Ethiopia's Coffee Production Rises

According to a report by STiR Tea & Coffee, the world’s leading tea and coffee industry magazine, on November 16, good news has come from Ethiopia while most of the world’s major coffee-producing countries are reporting declines in production.

Despite the worsening political crisis within Ethiopia, the 2021-22 new season saw coffee production rise by 0.3% to 7.62 million bags (60 kg/bag). The United States Department of Agriculture (USDA) stated that Ethiopia’s ongoing 2020-21 harvest season recently concluded with a total production of 7.6 million bags, an increase of 1.7% from the previous cycle’s 7.475 million bags.

According to a Bloomberg report on November 8, Ethiopia’s coffee exports this year have hit a new record high. Data from the Ethiopia Tea and Coffee Authority shows that in the three months ending October last year, Ethiopia exported 86,000 tons of coffee, generating revenue of $327.9 million—77% higher than expected.

Although the conflict between the Ethiopian government and the Tigray People’s Liberation Front (TPLF) armed group since the end of 2020 has resulted in thousands of deaths and displaced hundreds of thousands, exports have not been affected. As of the end of July, Ethiopia had exported 250,000 tons of coffee, generating $910 million in revenue. It is expected that coffee exports for this fiscal year will reach 280,000 tons, yielding $1.1 billion in income.

Coffee Futures Prices Hit 10-Year High

According to a Reuters (London) report on November 23, due to continued tight supply, the price of Arabica coffee futures on the Intercontinental Exchange (ICE) in the United States climbed to its highest level in nearly 10 years on that day. As of 6 pm Beijing time on November 24, 2021, ICE Arabica futures prices had reached $2.4113 per pound.

Ethiopian Coffee Farmers Face Rising Default Risk

Even as Ethiopia’s coffee production and exports rise, bad news follows. According to a Bloomberg report on November 23, the risk of default by Ethiopian coffee farmers is also increasing as coffee prices hit a ten-year high.

According to insiders, the recent surge in coffee prices has prompted some Ethiopian coffee suppliers who had previously agreed to deals at lower prices to default, exacerbating challenges for traders and coffee roasters in securing supplies.

At lower prices, some Ethiopian exporters were unable to fulfill deals with international buyers. The reasons behind this are twofold: either the farmers demanded more money, or local exporters were overwhelmed by the rapid rise in coffee prices.

The head of Ethiopia’s Tea and Coffee Authority stated that if buyers and sellers cannot reach an agreement, the government will intervene to enforce contracts.

An industry source in London commented that compared to farmer defaults in Brazil or Colombia, the situation in Ethiopia is not as severe.