All

Prices offered by shippers have soared in recent weeks and continue to do so. It seems that exporters are happy to slow down their selling activity and focus on milling and shipping. Volumes available internally are down as a consequence of past high activity and the current wet weather which is slowing down the movement of coffee from the growing areas to more urban towns and from there on to Addis. We believe that Export Registrations have surpassed all expectations and now the need to execute has come home, this has slowed the pace of new sales. Tensions between agrabes and shippers have not subsided and exporters continue to have a hard time “forcing” agrabes to fulfil commitments, with many preferring to hand back borrowed cash rather than deliver coffee which they sold elsewhere at higher prices. Logistics continue to heavily hamper export business. Coffee ready for export is taking over a month to get from Addis on to a vessel, due to the lack of containers and space on vessels. Shipping lines are in disarray providing conflicting information on vessel schedules, allocations and where stuffed containers are. We are expecting increased delays in July viz-a-viz June; and June was not great!

The conflict in Tigray is worsening, for more info: https://www.bbc.com/news/world-africa-57818673

Birr devaluation vs the greenback seems to be flattening out a tad in the last 2 months, having previously devalued 10% between Jan and May 2021:

Birr 44.04 = USD 1

Have a good weekend!

Once again shipments are up. As the graph below clearly shows, Ethiopian shippers are rushing to get the crop on vessels; No doubt that some urgency is due to the elections held last month, however I feel that the last few weeks NY price action allowed for lots of business to be concluded and even with many logistical constraints coffee has been getting on vessels. We should not understate the significance of achieving nearly 40 K MT shipped in one month, the previous record was 32 K MT (set in May), that is an increase of 8 K MT on the previous record or 25%. We expect that the July figures will be strong, however we are not expecting them higher than the June shipments. Later on in the year the pace will drop drastically, since the 20/21 crop is decent but production will not be able to sustain this pace of shipments.

The wet weather has caused some problems in getting coffee from the growing areas to Addis. Roads have been washed way making them impassable, these instances are usual for this time of the year, during the rainy season.

Twelve month Inflation rate at June 21 was 24.5 % (May 19.5%).

The situation in the North of the country is a mess: https://www.bbc.com/news/world-africa-57703538

And the dam issue resurfaces escalating tensions with Egypt: https://www.bbc.com/news/world-africa-57734885

Birr 43.89 = USD 1

Have a great weekend.

All

So this was the long awaited Election week. Monday was a holiday for the poll to take place and after a long day of voting, with many polling stations having stayed open into the night to allow for all voters to cast their ballot, Tuesday normal life returned to Addis. Many locations, deemed unsafe, will have their poll in September. In Tigray, where hostilities are ongoing, no date for the Elections has been announced. Results will start to trickle in from now onwards but final results are not expected for weeks.

All warehouses are open and activity continues. This week we loaded containers, drew PSS and even managed to buy some coffee! Logistical constraints are ongoing but no worse than they were one or two weeks ago. Unprocessed coffee has started to flow again from the interior to Addis as the poll has been largely peaceful in the locations where it was possible to be carried out. In some areas of Djimmah/Limu where there were some instances of insecurity it could take a little longer for coffee to start flowing to Addis.  

The Government continues to reject perceived meddling in its internal affairs by foreign nations. Fighting has intensified in some areas in Tigray and the Airforce was accused of dropping airborne bombs on civilians killing dozens of people at an open air market. There really seems to be no end in sight to suffering for a population ravaged by war and hunger.

There is little trading activity at the moment, shippers are over committed and reluctant to sell more; likewise importers are very much focused on seeing coffee get on vessels rather than buying more; this is a time of the year where the focus is much more on execution than on trading!

We have not looked at how the pandemic has been developing in Ethiopia for a number of weeks now. Below the graph shows that the wave that peaked in the Spring is clearly receding. Furthermore the number of doses of the vaccine administered is at 2 Million, although small for a country that has a population in the tens of Millions, it is a start!

Birr43.60 = USD 1

Let’s hope that the calm environment is ongoing so that coffee continues to flow through the supply chain and on to vessels in Djibouti.

Have a good weekend.

