Harvest is not going so smoothly

Out in the coffee growing areas many washing stations remain closed or only operate a few days a week. There is little cash to buy red cherries and prices are between 40 and 60 birr/kg of cherry at farm gate level. Farmers themselves are only selling small quantities of fresh cherries, larger quantities of cherries are being sundried to be sold later; we believe that the rationale is that farmers only sell to get cash for what they need to buy for their current needs. Food inflation is so high (above 40%), farmers believe that holding coffee instead of cash is a better hedge against runaway food prices. Naturals can be held by farmers in their homesteads for months and sold has they need to purchase goods, the hope is that when coffee comes to be sold the price (in local currency) will be higher than today. However, we are sceptical that the government will devalue the Birr substantially and with the C market is freefall, this strategy may not be successful.

There is a problem with current cherries prices in as much as: how much Grade 2 coffee will realistically be sold at a price that will allow the agrabe/exporter to make a return? There will not be many buyers queuing up to pay +150 FOB for their Sidamo 2! With few washing stations operating it is reasonable to expect that Grade 4 and 5 will be produced in higher proportions in 22/23. Since Naturals stay with farmers for longer before being sold to middlemen, it is feasible that farmers’ price for Naturals will be more reflective of the international market price. There is a time lag for overseas buyers’ price ideas to move back the supply chain to the farmgate, however by January the “new price reality” will have sunk in. In January a very high proportion of Naturals will still be in the hands of farmers therefore it will be the farmers that will have to accept much lower prices for the coffee they are currently picking than what they achieved last crop.

Minimum registration prices have been decreasing over the last few weeks however continue too high to attract any business:

In any event there is very little coffee around, quality of samples that we have been seeing in recent weeks is very poor, there is coffee in shippers’ warehouses however Djimmah stocks have been badly affected by humidity, furthermore, for the past few weeks insecurity has stopped movement of coffee from Wellega (Lekempti) to Addis. Washed Grade 2 coffee stocks are immobilised by the lack of interest from overseas buyers at the offered prices, over 300 c/lb…

Trading is at a complete standstill, the internal market will command the best prices for exporters’ stocks and being less quality orientated can absorb the currently available Grade 5s.

Birr 52.98 = USD 1

Have a good weekend.