Ethiopian coffee news from the current harvest

Ethiopian coffee – news from the current harvest

Justin Purser

“I’ve recently returned from a visit to Ethiopia where the price of coffee was a hot topic for discussion during my meetings with farmers. Throughout Yirgacheffe, Sidamo, Guji and Harar, the story was the same: at this year’s prices, growing coffee – even in these most romantic and hallowed of growing regions – is not viable, and individual farmers selling their coffee to private traders (which remains the standard trading practice in this country) will probably be making losses this year.

The farmers we trade with through the co-operatives they collectively own (which are themselves organised within either of two co-operative unions, Oromia and Sidama) are doing better, as they are receiving up to 40% more cash in their hands as well as other benefits through fair trade. However for these farmers too, growing coffee is scarcely profitable in early 2019.

The dominant feature of coffee production in Ethiopia is the very small production yield of individual farms. On average, coffee producers have less than a hectare of coffee trees and produce only a few hundred kilograms of coffee. Coffee farmers, who number in the millions, are very hard to reach with agronomical support that would help to make them more efficient and productive.

In southern Ethiopia, coffee farmers typically sell their coffee either to privately-owned washing stations, for a one-time cash payment, or else if they are members of co-ops they will sell their coffee at their own washing stations for a first cash payment and with the anticipation of one or two bonus dividend payments later in the season.

It was explained to me that private traders are playing a critical role in suppressing prices in Ethiopia, using their influence over local politicians to pressure co-operatives into holding prices at their own washing stations at the same level as the private traders. This means that in Sidamo, for instance, prices at all washing stations are typically 9 birrs per kg of coffee cherries this season, well down on last year’s price of 11 birrs per kg. This price drop reflects the general downturn in global coffee prices this year.

At this level of pricing, the income from coffee for smaller-scale Ethiopian coffee producers is well below a rate that would both cover their production costs and also provide enough extra return to meet the basic needs of their families such as schooling, health expenses, and other essential living costs.

There was a reasonable consensus among the farmers I met with during various co-op visits that an economically viable price for their (washed) coffee – one that would allow them to cover basic living expenses – would be roughly 20 birr per kg of cherries, including the bonus (dividend) payments they receive from their co-ops.

In Sidamo, the conventional coffee traders are paying farmers 9 birrs/kg this year, and for farmers delivering coffee to them this is all they get. The co-ops we met with, who export to us through the Sidama Coffee Farmers Cooperative Union (SCFCU), anticipate that on top of their own first 9 birrs/kg payout they will be able to pay their members an additional 4 birrs/kg through two bonus payments, a calculation which is informed by the export pricing they expect to achieve this year.

SCFCU’s export pricing is capped by what their export market will bear. In turn, its own customers – importers, which include Trade Aid – have our own limitations on what prices we can pay as we need to onsell the coffee and operate in a price-competitive market. Perhaps you can start to see from this example why the SCA’s Coffee Price Crisis Response Initiative has its work cut out for it – fundamentally, export pricing needs to be higher for coffee farming in Ethiopia to remain viable, but how can market forces allow this to happen?

The co-operatives I recently visited are not holding their breath for an answer to this question. While from the fair trade premiums they receive they still fund community-focused projects such as the construction of schools,several of them are now starting to use a portion of the prices we are paying them for their coffee to invest in infrastructure that can provide them with assets and an alternative revenue stream to coffee.In Harar, the Tutta Kanisaa co-op has constructed an office and retail block from which it gains rental income and in Sidamo, the Wotona Bultuma co-op has also built and leased out retail space. The Homa co-op, in Yirgacheffe, plans to build a complex that will include office space, retail, and also a hotel. Homa is also considering setting up a bus service in their district to generate non-coffee income while also meeting a community need.

I was encouraged during my visit to see that the membership of all of these co-operatives is steadily increasing – a sure sign that they are delivering extra value to coffee farmers. At each of the co-operatives I visited I could also see that large investments are being made in coffee plant nurseries, which are providing members with large quantities of new, high quality seedlings. In supporting their members in their efforts to improve their production volumes, this may yet prove to be a more effective way that their co-ops can help them to lift their incomes to a more sustainable level. In the meantime, they will continue to call for higher prices.”