Fighting has resumed along the Southern border of Tigray region. Additionally the Tigray authorities reported that government aircraft bombed a hospital in Mekele in Tigray region. It is a very sad state of affair after so much hope that the conflict was close to a peaceful resolution. The worsening of the conflict in the context of drought and lack of food in the region is of particular concern.

For an in depth read of the current situation and how we arrived at the resumption of hostilities pls follow the link: https://www.bbc.com/news/world-africa-62717070

This week also saw the docking in Djibouti of the first vessel to have sailed from Ukraine with wheat since the conflict there started in February. The UN Food Programme that bought the grain will be distributing the food to several destinations in the horn of Africa that are currently suffering from drought and on the brink of famine.

Returning to coffee, trading this week was more subdued as the terminal market in NY stalled. Arrivals from upcountry are not in large volumes so shippers are not under great pressure to sell, indeed some shippers are still struggling to find coffee to fulfil previously made commitments. Logistics are difficult but no worse, we are grateful for that!

Small quantities of cherry have started to be picked in the lowlands of Benchi Maji and Bebeka; in Teppi region we expect the harvest to start in 2 weeks time. Initial reports are that the crop in these 3 areas is expected larger than the 2021 crop. Other regions are also showing encouraging signs regarding the size of the crop, such as Limu, however the harvest there is not expected to start until mid-October.

The value of total exports from Ethiopia (Coffee and goods and services) July 2021 to June 2022 was a record USD 4.1 Billion, USD 0.5 B more than the same period the previous 12 months (July 20 to June 21). The country that bought more of these exports than any other is Switzerland, no surprise considering the number of coffee traders based in Switzerland!

Japan is well on it’s way to import 500 k bags of coffee from Ethiopia in 2022, January to July imports stand at over 326 k bags, the same as the whole of 2021!

Birr 52.47 = USD 1

Have a good weekend.

We have commented in the past weeks that the forex rate has been stable in 2022, however the official rate hides problems that underlie the Ethiopian economy. Below we track the Black Market exchange rate USD/Birr and it is clear to see that the Central Bank official rate is not reflecting the real value of the local currency. The graph below shows that while the the official forex rate has declined by 4% since January, the Black Market rate has moved by 10 times that, 42%!

Farmers and Agrabes are holding coffee, only selling piecemeal, as goods (such as coffee) are believed to be of more value than Birr! The Inflation rate is dangerously high, hovering around the mid 30’s percentage points, another reflection on the low value of the local currency. Are we about to see a big adjustment of the official forex rate?

In other news the BBC is reporting that ethnic Tigrayans are being taken back to their homes giving rise to hopes for a permanent peaceful settlement to the conflict in Northern Ethiopia: https://www.bbc.com/news/live/world-africa-62438202?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=62fccb0b405bb048e31822a4%26Tigrayans%20held%20in%20camps%20returning%20home%20-%20returnees%262022-08-17T11%3A46%3A48.057Z&ns_fee=0&pinned_post_locator=urn:asset:3a56bad1-7cf7-4cdf-8acf-02070df31f78&pinned_post_asset_id=62fccb0b405bb048e31822a4&pinned_post_type=share

Business activity remains slow and sporadic. Quality continues to be of concern and coffee arrivals in Addis are not as plentiful as hoped for. Empty containers are still hard to comeby, all in all shipment delays persist.

Birr 52.34 = USD 1

Have a good weekend.

Bucking the trend, the inflation rate in June declined from 37.7% the previous month to 34%. It will be interesting to see if this can be sustained as a decline in inflation is a rarity these days! The oficial forex rate continues very stable to the USD, so imported inflation is limited to goods and services that have increased in price in hard currency terms.

Coffee activity in Ethiopia has been subdued in contrast to the shenanigans on the NY terminal market. Such swings on the terminal market can freeze physical business and that is what we have been seeing during the last few days. Quality offered by shippers is generally quite poor in quality and exporters are still experiencing difficulties in moving coffee from the interior to Addis for processing. This is due to the wet weather that is ongoing and will trigger an early crop later this year. Prices in the internal market (Ethiopians consumes up to 50% of the country’s production) have doubled y-o-y as a consequence of the increase in the terminal price and devaluation of the local currency. Notwithstanding this, internal demand remains strong.

