Ethiopia’s coffee production to continue rising as exports marginally decline

ETHIOPIA – Africa’s largest producer and consumer of coffee, Ethiopia, has been experiencing a steady rise in production over the past three years, attributed to stable growing conditions.

According to USDA in a GAIN report, coffee production in the country is projected to reach 7.62 million bags (457,200 MT) in the Marketing Year (MY) 2021/22.

This is 20,000 million bags higher than the current 2020/21 crop estimate, assuming suitable weather and adequate rain will be experienced, indicates the report.

The growth in production volume is mainly due to the higher yields observed in the coffee growing belts mainly in southern and western regions of the country.

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Despite the sector experiencing growth in production, coffee is facing heightened competition from khat which fetches higher revenues that the former, as a farmer would need ten coffee trees to earn the same as one kilo of khat.

The total volume of khat grown in the country for the last five years (2015-2020) has increased by around 220%.

50-55% of Ethiopia’s local coffee production is consumed domestically

USDA

Ethiopians to consumer more than half of coffee produced in 2021/22

In Ethiopia, 50-55% of local coffee production is consumed domestically. During the period under review, consumption is forecast at 3.5 million bags (210,000 MT) assuming that the domestic consumption returns to normal after the COVID-19 pandemic.

Coffee consumed in the local market is mainly the one rejected or has failed to meet the Ethiopian Commodity Exchange (ECX) export quality standards.

However, the local price is usually higher than international price for coffee arabica, thus most producers opt to sell their produce locally.

Coffee plays a vital role in both cultural and social life of Ethiopians. The GOE has imposed measures like social distancing and special seat arrangement based on room size, which has had a huge impact on coffee shops, micro-roasters, restaurants, and other out-of-home outlets.

However, the current trend towards more consumption at home and offices are forcing retailers, roasters, and consumers to adapt to this new situation.

Coffee exports to decline due to change in price policy

Ethiopian coffee is loved both at home and in other markets with the country proudly holding the title of largest coffee exporter in the region.

In 2019, the country enacted a new marketing and export policy to allow direct coffee exports by smallholders with minimum of two hectares of land and by commercial farms in order to encourage vertical integration and improve coffee traceability.

Exports from October 2019 to September 2020 reached to 4.135 million bags (248,129 MT), 2326 MT lower than MY 2018/19.

Based on export performance during the first half of MY 2020/21, the report predicts the total exports to reach only 4 million bags (240,200 MT).

In MY 2021/22 coffee exports are projected at 4.1 million bags (246,000 MT), assuming that a complete worldwide recovery from COVID-19 pandemic crises and improved security situation in the country.

The country has been witnessing a marginal decline in export volumes or stagnation in performance in the recent years.

This is mainly due to low interest of some exporters to the revised government policy on minimum export price fixation to avoid under invoicing by exporters and security situation in some parts of coffee growing regions.

Ethiopia’s primary export destinations are Saudi Arabia, Germany, the USA, Japan, and Belgium.

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