Further confirmation of the low availability of Washed coffee came in the ECX December stocks which reported the lowest Washed coffee stocks in the last 4 years as follows:

This confirms our previous assertions that there was little 18/19 Washed coffee stocks in country; in addition arrivals of New Crop are also very much reduced, resulting in current ECX stocks being 3,000 MT lower than this time last year.

Meanwhile the crop in Guji area is at its peak with coffee ripe and picking heavy; there are some rumours that washing station owners are running short on cash to continue to buy at the current pace due to cash flow restrictions ( last year the price was 12 Birr/kg vs this year 20 Birr/kg) and the hording of processed stocks waiting for further devaluation of the Birr vs the USD before coffee is moved to ECX warehouses and offered for sale. Some stakeholders are expecting the price of cherry to fall next week as there will be less cash in the growing areas and fewer buyers.

Weather continues to favour a healthy development of the crop and processing.

Prices at ECX continue high due to reduced volumes on offer. We expect that at some point soon this situation will normalise and agrabes will start turning coffee into cash so that they can continue to operate at farm gate level.

by Charles Seara Cardoso

Having sold big volumes into the recent rally shippers are concerned that they cannot cover their more immediate shipments; it is a fact that volumes arriving at the ECX are disappointing and well below what shippers would normally expect to see this time of the year; a combination of weather and economic policy are behind this situation. Firstly,  the unusually wet conditions that had us concerned in November delayed the harvesting and consequently the normal flow to ECX; secondly the government appears to be making no secret of pursuing a strategy of steadily devaluing the  Birr, to reach the black market rate this would require a further devaluation of approx. 8 Birr (Black market rate around 40 birr to the USD), the Birr lost 2 Birr vs USD in the last 2 months. If you are an agrabe it would make sense to delay the sale of coffee in Birr for as long as possible to maximise the Birr price. In this very volatile terminal market, time will tell if this will pay off, for now it would seem that local traders are in the driving seat.

Birr lost 2.5% vs the USD since the beginning of December and 7.5% since the beginning of November.

Weather continues to benefit picking and processing, coffee quality concerns related to humid conditions should not materialise.

Prices for cherry are still very firm in the Southern regions, washing stations are currently paying above 20 Birr/kg cherry in Guji and Yrgacheffe.

Summary of Coffee Ithaka Jimma and Guji tour from 2^nd to 13^th December

The team travelled extensively to Guji and Jimma coffee zones, in both cases with exporters’ representatives, driving to Guji, passing by Yirgacheffe and Sidamo. In Jimma zone we drove through the coffee producing areas of Limu Kosa and Limu Seqa, among others. We were glad to not have seen any sign of political or socio-economic unrest in both the Southern and Western regions.

Crop Development and Quality

In Guji, coffee cherries are ripe, well-developed and show no signs of disease. Likewise the coffee trees are looking healthy. Crop development and processing:

Naturals: in the last 2 weeks of November, untimely rains fell in Guji zone, however sundried coffee showed no signs of mould damage – we assume farmers and sundried station managers are doing their part by covering during rainy episodes. Same thing for Jimma zone.

Washed: during our trip to Guji the skies were clear. Some parchment was cracked open due to midday sun exposure, which might affect washed coffee quality. In Jimma the weather was hot and the sun was strong, which caused all parchment to crack and to dry in 7 days rather than the ideal 21 days.

For Sidamo region we maintain our 22% reduction in the crop (vs 18/19 crop) published in our October Crop Report, however in Guji, farmers and processing station owners are confident that the 2019/20 crop might be as good as last year’s, despite being an off-year.

In Guji harvesting started 4 weeks ago (mid-Nov) and around 30-35% of the crop is expected to have been harvested to date. In the West, 75% of the Jimma/Limu crop has been  harvested.

Guji cherry Prices

During the team’s trip in Guji coffee zone, 1^st week Dec, fresh cherry in Bule Hora and Kercha (West Guji) was being sold between 17 and 20 ETB/kg, giving an FOB Djibouti equivalent of 200 to 235 US ct/lb

by Charles Seara Cardoso

Increased volumes of New Crop are arriving at ECX and therefore most exporters have started offering New Crop for 2020 shipments onwards, Washed coffees are offered for February shipment onwards and Naturals for March onwards, however, we would have to add 1 month to that to be on the safe side! Prices at the ECX are reflected in our price indications below:

	JAN-MARCH	MARCH/APRIL ONWARDS
DJIMMAH 5	-24	-24
LEKEMPTI 5	-20	-20
DJIMMAH 4	-13	-13
SIDAMO 4	N/A	-4
LIMU 2	N/A	+25
SIDAMO 2	N/A	+35

The Birr that normally devaluates to the greenback at a fairly constant and steady pace has recently accelerated its devaluation having lost 4% in about 3 weeks:

Weather-wise rains have been less intense than in previous weeks in the Southern coffee-growing region, we continue to monitor the situation; for an explanation of what is going on in East Africa with the weather, the BBC is much better at this us… pls follow the link below:

https://www.bbc.com/weather/features/50680884

by Charles Seara Cardoso

After a delay of a few weeks the Sidamo Referendum was held on Wednesday, 2.2 Million registered voters cast their ballot to decide if the Sidamo area should become an independent region; it is expected that the results will show that Ethiopia is on the path to add a new region to the already existing 9 autonomous regions that make up the country. The ballot was largely peaceful with many people waiting in line for many hours to cast their vote. Official results are expected in a few days’ time. There are other Ethnic groups that are also seeking recognition in other regions so the  challenge for the prime minister will be how to appear to be dealing fairly with all these demands without unleashing tension, that could lead to violence as seen in the recent past. All this is happening 6 months before a General Election, a period when pent up frustrations come to the fore; on a more positive note if the May electoral process emulates what happened on Wednesday the Elections will be a success.

Drier weather this week helping the harvest, bringing on cherry ripening and allowing for coffee to dry once picked and processed.

Cherry Prices seem to be on the up we have reports of prices up to 16 Birr in Sidamo and 18 in Guji; In Yirgacheffe prices are as high as 20 Birr. It seems that if the drier weather continues in the South there will be a flood of cherries to the washing stations, however shippers are concerned that a higher percentage of the crop ill become Naturals rather than Washed coffees; let’s see what happens in the coming weeks. Some fresh coffees from Keffa and Limu have started to appears at the ECX. Also of note is the improvement in Natural quality offered at the ECX in the last 2 or 3 weeks, which has allowed shippers to acquire better quality coffee to fulfil their current commitments. We expect the flow of current crop Naturals to ECX to continue as middlemen need to start focusing on the new crop.

As we have discussed the Ethiopian Coffee & Tea Authority aims to more closely align ECX prices to FOB Djibouti prices, in this regard a minimum price will be set and revised every 15 days, whereby exporters have to register sales at a price above the set minimum price. A further proposal is to punish those that do not follow the regulations, if exporters register a sale below the minimum price by more than 5%, the exporter will, in the first instance, be fined; a second infringement will result in a further penalty and disqualification to register any further contracts at NBE or to purchase coffee from the ECX. Discussions on this regulation are ongoing, we are expecting more news in the next few days.

by Charles Seara Cardoso