Prospect of shipment delays

Following several drone attacks on vessels by Houthi rebels in Yemen, many shipping lines stopped calling Djibouti this week with disruptions expected to continue for the foreseeable future. The expectations are that an international task force led by the US Navy will restore safe passage in the Bab el-Mandeb strait, the 20 mile body of water which lies between Djibouti and Yemen. Our understanding is that the port of Djibouti remains open however there are delays in vessels arriving and leaving.

Shippers had already been very active selling balance stocks during 1st half of December, we believe that any unsold stocks are now contracted. Overseas buyers will have longs at very attractive differentials. Execution will depend on what the NY terminal market does in the coming weeks, if it stays above 200 c/lb it could result in unfulfilled contracts.

Birr 55.88 = USD 1

Have a happy festive season!

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November shipments meet expectations

November 2023 shipments reached 16 K MT equaling the average November shipments for the past 5 years and were 4 K MT higher than in November 2022. All in all a good performance, December we also expect to be a good month for shipments. The higher terminal market and lower Minimum Registration Prices have flushed out the remaining lots in shippers warehouses at a time when the new crop is about to start arriving in Addis.

Accumulated exports for the 9 month period March to November remain below 200 KMT and around 21 K MT below the 5 year average for the same period. However, November shipments were strong and if this trend continues for the coming 3 months we expect that shipments for the 12 month period March to February to reach 240 k MT, which while historically low it is an improvement on where we saw things only 3 months ago.

Cherry prices in Sidamo have crept up as the harvest peaks, currently Washing Station operators are buying at 40 to 45 Birr per kg cherry, still well below last year’s prices.

Drought in the North of the country over the last few years is taking its toll on the population, the BBC reporting that 176 people have died from hunger in Tigray region: https://www.bbc.com/news/world/africa?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=6579441b87855b2dac7d4270%26Dozens%20more%20die%20of%20hunger%20in%20Ethiopia%20as%20drought%20worsens%262023-12-13T05%3A47%3A10.261Z&ns_fee=0&pinned_post_locator=urn:asset:445ac927-92db-4c9d-a58f-a85bc4ff3b1a&pinned_post_asset_id=6579441b87855b2dac7d4270&pinned_post_type=share

Birr 55.85 = USD 1

Have a good weekend.

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Last shipments of 22/23 crop close by

The Coffee & Tea Authority has reduced Minimum Registration Prices for 22/23 Crop Grade 5 coffees to try to boost shipments and clear warehouses of old crop as New Crop 23/24 is about to arrive in Addis for milling. New Crop 23/24 Minimum Registration Prices FOB Djibouti, are not so attractive, at around +100 for Grade 2 coffees from the South and 20 under for Grade 5s. The harvest continues to progress well with the Southern coffee producing regions approaching peak picking. Weather conditions remain favourable with a mix of rain and sunshine.

Most coffee growing areas are peaceful and safe. Cherry prices are increasing in the South reaching 40 Birr per kg cherry in some areas of Guji, however competition is subdued as a financing is limited and keeping a lid on out of control price hikes. Farmers are disappointed and we expect a higher than normal proportion of Naturals as a direct consequence of the perceived low prices for freshly picked cherries.

New crop Sidamo 4 FOB offers are competitive; shippers anticipate that the crop will be reasonably priced at farmgate level, demand subdued (Far East buyers are frustrated with the challenges of buying Ethiopian coffees over the past 2 crops).

Striking a more positive note, the city of Aksum was the centre of celebrations in recent days as reported by the BBC: https://www.bbc.com/news/world-africa-67589089

Birr 55.76 = USD 1

Regards

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Business activity improves

With the crop coming off trees in ernest, old crop is moving out of shippers warehouses and on to vessels at a steady pace and with an increased sense of urgency. Of course the recent upward movement in NY has also helped selling. We expect that November shipments will be steady following on from October exports which were an improvement on previous months’ shipments.

The harvest is approaching it’s peak now, all coffee growing regions are harvesting and so far we have no quality concerns. There is less cash in the field for cherry buying than in previous years which will limit the proportion of Washed Coffee, however the price remains well below last year’s price so export prices will not be under the same pressure as last season. In guji prices are now between 35 and 40 Birr/kg Cherry.

Weather continues favourable for ripening of the crop with intermittent wet and dry periods.