All

So next Monday is election day in Ethiopia; it has been a long-time in coming, originally meant for mid 2020, the ballot was postponed more than once. For more background on this major political event please follow the link: https://www.bbc.com/news/world-africa-57102189

Shippers stopped loading export containers from Wednesday onwards to avoid having cargo in transit during the election period. Likewise, coffee stopped moving from upcountry to export mills in Addis in anticipation of the ballot.

The last couple of weeks had seen the logistical situation improve a tad, with more availability of containers and slots on vessels, however shippers were experiencing delays in Coffee Liquoring Unit (CLU) approval of export samples for up to 3 days.

Business activity has slowed somewhat. NY moving off the highs, Elections and sheer volume of previously established commitments have all played a hand in reducing the quantities changing hands from shippers to overseas buyers. Some roasters are still looking for specific qualities, however having filled up during the recent rally in NY, are now holding back a little waiting for execution of unshipped business.

As we enter the rainy season we expect both quality and volume arriving in Addis to decrease. Volumes will decrease because roads become impassable and wet weather is not conducive to transporting coffee. As a consequence of this limitation in supply to shippers, agrabes will try to sell their lower quality to shippers in need of coffee to fulfil their commitments. From October, weather improves and whatever stocks remain upcountry need to be sold so the tables turn, and agrabes will be the ones needing to sell their balance stocks before new crop becomes available at farmgate level.

Monday is a holiday in Ethiopia, hopefully the poll is peaceful and normal activities will resume thereafter.

Birr 43.50 = USD 1

Have a good weekend.

All

For the 3rd month in a row shipments hit a new record, last May exports reached over 32 k MT a record for the month of May and indeed the highest monthly exports figure ever! Some Ethiopian insiders believe that these high Export figures are due to the upcoming ballot (June 21st), no doubt that the ballot has focused minds to get coffee on vessels, however I believe that other factors, much more coffee related than political, explain these high numbers. Firstly, the 2020/21 crop is larger than the previous crop, therefore there is more coffee available. Secondly, prices have been very attractive for both overseas buyers and shippers, so export business has been brisk and in volume. While Brazil differentials remained fairly firm over the past couple months as NY rallied, Ethiopia Natural differentials weakened significantly attracting overseas buyers’ interest, like bees to honey! June shipments are likely to remain high, even with the disruption to flows around the Elections. Indeed we expect that shippers will remain under pressure and very busy for many weeks to come.

Logistics have been a struggle, in fact, if there were more containers available and if space on vessels was not constrained, we would have an even higher Export figure. Although shipping lines are the main guilty party in causing this bottleneck, at times of known potential instability, such as tribal tension and Elections, importers slow down their activity and run stocks down, resulting in less imports and a lower number of containers being imported, and therefore less containers available for exports.

The UN has declared that the northern region of Tigray has famine. The BBC explores this in the following article: https://www.bbc.com/news/world-africa-57422168

Birr 43.30 = USD 1

Have a good weekend.

All

Logistics continue to be a struggle but we better get used to it because there is no end in sight!

The local currency is devaluing as we expect however the pace has accelerated in the last couple of months bringing with it fears of basic goods price hikes in the near term:

The recent terminal market action has incentivised business to such an extent that shippers are currently reluctant to offer until current commitments are fulfilled. The minimum price that a few months ago was an impediment to business has become totally irrelevant, shippers’ prices are now well above those set by the Coffee & Tea authority (C&TA). The graph below shows the differential of Lekempti 5 minimum registration price vs NYC. Currently Lekempti 5 is trading at a 20 cent premium to the Minimum registration price set by the C&TA:

Birr 43.1 = USD 1

Have a good weekend.

All

Another holiday in Ethiopia today, slowing things down when we need them to pick up!

Offers from shippers have all but dried up; As NY continues it’s drive upwards, Agrabes are getting emboldened and only release upcountry stocks at ever increasing prices. Offers at ECX are down to a trickle. Up country prices have exploded, in Sidamo the FOB equivalent for Grade 2 is 250 usc/lb and for Grade 4 160 usc/lb FOB. Shippers are therefore very focused on executing existing commitments struggling to first prise coffee from suppliers, and then empty containers and slots on vessels from shipping lines. There is plenty of coffee in Ethiopia, the struggle is to get it moving along the supply chain and on to vessels.

