A week with a few surprises, it’s Ethiopia after all! Firstly, the much anticipated minimum price regulations were meant to come into practice this week, alas nothing happened, registrations continued as normal with contract levels registered at very different levels, the C&T Authority is meeting in Awassa to discuss this issue again so let’s see what comes out of this meeting; then on Wednesday the government announced that the May Elections would now be held in August and we all sighed in relief, by August a fair volume of the New Crop will have been shipped and existing commitments will be in warehouses in consuming countries, if not roasted and consumed!

The Birr has barely moved vs the USD since the start of the year, devaluing 0.03% only, whereas during the first 15 days of December the local currency had lost 2% of its value vs. the greenback.

Only the very highest regions of the South (Guji) will remain with coffees on the trees beyond January, the crop is mostly picked; In the southern coffee growing areas agrabes will start buying dried cherries (for Sidamo 4) in February; in Djimmah and Lekempti Natural coffee is currently offered by farmers to agrabes and trades at between 30 and 34 Birr/kg; there are some concerns about security in some areas of Wellega (Lekempti) which could complicate the flow of coffee from the interior to ECX, hopefully things will calm down in the coming weeks.

Weather continues to favour crop processing and drying. Coffee quality from the South appears to be very good (from what we have cupped so far) and limited Washed carry-in stocks should translate to good quality of shipments in 2020.

Focus on Washed Coffees:

Volumes at ECX remain disappointing and New Crop Washed prices high, way above overseas buyers’ ideas; After many conversations with Exporters this week we have the following explanations for disappointing volumes offered and high prices recorded:

  1. Agrabe expectations that the ongoing devaluation of the BIrr from the current 32 to 40 (Black Market rate) vs the USD will happen in the coming weeks; if the currency devalues a further 25% this would mean that a cherry price today of 20 will equate to a cherry price of 15 if the Birr reaches 40 to the USD;
  2. Vertical Integration (shippers accessing coffee at farmgate level through own washing stations or agreements with Washing Station owners) has removed coffee from the ECX supply chain;
  3. There have been some large volumes rolled over from 2018/19 crop to the 2019/20 crop as a consequence of the tight supply of Washed coffees in late 2019; this exacerbates current demand as shippers try to cover current and past commitments in a reduced availability scenario;
  4. Crops were delayed by wetter than usual weather;
  5. Low carry-in stocks held by Agrabes and farmers of washed coffees since demand for Washed was high in late 2019;  for the last 3 crops Washed carry-in stocks have been very large, this season carry-in stocks are very low;
  6. Lower crop in the Southern region and a shift in production from Washed to premium quality Naturals, which will decrease the availability of Washed coffees.

The Graph below charts weekly sales of Washed Coffee at ECX of New Crop, and it is evident that this season the pace of sales this season is slow.

by Charles Seara Cardoso

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