The BBC has report on a cholera outbreak in the east of the country following floods: https://www.bbc.com/news/world/africa?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=656862cb6868a4009ac43095%26Ethiopia%20cholera%20outbreak%20kills%2023%262023-11-30T10%3A56%3A13.317Z&ns_fee=0&pinned_post_locator=urn:asset:3aad4f18-02eb-45a8-adc1-0cc91a6b9f1f&pinned_post_asset_id=656862cb6868a4009ac43095&pinned_post_type=share

Birr 55.70 = USD 1

Have a good weekend!

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Inflation higher but under control

The Coffee & Tea Authority has started registrations for New Crop 23/24 at prices that have substantial premiums to current 22/23 crop Minimum Registration Prices. Grade 2 23/24 premiums over current crop at between 20 and 25 usc/lb, whereas Grade 5 premiums are a more modest 10 usc/lb. However, given fledgling NY terminal market prices, we expect that New Crop registrations will be paralysed for now, no one is going to rush to pay +50 for Limu 2 and +100 for Sidamo/Yirgacheffe 2.

Harvest in progressing well, lower areas in the South (Sidamo) have started harvesting, prices paid for ripe cherries remain under control. Wetter than usual weather is not hampering harvesting activities so far.

Inflation in October had an uptick, increasing 1% from 28.2 to 29.2 %. This was the first time in 7 months that inflation has gone up. Although the rate is higher it seems to be fairly stable, the Government seems to have a handle on things!

Talks between the Government and the rebel group Oromia Liberation Army (OLA) have broken down: https://www.bbc.com/news/live/world-africa-67176426?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=655d84af2ea49e2bc009bc58%26Ethiopia%20talks%20with%20rebel%20group%20OLA%20end%20without%20deal%262023-11-22T06%3A03%3A36.222Z&ns_fee=0&pinned_post_locator=urn:asset:4117bc81-712c-4e15-8735-1f359d0847dc&pinned_post_asset_id=655d84af2ea49e2bc009bc58&pinned_post_type=share

The BBc also reported this week on the misery that internal conflict is causing in the North of the country: https://www.bbc.com/news/world-africa-67505676

In other news, an Ethiopian artist has broken her own record for the highest paid work of art made by an African artist at an auction in NY, the BBc reports: https://www.bbc.com/news/world-africa-67437955

Birr 55.65 = USD 1

Have a good weekend.

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Strong shipments in October

Exports for October topped 20 K MT; Shippers started “throwing in the towel” under pressure from Coffee & Tea Authority penalties, seeing the New Crop on the trees ready to be picked and steady prices. November shipments should continue this recent improved performance aided by the recent buoyant NY terminal market which as come just in time to help clear warehouses waiting to receive New Crop coffee. These strong October shipment figures followed on from very robust September shipments, however 22/23 exports are lagging behind expectations and even if the coming months register above average shipments by the time New Crop coffees come to market (March 2024) shipments will still be lower than expected.

Washing stations in the South have started receiving cherries, prices are 25 Birr/kg. It really seems that thus far stakeholders have taken heed of last years pricing chaos and have become much more disciplined (last year cherry prices in the South were between twice and 3 times current prices). There is also much less cash available in the field for cherry buying, leading to less competition which in the past has fueled pricing hikes.

Currently there is not much interest for new crop offers, it appears that roasters are waiting for lower prices and/or clarity on demand. Trade buyers are put off by the lack of carry in the market and high (even if stable) interest rates.

In other news, one year on from the peace deal between Tigray rebels and the Government, the BBC reports on the situation in the North of the country: https://www.bbc.com/news/av/world-africa-67290495

Birr 55.63 = USD 1

Have a good weekend.

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Business returns aided by the higher market

The higher terminal market and lower minimum registration prices coupled with rather firm Natural differentials from other origins allowed for a little more business to get done this week compared to previous weeks. However, quality has to be very carefully checked and only small volumes are available as we are at the tail end of the 22/23 marketing season.

Regarding the 23/24 crop the outlook remains positive, good rains followed by days of sunshine are ideal weather conditions for the ripening of the crop. Harvesting in Sidamo, Guji and Yirgacheffe is imminent. Cherry prices remain between 25 and 30 Birr/kg cherry. Liquidity concerns are ongoing, financing this crop has not been easy and is unlikely to get any easier as banks are reluctant to advance cash having had their fingers burnt last crop. We remain extremely optimistic that quality concerns surrounding last crop 22/23 will not repeat themselves this time round.

