It’s just past noon at the Ethiopia Commodity Exchange (ECX), and the floor is buzzing with the arrival of a few top-quality lots of washed Sidamos. More than 30 traders are participating in the coffee session at the ECX, showing there is no shortage of interest in Ethiopian coffee. Beans from this producing nation are, after all, the only ones that can claim to be traced back to the earliest beginnings of coffee. “It’s an open-outcry session, and today it’s a buyers’ market,” says Taika Fantaye, who looks after external affairs for the ECX. “The harvest flow has just started to pick up and we are starting to get a lot of coffee coming in now as we get close to peak season.” Coffee sold to the local market is traded in the morning, with afternoons reserved for international buyers. The Sidamo lot ends up selling for US$1.59 cents per pound, $0.18 above that day’s ICE Arabica price in New York. Now four years in operation, supporters of the ECX say prices paid to producers have increased significantly, by making trade more transparent than the former coffee auctions that took place in the remote region of Jimma. “Every year volume has been doubling or tripling, our membership is expanding and we are breaking records every year,” says Fantaye. While the long-term results of the ECX won’t be ready for evaluation for some time yet, there is no denying that Ethiopia’s coffee industry is growing. And the growth is everywhere, from production to consumption and from quality to trade. That is even though logistical issues remain and challenges from outdated marketing and export laws continue to cause headaches for foreign buyers. In the 2010-11 crop, export earnings from coffee reached an all-time high of US$879 million. This was in part thanks to 14-year-high Arabica prices, as well as increased production. While coffee has always been important to the struggling Ethiopian economy, record foreign exchange earnings from this crop have attracted a new level of political interest. Throughout the 1990s, annual coffee production in Ethiopia rarely surpassed 3 million bags. As Ethiopians are coffee drinkers – uncommon in Africa and indeed any producing country – exports rarely surpassed 1.5 million bags. At the turn of the millennium, Ethiopia produced a record 3.5 million bags, and the number has been climbing ever since. In 2001-02 production hit 4 million bags, growing over the years to an all-time high of 7.5 million bags in the 2010-11 crop cycle. “Coffee production in Ethiopia has increased and is definitively increasing, that is unquestionable,” says Yilma Gebrekidane, General Manager of the Ethiopian Coffee Growers Association. “It’s a new phenomenon for Ethiopia that has started in the past few years due to new agricultural policies that have led to us to having private investment in the coffee industry for the first time.” According to estimates from the growers association, Ethiopia’s production capacity – based on land in production – currently stands at a maximum 7.5 million bags. This would fall short of the government’s target to produce 9.5 million bags. “Of course we can get there, but not now, perhaps in the next five to 10 years if the programmed plantings continue and if we start improving the use of modern inputs to increase yields,” says Gebrekidane. “The land is there and the investment is there but the yields are still very low.” When the 9.5 million figure was released a year ago, in a market report from the International Coffee Organisation, this led to a stir of industry debate. With exports still trailing 3 million bags, the only way to explain the explosion in production figures was through higher local consumption, but nobody could get these numbers to match exports or any other figure. The importance of coffee exports earnings, which during the 1980s and 1990s could account for up to 70 per cent of the African country’s entire foreign exchange revenues, has taken on a new significance. Since the launch of the ECX, the Ethiopian government has been supporting aggressive policies to promote production. While coffee in many developing countries is no longer seen as a cash crop that can benefit development, in Ethiopia living conditions are still so basic that coffee is considered a viable way out of poverty. With the government benefitting from increased foreign exchange earnings, coffee production has become a pillar in the official “Growth and Transformation Plan”. And this is where the misleading figure first appeared, as part of a political goal rather than based on actual production figures. “The government is targeting the exchange earnings very aggressively and their target for coffee is very ambitious,” says Alemseged Assefa, General Manager of the Ethiopian Coffee Exporters Association. “I think the 9.5 million bag figure is probably too high, but now the government is starting to understand the importance of coffee here and this is good for Ethiopia.” Travelling to the origins of coffee in Ethiopia’s Kaffa province is an adventure. The region is around 500 kilometres southwest from the Ethiopian capital of Addis Ababa, just across the border from South Sudan. The trip takes visitors through the northern part of the Rift Valley. The arid beauty of Acacia trees dots the wide plains surrounding the Addis plateau. Past Jimma, the landscape starts changing into lush green forests. This part of Ethiopia, formerly known as Southern Abyssinia, is where coffee was first ‘discovered’ sometime between the 9th and 12th centuries. Legend has it that a goat herder named Kaldi discovered that his goats would become surprisingly energetic after eating the red berries off nearby bushes. The story of Kaldi is now known the world over, depicted everywhere from cartoons to coffee bags. The coffee in Kaffa still grows wild, thriving at altitudes between 1700 and 2200 metres.
