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Ethiopian Coffee on Algrano: 2024 Plan
Pre-contracting: December - Mid January
Samples: Late January. Browse availability here.
Sales period 1: Late January - Early March
Exporting: March - May
Available at the warehouse: June or July
Sales period 2: February - End of June
Exporting: July - September
Available at the warehouse: October - November
Why Were Minimum Registration Prices Announced in November?
Every January for the last three years, Ethiopian exporters have received a series of spreadsheets on Telegram. It’s the announcement of the new crop’s Minimum Registration Prices, which will be released biweekly until the end of the season by the Ethiopian Coffee and Tea Authority (ECTA).
The list ranks FOB prices by coffee type (the location where the coffee was produced), exporter type (commercial, vertical integration, cooperative union, etc.), grade, and processing method. It’s released in January because that’s when the early harvest coffees start arriving at the dry mills in Addis Ababa.
This year, the Minimum Registration Prices were announced in November, before any new crop coffee was ready to export. The measure is an attempt by the ECTA to reassure unhappy exporters and green buyers after a season of high prices, poor exports and subpar quality.
The early announcement also facilitates the sales of past crop coffees, as Ethiopian exports have been low for most of the year and exporters still have a lot of stock in the warehouse. And it relates to the question roasters have been asking all year: What happened to Ethiopian coffee?
In this harvest report, we won’t talk so much about the harvest itself. It started in October as usual, it’s peaking now, and the weather is good. Instead, we’ll explain the dynamics affecting coffee production, exports and quality in the country - and what roasters can expect this season.
You'll read about:
- Why the price of Ethiopian coffee went up when the quality went down.
- How the price of Ethiopian coffee got so high, from inflation to politics and the NY Exchange.
- What you can expect from the new Ethiopian harvest in 2024.
- What Algrano is doing to avoid quality problems and delays, including two origin trips.
Why did the price of Ethiopian coffee go up and the quality went down?
We heard from roasters that the quality of Ethiopian coffee in 2023 wasn’t the same as it used to be. And though we can’t fully agree with that, we did see a lot of quakers... This was a problem mostly for lower grades but even some specialty lots suffered.
Quakers are a result of both sorting and the quality of cherry delivery. In 2023, cherry prices were so high that producers were incentivised to sell everything they had, far beyond the ripest fruits. At the end of the season, prices were as high as 85 Ethiopian birr per kilo, three times higher than in previous years.
Ethiopia has also been struggling to secure foreign currency for imports and investments since 2020 when the war in Tigray broke out. Because of that, exporters were also incentivised to sell everything they could.
It’s a known fact that coffee is the country’s biggest source of American dollars. And that many exporters make money not from coffee but from selling imported goods in the domestic market. To buy these goods, they must first receive earnings from coffee.
With a government strapped for American dollars, the National Bank of Ethiopia (NBE) released a directive in September 2022 limiting the foreign currency that exporters could retain. Exporters had to surrender 70% of their hard currency earnings to NBE. This money would be immediately converted into birr and deposited to the exporter’s account.
After the 10% that had to be surrendered to their respective banks, exporters could only access 20% of their total foreign currency earnings. “Then, people might want to export more volume, focusing on quantity and neglecting quality. Imagine having to arrange 40 containers. You don’t have access to quality,” explained Zelalem Fisseha of FairCoffee Ethiopia.
With the Tigray war in 2020 and the latest conflict in the Amhara Region, which started in August 2023, more Ethiopians have been drawn to coffee to access currency. Unlike exporters working in coffee for decades, the newcomers are interested in dollars. With a high Minimum Registration Price, they were incentivised to sell large volumes of any grade, stretching the capacity of dry mills.
Ironically, the government’s strategy to increase forex earnings through prices backfired as many buyers refused to pay and others later rejected the coffees that were contracted based on quality. However, Zelalem points to a shift in demand that could absorb more lower-grade coffees from Ethiopia. “We’re seeing a lot of Middle Eastern buyers now. They are after commercial coffee, buying anything from grade 3 to grade 5.”
Why was the price of Ethiopian coffee so high? Inflation, politics & the NY Exchange
War and currency partially explain the 2023 price increase, with new and existing exporters ramping up competition for cherries. “With a shortage of hard currency for importing, exporters sent more money to washing station owners to buy cherry. They were all competing,” said Mebrahtu Aynalem of Boledu Coffee.
But the reality is that cherry prices have been increasing since 2020. In February of that year, our harvest report highlighted record cherry prices at 25 birr per kilo, a fraction of what we saw last year.
Cherry prices are being affected by high inflation and politics. To encourage production and boost popular support, the government has been keeping cherry prices up in favour of coffee farmers, who have been struggling to cover their basic needs.
