Ethiopia is a major producer (the largest in Africa) and exporter of coffee.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
Required Report - public distribution
Date: May 15, 2012
GAIN Report Number: ET 1202
Coffee Annual Report
Ethiopia is a major producer (the largest in Africa) and exporter of coffee. Because of information not
earlier available, estimates for Ethiopian coffee production have been revised upward substantially from
earlier USDA estimates. Exports for MY 2010/11 were also revised upward, to account for the informal
trade in the region. However, exports in MY 2011/12 are significantly lower, because of a new
directive mandating that coffee be shipped in bulk rather than the traditional 60-kg jute bags, which led
to many traders holding onto beans. The directive was retracted quickly, but was in force for most of the
peak shipping months of October-December, and therefore had a large effect. In MY 2012/13,
production is forecast to be strong, assuming the rains are good, and exports are forecast to rebound.
Ethiopia is famous as the origin of coffee and is the largest producer in Africa. In production of Arabica
coffee, Ethiopia is the sixth largest producer in the world. About 15 million people (almost 20 percent
of the total population) directly or indirectly depend on coffee for their living.
The largest volume of coffee is grown in the two large regions of Oromia (in the central part of the
country) and the Southern Nations, Nationalities and Peoples Region (SNNPR). Only five percent of
coffee production is grown on modern plantations, which are owned by private investors or by the
government. The rest is grown by smallholder farmers, and about half of that production is in
backyards or gardens. In both cases (modern plantations as well as smallholder production), coffee is
generally grown under shade.
Production estimates for Marketing Year (MY) 2010/11 (October 2010 – September 2011) and for MY
2011/12 have been raised substantially from earlier USDA estimates. However, there is not much
change in production from year to year. Although there is some additional planting of trees, there has
very little progress in management (e.g., disease and pest management remains poor) or input usage by
smallholders. Few commercial farmers are interested in investing in coffee due to the 5-10 years
required before trees come into peak production. Another limiting factor is the deforestation in the
country, caused by population pressure and the need for firewood, which is inhibiting the available
shade for coffee production and accelerating erosion.
Production in MY 2011/12 is slightly higher than the year before, because of good rainfall distribution
in most of the coffee growing areas, except for the southern part of Oromia. In addition, because of a
large development project, a large number of seedlings were planted about five years ago, and these are
just coming into fruit. MY 2012/13 production is forecast to be slightly higher again, because of
additional trees and because the short belg rains (usually February-May), although late, have been good.
The late start of the belg rain this year may delay the harvest by about a month.
Two factors may negatively affect coffee production over the long term. In parts of Oromia, a root rot
disease is gradually affecting trees, and even affects new seedlings if planted where a diseased tree has
been uprooted. In addition, especially in the eastern part of the country near the trade routes with the
Middle East, farmers are increasingly inter-cropping coffee with khat. A legal stimulant, khat is
relatively resistant to drought, disease and pests, can be harvested three or four times a year, and
commands high prices in neighboring countries, such as Djibouti, Somalia and Yemen. Recently the
government has imposed a new tax on khat aimed at discouraging domestic consumption (which
accounts for 80 percent of Ethiopian khat production). This likely will lead to more exports and to
higher prices for khat farmers, which may exacerbate the shift from coffee in the eastern regions.
Ethiopians consume about half of all coffee produced in the country. Ethiopian households normally
prepare and consume coffee two or three times a day, and the Ethiopian coffee ceremony is a traditional
way to welcome guests to one’s house. This marketing year has seen a steady rise in local coffee prices,
with the price of green coffee currently at 8 USD/kg. In MY 2012/13 the expected higher production,
coupled with high ending stocks, may depress local prices somewhat and lead to increased domestic
Because of the current high prices, some coffee shops are known to mix coffee with barley, as a way to
extend the coffee and maintain profits. The high prices have led to a trend in urban areas for small
roadside coffee stalls, not subject to VAT tax and therefore cheaper than normal coffee shops. Because
they deal in such small quantities of coffee, they do not use barley and are therefore popular with
Ethiopians. In some non coffee-growing areas, people even boil the skin of the processed coffee beans
to make coffee, as a way to have a coffee drink at low cost.
Coffee is the most important export item for Ethiopia, accounting for 25-30 percent of total export
revenues in the last two years. The trade figures in the PSD are higher than official export figures, or
import figures from destination countries, in order to account for estimated informal trade to
neighboring countries, including Eritrea, Somalia, and South Sudan.
Exports in the current marketing year (MY 2011/12) are considerably lower than in recent years because
of a response to government policy. In an effort to modernize coffee shipments and in an attempt to
avoid using contaminated bags (see below), in November 2011 the Ministry of Trade imposed a new
directive requiring that coffee be shipped in bulk containers rather than the traditional 60 kg. jute bags.
However, in addition to the fact that many operations are not physically equipped to handle shipments
in bulk, traders objected to the new policy because it undermined the identity of specialty Ethiopian
coffees. Therefore, many traders held onto their beans instead of shipping.
The situation was exacerbated by the Ministry of Trade’s earlier action, in October 2011, to ban 41
exporters because of hoarding coffee. An additional 57 exporters were suspended for varying lengths of
time, up to a year. Therefore, during the peak export time of October –December, many export contract
obligations were not fulfilled. In order to reverse the new directive, the issue was taken up to the prime
minister’s level, and on December 17, 2011, the Ministry retracted the directive. But the major shipping
season was coming to a close, with the result that the short-lived directive is having an impact
throughout the marketing year.