Politically the situation in Ethiopia is worsening, President Bidden has demanded the cessation of hostilities in Tigray and imposed sanctions in an attempt to stop atrocities being committed by Eritrean and Ethiopian forces in the region. The Ethiopian PM wants the US to stop meddling in what he perceives has Ethiopian internal affairs. Pls follow the link for the BBC’s take on the current political situation: https://www.bbc.com/news/world-africa-57266110

Covid cases and related deaths continue on a downward trend, to the relief of everyone.

The postponed General Election is due to be held on June 21st; let’s hope this time it actually happens!

Forex: Birr 43.00 to the USD

Have a good weekend.

All

Ethiopian Electoral Board announced a postponement of the ballot originally being held on June 5th. No new date has been given since the oficial issues behind this decision, slow voter registration, delays in training polling station staff and supply of ballot papers have not been overcome! The extreme insecurity in different parts of the country are a very strong reason not to hold the ballot at present and until resolved will continue to hamper efforts to forge forward with planning for the ballot. In Tigray region all plans to hold the poll had already been abandoned, however instances of violence in other parts of Ethiopia continue to occur and impede normal daily life.

Meanwhile in Addis, coffee mills are full and working at capacity churning out coffee for Export; the usual logistical constraints, lack of containers, changing vessel schedules and equipment breakdowns hamper efforts to get coffee on vessels. Having said this, we continue to expect Export figures to remain at very high levels as a combination of attractive prices and a bumper crop “push” coffee on to vessels!

Overseas buyers appear to have an insatiable appetite, Ethiopian coffee inquiries do not stop coming and business continues to be concluded; Ethiopia Washed Coffees are increasingly competitive vs coffees from other Origins, as Ethiopian Naturals have been vs Brazil. At this rate, carry out stocks are likely to be small this year across the full quality spectrum.

Minimum registration prices for Washed coffees were set lower this week, a clear sign that the Coffee and Tea Authority (C&TA) is in misteep with both the NY Terminal Market and overseas demand for these coffees.

Now some good news, Covid cases and associated deaths continue to decline. Nearly 1.5 Million doses of the vaccine have been administered.

Source: World Health Organisation

Birr 42.70 = USD 1

Have a nice weekend.

All

We recorded in April 28.8 k MT of Exports in Ethiopia a new record for the month of April, following a record March. Things are looking good for this year! It will be interesting to see how Export shipments progress over the coming 4 months (peak shipment season); we believe that exports will remain at a very high level, prices are attractive, quality is good and the crop is big.

Internal flow is nearly restricted to Vertical Integration. The increase in terminal prices continues to strain the relationships between Agrabes and Shippers, with the former pushing to renegotiate previously agreed prices to better reflect a higher NY market. We expect some disruption but we not expect the overall export figures to be negatively impacted by stakeholders wrangling!

Covid cases continue to decline on a weekly basis and vaccinations are ongoing, so far nearly 1.5 Million doses have been administered.

Elections are still set to take place in June. The European Union is no longer sending a monitoring team to the country having not been able to agree a remit for their monitors with the Ethiopian Authorities. Registration to vote has been extended so as to allow more of the population to cast their votes in a few weeks’ time.

Birr 42.45 = USD 1

Have a good weekend.

Hi

Another up week in NY leading to increased activity in Ethiopia. One does get the sense though, that there has been a lot of selling in the past few weeks and that shippers are now concerned with covering rather than selling at higher prices! The supply of coffee to ECX is down to a trickle, in the last 5 trading days only 1,600 MT were traded; we would have expected at least 4 times that figure; In the last 3 years during the same period between 6,000 and 7,000 MT were sold at ECX! With the ECX quickly disappearing as a source of coffee for shippers, vertical integration supply chains are being challenged by short shippers desperate to access coffee and agrabes that see opportunities to increase their returns daily. The relationships between shippers and agrabes are being stretched, shippers financed agrabes want “their” coffee and agrabes demand higher prices more reflective of a higher terminal market. Eventually things will sort themselves out, for now stakeholders haggle. Export Logistics have not improved, containers and slots on vessels are hard to come by. In spite of these challenges we are still expecting very strong export figures for the month of April.

Covid cases (and thankfully related deaths) continue to decline and a heavy military presence throughout the country if keeping the peace.

Birr 42.13 = USD 1

Have a good weekend.