Fighting in Amhara returns to the region, for more please follow the link: https://www.bbc.com/news/world/africa?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=6548a7032ea49e2bc0099d81%26Fighting%20intensifies%20in%20Ethiopia%27s%20Amhara%20amid%20blackout%262023-11-06T09%3A15%3A12.881Z&ns_fee=0&pinned_post_locator=urn:asset:eea4423c-a80a-4700-83cf-3ad263915126&pinned_post_asset_id=6548a7032ea49e2bc0099d81&pinned_post_type=share

The Prime Minister stoked tensions with Eritrea with comments regarding the problems that Ethiopia faces due to being a landlocked country since Eritrea succeeded in the 90’s. For the BBC’s take on this story please follow the link: https://www.bbc.com/news/world-africa-67332811

Birr 55.60 = USD 1

Have a good weekend.

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Harvest progresses smoothly

Cherry prices have increased a tad this week, we have heard that agrabis are paying up to 30 Birr per kg of cherry. This price remains still well below last year’s cherry prices which reached 3 times as much. Weather continues favourable for harvesting. Benchi Maji has seen some rain but this is not affecting processing. Liquidity remains tight with cash to finance the crop very much reduced viz a viz past seasons. Banks had their fingers burnt during the last couple of years and now are reluctant to support exporters.

Saudis continue to be the main buyers for Ethiopia coffee, most of the recent contract registrations are of UG quality which has a Minimum Registration Price of 1.33 USD/lb, and is therefore cheaper that Brazil. The lower price reflects the poor quality, however these shipments will insure that new crop shipment starting 2nd quarter 2024 will not be mixed with current crop lower quality coffees. Some volumes of washed coffee remain unsold however price/quality matrix not working for most buyers.

Security remains stable at present, most of the country seems to be peaceful.

The PM halted any speculation that tensions with Eritrea have increased in recent weeks: https://www.bbc.com/news/live/world-africa-67176382?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=653a1bb4364b3f1612ec6815%26We%20will%20not%20invade%20any%20country%20-%20Ethiopia%20PM%262023-10-26T09%3A06%3A40.863Z&ns_fee=0&pinned_post_locator=urn:asset:75b2faec-8268-40f4-a36a-2b59d8db3dc4&pinned_post_asset_id=653a1bb4364b3f1612ec6815&pinned_post_type=share

On a more positive note an Ethiopian scientist working in the US has been awarded the prestigious National Medal of Science by President Biden: https://www.bbc.com/news/world-africa-67213442

Birr 55.48 = USD 1

Have a good weekend

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Inflation continues on a downward trend

This week’s rally in NY helped a little business get concluded. However Minimum Registration Prices continue to limit business, additionally demand is muted, normally a 15 cent rally would induce a few contracts getting signed off, alas not this week.

Meanwhile focus is increasingly turning to the new crop which continues to come off the trees. Cropping is ongoing in Djimmah and Limu areas. Weather remains favourable and prices stable at between 20 and 25 Birr per kg of cherry.

On a different topic, inflation has been declining for 6 months. However, Black Market forex rates continue extremely high at approximately double the official rate.

Birr 55.42 = USD 1

Have a good weekend

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September shipments still below potential

Ethiopia coffee exports reported as 17 k MT bringing the 7 month March to September period to 160 k MT. We are currently 21 k MT below the 5 year average and given that this 23/24 March to Feb period should have been an up year the pace of shipments is very disappointing. We believe that the inventories are at elevated levels across the supply chain, and particularly high at farmer level as a consequence of prices having not met growers expectations. Furthermore, the Coffee & Tea Authority (C&TA) continues to maintain elevated Minimum Registration Prices, particularly for lower quality Grade 5 Naturals discouraging export sales to European markets.

Looking at the coming months we would normally expect shipment flow to decrease between Oct and Feb, given that weakness in the terminal market, poor quality of the coffee remaining in the country and general stubbornness of farmers and the C&TA we expect that exports will remain below potential. I would be surprised if the by the end of the 12 month period (Feb 24) shipments have reached 225 k MT.

Meanwhile harvesting and processing of the 23/24 crop continues, cherry prices remain below 25 Birr/kg (less than half the price paid last year) and given the lack of cash in the field we expect that they will remain contained. Limu areas will start to receive cherries second half October and the Southern regions will start in November.

As a big part of the export market is closed due to high minimum registration prices, local “mercato” coffee prices have decreased due to increased availability of coffee for local consumption. Additionally, crop quality is so poor that the proportion of undergrades is much higher.

Birr 55.35 = USD 1

Have a good weekend.

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