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:

The BBc also reported this week on the misery that internal conflict is causing in the North of the country:

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:

Birr 55.65 = USD 1

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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:

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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:

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:

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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:

On a more positive note an Ethiopian scientist working in the US has been awarded the prestigious National Medal of Science by President Biden:

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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.

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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.

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The Coffee and Tea Authority decreased Minimum Registration Prices by 3 cents, however Grade 5 FOB prices remain at a premium to NY. As a means of getting around this impediment to trade Under Grade (UG) sales are being registered at the current Min Reg Price of 133 c/lb.

New crop harvesting continues without any hiccups, weather remains favourable and prices much more in line with international market prices. The security situation in several regions of the country seems to have improved in recent weeks, this will greatly help farmers as the coffee harvest gathers pace. In Tepi the first samples will be available as early as next week.

In other news, a UN-backed inquiry into abuses committed in Ethiopia will end its work next week after member countries chose not to renew its mandate. Furthermore, the US Government resumed distributing much needed food aid, for more on this please follow the link:

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Analysing Export data and destinations of Ethiopian Coffee Exports from the last 2 years, we can clearly see that the quality issues over the last few months have resulted in some destinations gaining and others losing market share. Saudi Arabia is now the top destination for Ethiopia, with Germany (previously top dog) dropping to second place. Interestingly, Saudi Arabia, UAE and Sudan are the countries among the top 10 destinations with increased volume. More traditional destinations such as Germany, Belgium and Japan have reduced imports drastically. Overall shipments decreased by 1 Million bags reflecting lower availability and the struggle to find a market for very poor quality current crop coffees.

Trading continued slow this week, there were 2 holidays on Wednesday and Thursday, furthermore terminal market dropped 11 cents week on week with Minimum Registration Prices decreasing much less, between 5 and 1 cent/lb. There will be few buyers for Grade 5 at plus differentials!

The harvest is progressing well, lower growing areas of Tepi, Benchi Maji and Bebeka are all harvesting. Limu will start within 2 weeks, cherry prices are approximately half the price paid last year. Washing stations owners had their fingers burnt last season, so sticking to prices between 20 and 25 birr/kg cherry. In addition less liquidity means there is less cash in the field, as a consequence competition is much lower even if farmers are resisting the lower prices. All this is good for Natural Grade 5 availability in 2024, crop is good and the proportion of Naturals will be big. Weather wise, there are no concerns.

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Shipments for August reached 26 k MT, which is the average for the last 5 years. However the 6 month exports March to September 2023 is still 19 K MT below the period’s average of 161,743 MT. We are now half way between the shipment period February to March, and it looks like we are going to struggle to reach 4 M bags for the the full year. Plenty of coffee remains upcountry, agrabes are still holding substantial volumes of parchment and farmers still hold above average dried cherry inventories; export volumes can only recover if these stocks are bought and exported by shippers. However, banks are reluctant to further finance non performing shippers and quality of the coffee that remains in country is generally poor. Prices in the internal market have dropped as there are more sellers than buyers at present. Paradoxically, Minimum Registration Prices for export contracts have remained unchanged for several weeks, so overseas buyers cannot even be tempted by low prices.

Ethiopia announced this week that the GERD dam has reached a new milestone:

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Retail Fuel prices were increased from 69 Birr/L to 75 Birr/L, a 12% increase in the price. However, inflation is at its lowest in 2 years and trending lower:

For the past 2 months inflation has been below 30% p.a. which we have not seen for 2 years and has been decreasing for 4 months on the trot.

Meanwhile there is little trading in Ethiopia, Minimum Registration Prices are too high and quality leaves a lot to me desired. We should have August shipment figures next week, again these are likely to disappoint.

Weather remains favourable for the harvest which is rapidly approaching.

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Meanwhile the BBC reported on a confrontation in Tigray between protesters and authorities:

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