Minimum Price Havoc

Minimum price rules are creating havoc, we have had to register Sidamo 2 contracts as Guji 2 because the min price for the latter is realistic and lower than the former, which really does not make any sense at all. All week D5 min price has been higher than L5, Yirgacheffe lower than Sidamo and so on… generally speaking the min prices have increased every day while the terminal market collapsed this week. Trading in Ethiopia is now at a standstill. The government is tightening the supply of money, banks are not lending and exporters are struggling to finance coffee purchases to meet their commitments; if this situation continues ECX prices will fall not only because export sales dry up but because shippers will not have cash to buy at ECX.

As we understand it, if there are no export sales registrations (or a very small volume registered at the minimum price) then the Coffee and Tea Authority will reduce the minimum price allowing for more volume to be registered and exported; however we are yet to see this in practice and the policy seems a little vague. What happened in Sesame Seeds was that the trade came to a holt; first the Export trade and then the internal/ECX trade; In coffee eventually this could result in delayed shipments and delayed deliveries to roasters, in other words “disruption” to the flow from origin to destination market.

At ECX we are seeing a much greater volume of Lekempti come to the market; there are still concerns about quality because what is coming to the market currently is very poor. Shippers are still hoping that the quality of Lekempti will improve and to be fair we expect approx. 1,500 MT to come to ECX every week over the coming 8 weeks, so the jury is still out.

The Birr is currently at 32.35 vs the USD

by Charles Seara Cardoso