MY 2010/2011 Ethiopian Coffee Exports by Destination
(1000 60-kg bags)
Destination MY 2010/2011
Saudi Arabia 415
Source: Ethiopian Customs Authority
Prior to 2008, the Japan market was the second destination for Ethiopia coffee, but a problem with
DDT-tainted jute bags that year dramatically reduced this trade. The Ethiopian government reacted by
mandating that all export coffee be tested at a Ministry of Agriculture coffee laboratory. The Ministry is
working with the Japanese development agency as well as other donors to improve overall laboratory
systems, in order to avoid similar problems in the future.
Coffee stocks are primarily held by coffee cooperative unions, with some quantities held by the
Ethiopian Commodity Exchange (ECX) (see Marketing section below), coffee exporters and
wholesalers for the local market. The government, however, has severe penalties for hoarding, and
exporters are not allowed to store more than 500 tons of coffee over a two-month period, unless they
have a contract with an importer. ECX, cooperative unions and local market wholesalers are not
affected by this restriction. Storage capacity is a major issue, and ECX continues to invest in
warehouses throughout the country.
There are no particular policies affecting coffee production. As noted above, however, coffee storage is
regulated, as is the export trade. Because coffee is one of the most important export items, the
government imposes a number of regulations to maximize the foreign currency resulting from this
export. It is illegal to sell export quality coffee in the domestic market, and businesses must have
special licenses to be roasters, domestic wholesalers, or exporters. In order to maintain export quality,
all parties in the export supply chain are required to be certified by the Ethiopian government in order to
collect, process, store or transport coffee.
The Ethiopian Commodity Exchange (ECX), a public-private enterprise, was established in April 2008
with the help of USAID to reduce transaction costs and risk to growers, as well as to control foreign
exchange. It started with export items like coffee and sesame, and is now extending to haricot beans
and grains, including for the local market. Over the past four years, it has become a well-organized
market institution where local buyers and sellers come together to trade, assuring quality, quantity,
payment and delivery. It now handles about 90 percent of all coffee exports, and has its own
laboratories and warehouses. Unwashed coffee accounts for over 60 percent of all ECX transactions.
Many farmers have benefited from the ease in marketing and better prices afforded by trading through
ECX. However, there are some complaints by producers and traders. First, some growers object to the
fact that trading through ECX is mandatory; by law all coffee must be traded either through ECX,
through a cooperative, or by a commercial operation. (Sesame is also required to be traded through
ECX; using ECX is voluntary for other crops.) Second, ECX handles coffee in commodity fashion, to
the disadvantage of growers (and buyers) of specialty coffees. This has given an advantage to
commercial farms and certain coffee cooperatives, which do not have to sell through ECX and are able
to get premium prices by marketing their coffee either by terroir (e.g., Yirgachefe) or by production
process (e.g., organic, or bird-friendly). In an effort to address this, ECX is taking steps now, working
on a pilot project with Starbucks, to identity-preserve specialty coffee.
Production, Supply and Demand Data Statistics:
2010/2011 2011/2012 2012/2013
Coffee, Green Market Year Begin: Oct Market Year Begin: Oct Market Year Begin: Oct
2010 2011 2012
Ethiopia USDA New USDA New USDA New
Official Post Official Post Official Post
Area Planted 0 499 0 516 530 (1000 HA)
Area Harvested 0 489 0 506 520 (1000 HA)
Bearing Trees 0 1,223 0 1,264 1,300 (MILLION
Non-Bearing Trees 0 25 0 26 25 (MILLION
Total Tree Population 0 998 0 1,290 1,325 (MILLION
Beginning Stocks 53 53 28 95 762 (1000 60 KG
Arabica Production 4,400 6,113 4,700 6,320 6,450 (1000 60 KG
Robusta Production 0 0 0 0 0 (1000 60 KG
Other Production 0 0 0 0 0 (1000 60 KG
Total Production 4,400 6,113 4,700 6,320 6,450 (1000 60 KG
Bean Imports 0 0 0 0 0 (1000 60 KG
Roast & Ground Imports 0 0 0 0 0 (1000 60 KG
Soluble Imports 0 0 0 0 0 (1000 60 KG
Total Imports 0 0 0 0 0 (1000 60 KG
Total Supply 4,453 6,166 4,728 6,415 7,212 (1000 60 KG
Bean Exports 2,660 3235 2,800 2733 3,650 (1000 60 KG
Rst-Grnd Exp. 0 0 0 0 0 (1000 60 KG
Soluble Exports 0 0 0 0 0 (1000 60 KG
Total Exports 2,660 3,235 2,800 2,733 3,650 (1000 60 KG
Rst,Ground Dom. 1,765 2,836 1,850 2,920 3,200 (1000 60 KG
Soluble Dom. Cons. 0 0 0 0 0 (1000 60 KG
Domestic Use 1,765 2,836 1,850 2,920 3,200 (1000 60 KG
Ending Stocks 28 95 78 762 362 (1000 60 KG
Total Distribution 4,453 6,166 4,728 6,415 7,212 (1000 60 KG
Exportable Production 2,635 3,700 2,850 3,849 4,371 (1000 60 KG
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