballot this week; the results of these regional elections are not expected to change the outcome of the overwhelming victory for the governing party in the June poll.

Meanwhile the government continues to be at odds with the international community over the Tigray conflict, for more on this please follow the link: https://www.bbc.com/news/world-africa-58753569

Forex rate: Birr 46.16= USD 1

Have a good weekend

We mentioned a couple of weeks ago that inflation has taken off in Ethiopia, this week we are looking at this in a little more detail. Having hovered between 18 and 20% over the previous 12 months, in June inflation started to accelerate to reach over 30% in August, the highest inflation rate in over 10 years. The main component of the Inflation Rate is the price of food with a weight of 54%, and this element has increased by 38% in August!

This is a direct consequence of lack of supply; mainly of foodstuffs caused by the debilitating fighting within Ethiopia. We discussed in an earlier post the measures taken to try to halt this steady rise in prices starting with cancelling import duties on basic goods. However, with fighting spreading to Amhara and Afar the food security situation is not improving.

On the coffee front sporadic offers and buying interest keeps popping up here and there. The logistics continue to be a struggle and we feel that the volume of business has slowed down a tad.

Birr 46.02= USD 1

Have a good weekend.

Coffee shipments from Ethiopia were up once again in August after a strong July. August, which normally marks the start in a decline in shipment pace recorded shipments of over 32 K MT. This is the 3rd month in the last six to record shipments above 500 k bags. Shipments March to August topped 190 K MT, 50 K MT more than the same period in 2021. This is a remarkable performance considering that the logistics are so difficult at present, causing delays. September should also record a good export performance since there are so many penned up shipments that have spilled over from August to September.

Offers continue to pop up from small (sometimes unheard of before) shippers. Larger offers are difficult to come by. Shippers that have stock are being more realistic about price expectations allowing for more trading to take place.

On a lighter note, Ethiopia celebrated the New Year this week. For more on this and other Ethiopian peculiarities pls follow the link: https://www.bbc.com/news/world-africa-57443424

Birr 45.87 = USD 1

Have a good weekend.

In a bid to tackle recent food inflation, the Government has waivered all import duties on wheat, sugar and edible oils. This is step in the right direction in addressing the people’s main concern in recent months, soaring prices for basic food stuffs. Furthermore, the National Bank of Ethiopia (NBE) has just done a u-turn by reverting the decision to not allow Asset Based Collateral Loans for Importers, acknowledging that the restrictions imposed a couple of weeks’ ago would have adversely impacted the Government’s inflation busting policies. This is a boost to those Coffee Exporters that also own import businesses.

Asking prices from shippers remain all over the place, but generally speaking they seem to be coming a off a little, probably because recent high asking prices have failed to attract business. In addition, stakeholders are starting to feel the pressure to dispose of their stocks (if they have any) as the new crop is round the corner and NBE is tightening monetary policy, restricting imports of nonessential goods and materials. However, availability is scarce, you really get the feeling that there is little coffee around.

Although the war feels far way from Addis, fighting in the North of the country is intense and spreading to Amhara and Afar regions. Please follow the link for the BBC’s latest assessment: https://www.bbc.com/news/world-africa-58450223

Covid situation in Ethiopia has recently been quite bad but it would appear that the country is starting to recover after a 3rd wave of infections. Each wave has been worse than the previous one and vaccination rates are way below what we have in Europe and other Northern hemisphere countries.

Weather remains favourable for the upcoming crop with some picking in the lower lying coffee growing areas to start still in September.

The local currency devalued 2.5% in the last month vs the USD.

Birr 44.67 = USD 1

We have been reporting in the last couple of weeks on the downward turn that the Ethiopian economy seems to have taken in recent months. The Government this week has taken some measures to restrict liquidity and try to tackle inflation. The National Bank of Ethiopia (NBE) increased the base rate from 13% to 16%. Additionally, commercial banks require to up their deposits with the NBE from 5% to 10%.

The Government also announced that exporters will only be granted (for imports) 40% of the value in U.S. Dollars that they export, it was 70% until yesterday. We are not entirely sure of the impact of this squeeze on liquidity, however it is now harder for those shippers that rely on the USD proceeds from coffee exports to finance their import business, and therefore there will be less imports.

The worsening economic outlook has negatively impacted imports and the number of food grade containers arriving in Addis. If fewer containers are imported, then fewer containers are available to load coffee for export… As a consequence, despite a seasonal reduction in shipment pressure, it has become harder to find containers to load coffee for export. Average waiting time for containers has gone from 2 weeks to 3 weeks and we believe this is likely to worsen since imports are likely to decline further.

What will the Ethiopian Government do with increased proportion of USD that now has to be transferred to NBE? Resupply the army or buy much needed food and other first necessity goods? We hope for stability and prosperity, for the BBC assessment on what it is like to go about your daily life in Ethiopia these days, please follow the link: https://www.bbc.com/news/world-africa-58319977

Offers from shippers are few and far between, prices are all over the place, it really feels that coffee stakeholders are uncertain about what to do and where things are going. Meanwhile the next crop is coming along nicely, weather (so far) has been favourable, leading us to believe that the crop will be a good one, both in terms of quantity and quality. The coming 3 months will be crucial, in terms of weather and political stability, to insure that 2022 exports fulfil expectations and surpass 2021.

Forex Birr 45.57 = USD 1

Larger shippers are really struggling to acquire, mill and ship coffee. Most have slowed down their operations to a trickle compared to the peak shipment months leading up to June. This is coinciding with a considerable decrease in import activity and consequent reduction in the availability of containers in Addis Ababa. It is fortunate that March to July were very higher export months allowing a higher than usual share of the crop to be shipped. The ongoing fighting in Ethiopia is starting to slow down economic activity, negatively impacting imports and inflation is once again gaining pace.

As mentioned, the fighting between Tigray forces and the National Army supported by local militias continues unabated, the latest as reported by the BBC:

https://www.bbc.com/news/live/world-africa-47639452?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=61277d6eb19a573a6ec3821f%26Tigray%20fighters%20accused%20of%20killing%2035%20in%20Amhara%262021-08-26T12%3A08%3A43.715Z&ns_fee=0&pinned_post_locator=urn:asset:0dfd5510-0845-4cc7-9c31-d7860b2ab9a0&pinned_post_asset_id=61277d6eb19a573a6ec3821f&pinned_post_type=share

Middlemen sitting on coffee are starting to get a little restless, as shippers are not willing to pay the equivalent of 200 c/lb FOB for Naturals; nevertheless there is no indication that agrabes are settling for anything close to commercially viable prices. If in a few weeks’ time NY terminal market remains below recent highs, when roads are less waterlogged and the next crop starts to ripen, there will be a shift in priorities and we expect that middlemen will release their last stocks at more reasonable prices.

Birr 45.27 = USD 1

Have a good weekend.

Hi

With little coffee arriving from upcountry and the ongoing good shipment pace, stocks in Addis are starting to look depleted. Much less coffee is arriving in Addis due to seasonality, rains making roads unpassable and high price expectations of agrabes impeding trade. Middlemen having sold most of their stocks are now holding out for high prices in the knowledge that shippers are short and volumes available in Addis are very much reduced. In light of this we expect in August to record lower shipments than in July and June, but it is in September that we expect a more significant drop in pace of exports. Offers from exporters are hard to come by and the few that offer are asking for high prices that are not viable in a declining terminal market. Weatherwise, the current colder and wetter weather is normal for this time of the year.

As normal the Birr continues to devalue at a steady pace to the USD, however basic necessities’ price inflation is very high and some are questioning the relevance of the current forex policy.

Birr 45.05 = USD 1

Have a good weekend.