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Harvest Origin Report - Ethiopia

For our November Ally Coffee origin report we are shifting our focus from Latin America to Ethiopia. Having experienced lesser impacts from the coronavirus pandemic, Ethiopia will surely provide the world with some of the most unique coffees again in the 2020/2021 harvest. We will have a look at expectations and trends in Ethiopia, as well as global statistics and the futures markets.

 

The World Market

C-Market Analysis

Candlestick chart of the C-Market, September to November
Source: Tradingview

The coffee futures market found a short-term floor at $1.07 at the start of October following the rapid fall in price through the month of September. The market continued to trade in the range of $1.04 and $1.11, closing the month at $1.04. Unfortunately, that does mean the rally of July and August was short lived. Nevertheless, the market is still 8.36% up from the yearly lows of $0.95 we saw in June. The month of October showed relatively little volatility compared to the months prior. In early November the price bounced from $1.03 back up to $1.10. In the weeks to come we will have to see if the market will continue to trade in the $1.03–$1.11 range, build up to another rally, or potentially continue the downtrend and dip below the one dollar mark again.

Global Coffee Industry Statistics and Analysis

Below you can find a review from the ICO´s monthly coffee market report. This report focuses on a macro-level view of the coffee industry, looking at production, consumption, prices and exports.

The ICO composite indicator in October decreased by 8.9% to 105.85 US cents/lb as prices for all group indicators declined, though the largest decrease was for Brazilian Naturals. Global shipments in September increased by 0.9% to 10.16 million bags as increased Robusta exports offset a decline in Arabica exports. Exports in coffee year 2019/20 fell 4.9% to 126.9 million bags, and the value of these shipments decreased by 3.6% to 17.87 billion USD compared to coffee year 2018/19. Global coffee production in 2019/20 is estimated at 168.84 million bags, 2.5% lower than last year, while world coffee consumption is estimated to decrease by 0.9% to 167.59 million bags, resulting in a surplus of 1.24 million bags.

The monthly average of the ICO composite indicator fell by 8.9% to 105.85 US cents/lb in October 2020, nearly reversing the gains made in the last two months. The daily composite indicator continued the descent that began in mid-September, going from a high of 107.94 US cents/lb on 9 October 2020 to a low of 103.3 US cents/lb on 21 October. In the last seven days of the month it ranged between 104.49 US cents/lb and 106.5 US cents/lb. Increased exports in September, signalling availability of supplies at the end of the crop year, and the larger crop from Brazil are weighing on prices.

ICO Report Data, November 2020

Source: International Coffee Organization

At Origin

Harvest in Numbers and Statistics

Harvest in the coming season is expected to be very good in all regions compared to last year, which was slow in some areas in SNNPR (Southern Nations, Nationalities, and Peoples' Region). The total production quantity is estimated to increase significantly to 7.5 million 60 kg bags, up more than 25% from last year’s 5.9 million 60 kg bags. The increased production is cause for concern however for the current bottlenecks in the dry milling and shipping of coffee.

The weather has been very conducive for good production, but according to the National Meteorological Agency there is above normal rainfall in some parts of Ethiopia. This rainfall has caused flooding and landslides, displacing people in several parts of the country. If the heavy rain continues much longer it could possibly also affect the ripening of cherries, harvest, and processing.

In 2018/2019 the Ethiopian government reformed the coffee industry and we can now start to see the results of this reform. Over the past two years many new coffee exporters have begun operations, usually with an active and engaged presence in the growing regions. This has made the purchase of coffee cherries more competitive, allowing farmers to earn more for their cherries and to have multiple options to choose from when selling their coffee.

Coffee Cherries at Guji Uraga Solomo washing station Coffee Cherries at Guji Uraga Solomo washing station

Coronavirus Impact

Fortunately, COVID-19 has not affected Ethiopia as drastically as it has other parts of the world. As of the 3rd of November, Ethiopia reports a total of 96,982 cases, which translates to roughly 84 per 100,000 inhabitants. Last season’s exports were delayed because of the initial restrictions put in place by the government to help stop the spread. Testing capacities are being expanded as well as contact tracing in continued efforts to stop further spread of the virus. The majority of active cases can be found in the capital city of Addis Ababa, followed by the Oromia region, which is the largest coffee growing region in the country.

The tourism industry in Ethiopia has suffered a lot due to the travel restrictions. Beside the primary economic impact of this downturn in tourism, this also implies there is a lesser influx of foreign currency, which is already scarce in Ethiopia. The secondary generator of foreign currency is coffee, which may be leveraged to make up for the lack of incoming currency from tourism.

2019-2020 for Ally Coffee in Ethiopia

During Ethiopia’s last coffee season we were happy to continue our existing relationships in Ethiopia while also welcoming new partners to our network. Despite some delays, we saw our Acacia Core Coffee land in both Natural and Washed presentations around the world, as well as Grade 1 coffees from our favorite washing stations of Koke, Biloya, Chelelektu and Chelichele.

This season was also marked by the rapid proliferation of ‘’special processes’’ in Ethiopia. We’ve already seen the introduction of Honey processes at some washing stations, but in line with global trends we also found anaerobic fermentation, yeast inoculation, and extended drying processes begin to appear more frequently. It continues to be interesting to watch how the global coffee industry continues to connect and learn from one and another. We’re excited to see over time which trends will be short-lived novelties and which will become the new standard to be treated to scalability and mass-adoption.

Rahel Mulat, Ally Coffee's buyer in Ethiopia Rahel Mulat, Ally Coffee's buyer in Ethiopia

Future Outlook for Ally Coffee in Ethiopia

The upcoming 2020/2021 harvest year has just started in Ethiopia and we are excited to see what it brings. The increased production should make more coffee available to purchase, and the conditions have been favorable for producing outstanding quality as well. However, the balance between volume and quality is always a fragile one. Considering these factors, we couldn’t be happier with our permanent presence in Ethiopia to tirelessly cup and select lots for our shipments. The ability to closely follow the coffees from the washing station, to the Addis Ababa warehouses, and eventually to the loading of the containers, has been an essential step in assuring the quality of our Ethiopian offerings. We’re proud to be able to represent the homeland of coffee on the global stage, and bring the best of Ethiopian coffee to the world in close collaboration with our origin partners and office.

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