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: https://www.bbc.com/news/world/africa?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=651fb4def34eee40bb92a8fe%26US%20resumes%20food%20aid%20to%20refugees%20in%20Ethiopia%262023-10-06T08%3A58%3A57.862Z&ns_fee=0&pinned_post_locator=urn:asset:9a9af04e-4ecb-4f43-a189-1da65001c87c&pinned_post_asset_id=651fb4def34eee40bb92a8fe&pinned_post_type=share

Birr 55.28 = USD 1

Have a good weekend

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.

Birr 55.20 = USD 1

Have a good weekend.

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: https://www.bbc.com/news/world-africa-66771155

Birr 54.14 = USD 1

Have a good weekend.

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.

Birr 55.14 = USD 1

Meanwhile the BBC reported on a confrontation in Tigray between protesters and authorities: https://www.bbc.com/news/world/africa?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=64fa04d2d7211212a459d66e%26Tigray%20protesters%20brutally%20beaten%20and%20arrested%262023-09-07T17%3A28%3A07.498Z&ns_fee=0&pinned_post_locator=urn:asset:30882fa3-123c-4048-ae60-7ffd96c67ac2&pinned_post_asset_id=64fa04d2d7211212a459d66e&pinned_post_type=share

Have a good weekend.

With little else to discuss we look at what the Forex rate has been doing in recent months:

Having been very stable in the six months to February 2023, the last six months the Birr has lost 4% vs the greenback. In truth the local currency should be trading at around 100 to the USD if the Blackmarket rate is anything to go by; however, the Government is keen to keep a tight grip on the forex rate in an attempt to manage inflation which is still in the mid 30’s % P.A.

Weather has remained favourable to ripening of the crop on the trees. The harvest in the lower lying areas of Bebeka and Tepi will start imminently and generally thought to be an early crop this year. Farmers are also optimist on size of the crop, all we need now is favourable weather so that we can look forward to a good 2024!

Birr 55.10 = USD 1

Have a nice weekend.

With lots of coffee still unsold of the current crop and the next crop just round the corner shippers seem increasingly willing to sell, however minimum registration prices for Naturals remain high. While there are unshipped contracts registered at higher prices it is unlikely that the Coffee and Tea Authority will reduce Minimum Registration Prices fearing that overseas buyers will default on existing contracts to replace with cheaper purchases. As a consequence new contract registrations remain at a low level and exporter figures in the coming weeks and months will reflect this. The positive side arising from low levels of business at current prices is that it will push stakeholders to buy new crop cherries at more realistic levels than what was paid last year.

In lower lying areas of Teppi, Bebeka and Djimmah the harvest will start in early September. Generally, we are expecting an early crop this year as a consequence of above average rainfall during the maturation and ripening of the crop.

Shippers that have non performing bank loans have been warned that they could have face higher interest rates of as much as 22%, hopefully this will incentivise exporters to only purchase good quality coffees since poor quality is increasingly rejected by overseas buyers, becoming “sticky” and costing more to finance. In any event, given the extremely poor quality of the 22/23 crop, 23/24 can only be better, speeding up the flow from farm to ship.

Weather has become drier in the past few weeks, this is beneficial to lower moisture levels of current crop coffee stocks. Furthermore, as the new crop begins to be processed sunnier weather will be needed to dry parchment and naturals alike.

Ethiopia along with Five other countries has been invited to join the BRICS group, which aims to counter balance the weight of the G7 on the world stage.

Birr 55.02 = USD 1

Have a good weekend.

As always, when the terminal market falls out of bed, export registrations grind to a holt; this week was no exception, current Minimum Registration Prices as follows:

Internal prices are yet to reflect the lower international market prices, middlemen reluctant to accept lower Birr prices, particularly since they are well aware that shippers can since last week keep 40% of forex earnings (it was 20% before last week) allowing shippers to double in value their imports to sell locally. Long holders of Naturals are mostly farmers and Agrabes, shippers have little stock. Shippers are long Washed coffees which still have very high moisture levels and remain unsold. Prices and moisture levels will have to decease for these to start moving.

Banks have increased interest rates by approximately 2% this week.

Weather has improved, much more sunshine and no heavy rainfall in the last week. This weather will favour an early crop, we are expecting lowland harvesting to begging in early September.

Birr 54.96 = USD 1

Have a good weekend.

July exports were just above 21 k MT, the lowest export figure for the month of July in 6 years. At this rate the 22/23 crop year exports will be around 220 k MT the lowest export figure since 20/21. The good news is the following year 21/22 (March 21 to Feb 22) shipments were a record 310 k MT, so there is hope! If crop 22/23 is a write off looking ahead at the coming crop (23/24) , we are encouraged by the effects of heavy rainfall (which as been so detrimental to the current crop) and the prospect of an early crop will translate into good volumes; furthermore, if the rain stops during the harvest and post harvest period, quality will be good.

There is a noticeable change in destinations of exports, with Saudi and other Middle East destinations becoming more predominant at the expense of markets in the Far East, Europe and the USA. This, in our view, is a reflection of the qualities available this season having been negatively impacted by excessive moisture and humidity.

The Central bank has finally given in to exporter pressure and reversed the forex restrictions imposed during the conflict in Tigray; from now onwards shippers will be able to keep 40% of USD earned from coffee exporters to be used for payment of imported goods and services. This will allow shippers to lower USD export prices and the Government hopes increase export volumes. Previously exporters were only retaining 20% of USD export values. Additionally, the Black Market rate for USD should also drop.

Birr 54.89 = USD 1

Have a good weekend.

By all accounts stocks within Ethiopia remain very high, agrabes have stopped buying from farmers and exporters are not buying from agrabes, overseas buyers are totally absent so all trading is at a gridlock. Whereas there have been some small improvements in quality on the Lekempti coffees all other qualities are very poor. Washed coffees are still presenting high moisture content and Natural Djimmah coffee has so many unclean cups that the market for this coffee is restricted to the local market and a few less discerning overseas ones.

Weather is cold and drier than in previous weeks, however this is a more usual weather pattern than the months of high precipitation that we experienced from March to June. Net week we expect to have July shipment figures available. We are not expecting any changes to the slow pace of exports registered in the last few months. Imports of Ethiopian coffee to Japan for the first 5 months are under 40 K bags, the lowest imports from Ethiopia for over 10 years.

Birr 54.82 = USD 1

Have a good weekend.

June export figures just fell shy of 31 K MT; at first glance the figure seems fairly good, granted lower than the June shipments for the past 3 years but at least above 30 K MT; however, as we can see below, the path is clearly for lower shipments this season vs last which if it materialises will be a break in the off/on cycle. The Saudi market has gained weight as a destination for Ethiopian coffee, a sign that quality is currently more geared to middle eastern markets that the more customary destination of Europe, Japan and the USA.

New business is at a standstill, exporters do not want to buy from agrabes having had their fingers burnt with poor quality deliveries. Overseas buyers cannot pay the minimum registration prices, +120 for Sidamo 2, +60 for Limu 2 and around level money for both Grade 5 qualities. In any event quality is major concern so buyers prefer to wait than risk owning quality that they will not be able to move later.

The weather has been a little drier this week which has helped to move coffee from the growing areas to Addis, we are starting to see more pre-shipment samples as a consequence. However, shipments continue to be very delayed.

Birr 54.67 = USD 1

Have a good weekend.