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.
https://www.coffeeithaka.com/wp-content/uploads/2021/08/Green-coffee-beans-natural.jpeg333500Charles Seara Cardosohttps://www.coffeeithaka.com/wp-content/uploads/2020/08/logo-ithaka_350133.pngCharles Seara Cardoso2021-08-20 14:19:192021-08-20 14:19:22Arrivals in Addis from upcountry slowing down fast
July 2021 exports just shy of 30,000 MT. March to July 2021 exports total 158 k MT vs 123 k MT same 5 month period in 2020. This means that Ethiopia has exported over half a million bags more of the 2020/21 crop than at this point 12 months ago of the 19/20 crop. At this rate exports will top 5 M bags by Feb 2022! We expect the pace to tapper over the coming months, the peak is over and coffee arriving in Addis is currently down to a trickle. The wet weather has made roads impassable and terminal market volatility disrupted the steady flow of coffee from agrabe to shipper. Not to mention the ongoing and worsening logistical situation. If things are bad in the Far East and in Brazil, imagine how Africa is coping with challenging logistics! Not very well, believe me.
Anyway we should not complain, pace of exports so far this 20/21 crop have been good, we foresee many challenges going forward due to difficult logistics, market volatility and an increasingly uncertain security situation. However, the past few months have been positive for the Ethiopian coffee supply chain, if the flow slows down a little now it is to be expected. Trading has slowed down considerably, not many shippers have coffee to sell and sourcing in the interior is is difficult as agrabes continue to ask for sky high prices.
https://www.coffeeithaka.com/wp-content/uploads/2021/08/Coffee-cherries-on-branch-2-a.jpeg339500Charles Seara Cardosohttps://www.coffeeithaka.com/wp-content/uploads/2020/08/logo-ithaka_350133.pngCharles Seara Cardoso2021-08-13 11:22:082021-08-13 11:22:11July exports, lower than June but still a record July
A lot has happened on the terminal market in the last 3 weeks, all said and done, we are now roughly 20 cents higher than we were before the frosts and subsequent panic that saw the market travel from 155 to 213 and back to around 175 today.
In Ethiopia this has stopped trading altogether there is nothing arriving in Addis from the growing areas. Middlemen that already sensed they had the upper hand on shippers before the July shenanigans have stuck to demanding around 200 c/lb FOB equivalent for Grade 4 and 5 coffees. Shippers cannot absorb these loses so have stopped buying and consequently coffee arriving in Addis is down to a trickle. After 4 months (March to June) of record exports we now bracing ourselves for record defaults and delays!
Logistics are a disaster, there are no containers in Addis, it takes us a minimum of 2 weeks to get an empty box to stuff. Afterwards coffee lies waiting for weeks to get a slot on a vessel, there are continuous vessel cancellations and slots are starting to resemble gold! To add to our many logistical woes trains on their way to Djibouti have had to return to Addis mid-journey due to violence in the Afar region that lies Northwest of Addis and has to be crossed to get to Djibouti.
In light of these challenges expect delays and traders tearing their hair to fulfil delivery deadlines and to cover commitments.
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!
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%).
https://www.coffeeithaka.com/wp-content/uploads/2021/07/Coffee-bag-scaled-e1625837120510.jpg5941058Charles Seara Cardosohttps://www.coffeeithaka.com/wp-content/uploads/2020/08/logo-ithaka_350133.pngCharles Seara Cardoso2021-07-09 15:48:192021-07-09 15:48:21Exports explode in June
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.
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.
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.
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:
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!
https://www.coffeeithaka.com/wp-content/uploads/2020/07/ithakaIMG_4323.jpg13822074Charles Seara Cardosohttps://www.coffeeithaka.com/wp-content/uploads/2020/08/logo-ithaka_350133.pngCharles Seara Cardoso2021-05-28 15:18:262021-05-28 17:26:28It´s all a bit of a mess!