Mebrahtu also pointed out that industry predictions at the beginning of the last harvest “were all wrong”. Washing stations started buying cherries when futures prices were still high and the government expected them to stay that way. But NY Exchange prices slumped after October 2023 to recover only slightly in January 2023, right when contracts for Ethiopian coffees were being signed.
“The NY price started going down every month, so a lot of coffee was only sold after May and shipped after June. Buyers were confused about the price,” he said.
In January 2023, there was also a rumour that the Ethiopian government would devalue the birr, allowing companies to make higher profits from imports. Exporters loaned large amounts from banks to buy cherries only to see predictions not coming true and falling flat on their faces.
What can you expect from the Ethiopian coffee harvest in 2024?
Coffee prices will be lower in 2024, reflecting the NY price more closely. Though the Minimum Registration Prices change every week, the November announcement already shows reductions of around US$ 0.20/lb for grade 1 Sidamo, Yirgacheffe and Guji, for example.
In the week between November 21st and 27th, such coffees were listed between US$3.55/lb (Washed) and US$3.58/lb (Natural). Grade 2 was significantly lower between US$2.75/lb (Washed) and US$2.78/lb (Natural). Special processing methods like Anaerobic, Carbonic Maceration and Honey were listed at US$8.89/lb, down from around US$9.60/lb.
While cherry prices started at around 25 birrs per kilo in some regions, going up to 35 birrs per kilo in areas associated with quality such as Guji and Sidamo, prices will change. “We anticipate that the price will get to 40 birr or 43 birr per kilo closer to the end of the harvest,” said Zelalem of FairCoffee.
Ethiopian banks are also facing liquidity problems and making fewer loans to exporters. Many exporters defaulted on their loans throughout the year, making banks even less willing to lend. As a result, washing stations have been slow to buy cherries.
With washing stations buying less, production of Fully Washed coffees is expected to be lower - especially of commercial-grade coffees. According to Mebrahtu of Boledu Coffee, specialty buyers will not struggle to find higher grades of Fully Washed coffees but must be aware of who they’re buying from.
“Be careful when you buy coffee. There is a lot of old stock in the warehouses and they’re blending it. And lots of people still have Washed coffees from last year, so they are not willing to produce more Washed this year. It’s more of a problem for commercial grades but for specialty, there will be enough,” he warned.
On the other hand, washing stations can focus more on quality when they have less volume to process. The exporters we spoke to said that buyers would see more grade 1 coffees available come January.
What is Algrano doing to avoid quality problems and delays?
In 2023, Algrano started to monitor the response from roasters to Ethiopian coffees more closely to understand their concerns and better support trade partnerships with producers.
We’re aware that issues with price volatility, coffee availability and on-time delivery have been obstacles for roasters interested in sourcing Ethiopian coffee directly. To solve these problems, the sourcing and sales teams have already started implementing operational changes.
- Quality review: Our QC lab has doubled down on the physical and sensory evaluation of Ethiopian coffees so we can spot problems, review offers in the marketplace and adjust to the needs of roasters. If you already know what type of coffee you need from Ethiopia, get in touch with us at sales@algrano.com.
- Visit and early samples: The sourcing team will visit key exporters in January to see their operations, cup coffees and make new crop samples of Washed lots available to roasters that same month. The team will return to Ethiopia in February, this time to attend the 20th African Fine Coffees Conference in Addis Ababa.
- February shared shipments: Dry mills in Ethiopia enter their busiest period in April going all the way to July. During this time, simple orders are prioritised. Mills tend to prepare multi-container loads of single commercial-grade lots first, leaving the more complex specialty shipments for later. To avoid delays, we will close the first containers earlier so they can be milled in March. There will be a later sales window for roasters that don’t contract early in the year.
- Roaster-producer calls: Our team will help set up calls between roasters and producers to strengthen partnerships and support best practices. Roasters will be able to ask all their questions directly to sellers and hear about production realities.
We encourage roasters to be proactive this season to help us avoid delays. As always, Algrano provides quality assurance for all marketplace coffees (unless buyers hire shipping services only) and can support price and quality negotiations with producers.
In Ethiopia, Algrano only works with cooperative unions and exporters that have been in the coffee industry for many years. They are dedicated to quality and to the producers they buy from, coming back to the same farms and washing stations every year.
To learn more about our current partners, see the Featured Producers on our Ethiopia origin page.
To learn more about Ethiopia’s marketing system, we also highly recommend reading Christopher Feran’s detailed account of the country’s recent coffee history. March forward, dear mother Ethiopia is a complex overview of new rules, price and quality evolution with a welcomed touch of optimism.