In other news, Ethiopian Tamirat Tola took home the gold medal in the men’s marathon at the World Athletics Championships in the US. He crossed the line in two hours five minutes and 36 seconds – a championship record. Tola’s compatriot Mosinet Geremew came second. Ethiopia now has two golds after Letesenbet Gidey won the women’s 10,000 metres.

Birr 52.10 = USD 1

Have a good weekend!

The Coffee and Tea Authority (C&TA) launched a new Coffee Development Strategy. The 15 year program focuses on the following corner stone issues:

• research
• production-enhancing extension services
• processing
• value addition
• marketing
• sector strengthening

The coffee sector is responsible for 30% of Ethiopia foreign earnings and these are expected to grow from < USD 1 B in 2019 to between 3.5 and 4.5 B by 2033 and employing 2.7 Million people in production and other activities along the value chain. The aim is to export over 15 M bags by the mid 30’s, an ambitious target since current export volumes hover around 5 M bags.

Upcountry prices are not receding, Grade 5 offered by Agrabes at an equivalent FOB of around 230-240 usc/lb. There are many stale Sidamo 4 shorts that exporters have renegotiated as Lekempti 4; Wellega region coffees are struggling to reach Addis not due to insecurity but impassable roads, destroyed by heavy rainfall of the past few weeks. Export figures are expected to be announced next week. We are not expecting any major deviations from the recent trend.

Fuel prices have increased 25% at the pump (home use gaz increased 30%). There are more and more fears that inflation will take off once again in the coming weeks and months. Exporters foresee their costs also increasing as a result of energy price hikes.

We are expecting an early crop in Djimmah areas (Limu and Benchi Maji) due to recent weather favouring cherry ripening. Still a few weeks off before the new crop starts.

Meanwhile, Ethiopia and Sudan’s leaders have meet on the sidelines of a conference in Kenya and made progress in resolving the latest border skirmishes: https://www.bbc.com/news/world/africa?ns_mchannel=social&ns_source=twitter&ns_campaign=bbc_live&ns_linkname=62c5324bb893776ef334330e%26Ethiopia%20and%20Sudan%20leaders%20agree%20to%20solve%20border%20row%262022-07-06T08%3A11%3A07.134Z&ns_fee=0&pinned_post_locator=urn:asset:36c55e56-e9cc-4c44-9203-b703476603bb&pinned_post_asset_id=62c5324bb893776ef334330e&pinned_post_type=share

Birr 52.03 = USD 1

Have a good weekend.

A number of meetings of coffee professionals are taking place across Europe currently, last week many were in London for the British Coffee Association (BCA) gathering and this week we have the World of Coffee event in Milan. Most participants are so pleased to reconnect with old coffee friends that the discussions about our trade’s ailments get forgotten, this is truly a people business with connections that stretch around the globe. True to form, many Ethiopian Exporters are in Europe keen to find homes for higher than usual stocks (for this time of the year) sitting in their warehouses back in Addis. Whereas the terminal market has not returned to the hefty levels seen in February (260 ish) the recent foray in the 240’s helped flush out some of these stocks. No doubt that lower than expected mild arabica crops in Central and South America have also helped in keeping bid prices at historically attractive differentials. However, there still seem to be stocks of good quality coffee unsold, these will be looking for buyers in the coming weeks. In Addis many shippers are busy fulfilling recently done Grade 4 and 5 sales. Shipments continue to be hampered by logistical constraints, lack of food grade containers and slots of vessels, however, all in all, coffee is flowing reasonably well along the supply chain.

The week started with grim reports of attacks, burning of dwellings and mass graves; pls follow the link for the BBC’s report: https://www.bbc.com/news/world-africa-61864392

Birr 51.90 = USD 1

Have a good weekend