The pandemic seemingly remains under control in Ethiopia, the focus on tackling the virus is concentrated in a few hotspots in Addis. The Ethiopian economy is also slowing down, construction appears to be adversely affected as well as other drivers for the previous price disparity between ECX prices and FOB prices. Coffee shippers heavily invested in the import of construction materials, etc. were prepared to give up to 1/3 of the USD value of lower quality coffees to access the foreign currency needs to import goods. In addition the minimum price regulations, which set a weekly minimum price, only really allow for coffee to be sold when NY rallies strongly during a short period of time. If we add to these 2 factors the uncertainty of future demand in consuming countries as a consequence of Covid 19, we have the reasons for lower volumes traded at ECX of Natural coffees and lower than expect sales to overseas buyers at FOB level. At 8thMay ECX traded volumes of Naturals were 15% lower than at the same date in 2019. Sidamo Naturals have the sharpest decrease however Djimmah volumes are also down, overall sales of Naturals at ECX are down by 9,000 MT at that date.

Below we chart the weekly minimum registration price for Djimmah 5 and Lekempti 5, these prices were decreased below 100 c/lb for the first time since minimum prices were introduced in March, however, these remain well above tradable levels on the export market. We believe something will have to give in the coming weeks and months to spirt flows at ECX and the FOB market. The Birr continues it’s steady devaluation vs the USD however the pace of devaluation will limit this factor as a driver for sales, we need the terminal market price sharply up or the internal prices (ECX and Minimum Registration Prices) to decrease.

Birr 34.10 = USD 1

by Charles Seara Cardoso

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