By Mekonnen Teshome
Coffee exporters in Ethiopia are experiencing market challenges due to the slump in the global price of the commodity over the last six months.
The Ethiopian Coffee and Tea Authority (ECTA) has expressed its concerns on the situation and indicated that the government is holding discussions with international buyers to transport the export standard coffee in stores.
Director General of the Ethiopian Coffee and Tea Authority (ECTA) Adugna Debela /PhD/ last month confirmed that the county’s coffee export volume has been decreasing as the international price of the commodity drops over the last six months.
“The past six months have shown slight decline in export volume while the revenue increases by 80 million dollars compared to same period of last budget year but still this accounts only 67 percent of the target,” He said.
While presenting sector’s performance report of the previous 8 months to the House of Peoples’ Representatives (HPR), ECTA Director General Adugna Debela (PhD) this week, indicated that the demand for coffee, spices, and tea has decreased significantly this year due to the global economic slowdown.
As a result Ethiopian coffee exporters have defaulted on 394 coffee export contracts since October 2022.
The exporters had to breech their contract for the reason that coffees local price in Ethiopia is higher that the international price of the commodity and they failed to meet their contractual obligations by withholding 28,000 metric tons of coffee worth USD 133 million.
The prices of the export commodity on the international market have fallen by 32 percent over the same time last year. A pound of coffee (0.45 kg), which cost one dollar a year ago, is now 70 cents. Ethiopian exporters signed their deal while coffee prices were higher.
Instead of exporting, coffee suppliers have stored export coffee in their warehouses, hoping for a better international price in the future. The Authority, in its part, is examining possibilities in which exporters bargain with overseas customers and export the coffee at new prices.
Due to price variations in the domestic and international markets, the Authority’s goal of bringing USD two billion from coffee exports in the current Ethiopian fiscal year is already experiencing obstacles.
On the other hand demand in the local market is growing. The domestic price of coffee has increased dramatically during the past 12 months. This means that exporters will have to pay more for coffee in the domestic market and will have to export it at a loss. Disgusted, many exporters refused to ship the coffee, instead stockpiling it in their warehouses.
Coffee brought USD 1.4 billion to Ethiopia’s export last year, and officials have set a target of USD two billion this year after hitting record-high export earnings for the first time ever. However, price fluctuations have defined the coffee trade this year, and with global coffee prices dropping, the chance to improve on last year’s performance has become very limited.
In the last eight months, almost 143,000 tons of coffee have been shipped to overseas markets, bringing in USD 780 million. Parliamentarians voiced worry over the performance gap.
The Director General, on the other hand, expressed optimism that coffee export performance could improve significantly in the four months before the Ethiopian fiscal year 2022-23 closes on June 30, 2023.
Earlier, in the first half of the fiscal year, the country exported 117,000 tons of coffee worth USD 663 million as the authority target to generate USD two billion over the course of the current fiscal year by exporting 360,000 tons of the beans.
“Due to international price decrease exporters are hoarding their coffee as the price they get locally is expensive than the international price they anticipate to sell to, rendering them to hold on to the coffee for speculated increase. We are working to improve the situation by engaging with different stakeholders including buyers,” Adugna said.
“Exporters have large amount of stocked export standard coffee due to termination of contracts. We are in discussion with buyers to solve the matter and to increase the volume and with exporters to review their contract,” said Adugna, adding, “We believe in the two or three months exporters will finish exporting coffee they have in their backlog stock due to termination of contacts. This is one measure to achieve our target.”
He told reporters that the cost of the item has decreased by 50% on the international market since last year. Less purchasing power has caused a decline in interest from buying nations. Ethiopia’s attempts to make money off the commodity are hampered by both of these circumstances. Brazil is also making a return after suffering a frost disaster that destroyed its coffee plantations.
“There is no shortage of supply and volume, however, due to the situation there is a slowdown in the interest of buying countries which we have to wait until situations improve,” Adugna underscored.