Fighting is intensifying in the Northern part of the country, with rebel Tigray forces taking several towns from the National Army in Amhara region. Of concern to the Government will be reports that the rebels are moving Southwards in the direction of Addis Ababa and that they are now 350 km North of the capital. The BBC has several reports including the USA government’s reaction to the latest reports of rebels advances.

https://www.bbc.com/news/live/world-africa-47639452?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=617f91ef9ceecf0ab2ddd6d7%26US%20%27alarmed%27%20by%20reported%20takeover%20of%20Ethiopian%20towns%262021-11-01T07%3A20%3A53.683Z&ns_fee=0&pinned_post_locator=urn:asset:87528666-c002-4335-b2e2-80b994133c7d&pinned_post_asset_id=617f91ef9ceecf0ab2ddd6d7&pinned_post_type=share

https://www.bbc.com/news/live/world-africa-47639452?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=617fa69fa524990fa293c531%26Tigray%20general%20rules%20out%20talks%20with%20government%262021-11-01T08%3A37%3A00.604Z&ns_fee=0&pinned_post_locator=urn:asset:11c2e39d-5933-48fd-a053-cea6876cfdd8&pinned_post_asset_id=617fa69fa524990fa293c531&pinned_post_type=share

https://www.bbc.com/news/live/world-africa-47639452?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=617f62c217cef931bb3d33e1%26Abiy%20urges%20all-weapons%20fight%20against%20Tigray%20rebel%20advance%262021-11-01T04%3A38%3A26.559Z&ns_fee=0&pinned_post_locator=urn:asset:a7119826-1cac-4a02-9100-b90fb756564d&pinned_post_asset_id=617f62c217cef931bb3d33e1&pinned_post_type=share

It nearly seems inappropriate to discuss the arrival of the New Crop to market at this time of political instability and fighting, but that is what we need to do. The first arrivals from Tepi and Benchi Maji have started to reach the ECX and slowly but surely more coffee growing regions will start harvesting. Cherry prices converted to USD are higher than last year and these tend to increase over the harvest period as competition among agrabes intensifies. This season the aforementioned political instability and more restrictive financing environment might diminish pressures at farmgate level, time will tell. What is likely, given the ongoing devaluation of the local currency vs the greenback and the higher terminal market this year, is that cherry prices in Birr will be the highest ever paid.

Birr 47.22 = USD 1

Have a good week.

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.

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

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.

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