In the once wild landscape, private estates developed by investors interested in the coffee trade have started emerge for the first time in the region’s over 1000-year-old coffee growing history. “I wanted to do something that was permanent both for me and for the people here. As the government had started opening up the coffee sector to private investment I decided to go into coffee,” says Addisu Beyene Tifferi, a businessman who was one of the first to set up a private-run coffee estate in Kaffa in 1998 following government reforms. “The government was eager to attract investors to the coffee sector and most of the land available was in the Kaffa zone,” says Addissu. “At the time I just wanted to get away from Addis and the idea of quick money, and I knew that you have to be patient growing coffee. Other than this, I didn’t know anything about coffee except for drinking it.” Addisu’s estate stretches out over 250 hectares of which 220 hectares have been planted with different Arabica varieties on the lands through his LemKeffa Coffee and Spices Agro Company. And as everywhere else in Kaffa, the new coffee production is picking up. In addition to cultivated farms, Kaffa coffee still grows wild in many parts of the region. Known as “forest coffee”, wild coffee trees grow up to 15 metres tall, have long thin leaves, and look nothing like most commercially developed Arabica varieties. In the nearby town of Bonga, more than 50 trucks have lined up to have their coffee graded at the local ECX delivery warehouse. As one of 17 warehouses certified by the ECX, staff here has worked overtime since the new harvest picked up this past February. “The harvest begins in October, but the peak starts in January and we are still in the middle of that now,” says Nigussie Senbet, one of four Q-graders at the warehouse. “The harvest is smaller this year, but the quality is better. We have seen a constant improvement in quality during the past four years since the warehouse started operating; especially the drying techniques have improved and the volume of washed coffee is bigger than ever before.” With vast areas of undeveloped agricultural land, Kaffa province is leading the country’s production boom. Some renovation efforts have also been reported out of the better-known Sidamo, Harrar and Yirgacheffe regions. However, with higher population densities, these latter areas have limited new development potential. Local authorities in Kaffa say they plan to keep up the momentum. “In the next three years, the project will have a total 260,346 hectares of land cultivated with coffee,” says Kassahun Taye, Manager of the Kaffa Regional Agriculture Office. This would see the land cultivated with coffee expand by over 45 per cent from 2012. Of the total area, 61,920 hectares are designated as “garden coffee”, cultivated by smallholder farmers. Another 13,154 hectares are cultivated by private estate owners. The balance is a mix of forest or semi-forest coffee. Semi-forest coffee is picked by local communities, on public property and in the wild. Yields from either type of forest coffee are quite low, however make up a large share production. In the 2011-12 harvest, around 255,000 bags of the Kaffa Zone’s 580,000 bags were from forest or semi-forest coffee, according to official data from the agriculture office. Increases in production have mainly come from cultivated coffee, which have seen improved yields in recent years thanks to better practices. “In 2008, production in the Kaffa Zone was only around 400,000 bags,” Taye explains. “But five years ago, a political decision was taken to turn this area into a market centre. The government has been providing training to farmers on how to implement new technology, in addition to providing extension services on farming practices and providing seeds.” A few kilometres north of Bonga, local farmer Gerawa Yesuf tends to a new field of young coffee seedlings. The government, she says, gave local producers 4 kilograms of seeds. When carefully nursed, 1 kilogram of seeds can produce 4000 seedlings. “This was all forest coffee,” says Yesuf, pointing to the farm, still bordered by forest. “I have been here almost 25 years and I have 4.5 hectares, of which 1.5 hectares is forest coffee and these 2 hectares we have planted with new coffee during the past two years.” The wild, still relatively undeveloped, countryside is a sharp contrast to the built-up Ethiopian capital of Addis Ababa. Here, talk of coffee is not about growing, but rather consuming. Visible social development and economic progress is a welcome sign in a country that was ranked the second poorest country in the world a decade ago. Today, however, spending power has arrived. Modern coffee shops and café culture competes with traditional street coffee booths. Local consumption is estimated at 4 – 4.5 million bags a year. While many producing countries are undergoing massive efforts to boost local consumption, Ethiopia has the advantage of an established coffee drinking culture. Villagers in Ethiopia say the act of drinking coffee “is transformational as each cup changes the inner persona of the one who drinks it”. Combined with increased local production, coffee should prove a bright light in Ethiopia’s path to development.
Market Reports
Ethiopia’s production potential
