Coffee, Seed Exports Drop

Addis Fortune (Addis Ababa)

Mahlet Mesfin

6 June 2011

The volume of coffee exported in 2010 decreased by 22pc when compared with the previous year. In 2009, Ethiopia exported 271.3tn of coffee, the highest until now.

The volume of coffee and oil seeds exports has decreased by 33.8pc and 14.6pc, respectively, over the past 10 months, making it unlikely for the government to collect its target of three billion dollars from the commodities this fiscal year.

Coffee and oil seeds (sesame and flax seeds) are the two top major export commodities, accounting for 26.4pc and 17.9pc share of the total export market, respectively, in 2009/10.

While the government had planned to collect 742.3 million dollars and 325.2 million dollars from the export of coffee and oil seeds, respectively, over the past 10 months, the collection stood at only 633.6 million dollars and 246 million dollars, respectively.

To achieve its earning goals would be very difficult as the government would have to collect 900 million dollars in the two months remaining before the end of the fiscal year, according to a macro economist who spoke to Fortune on condition of anonymity.

The country’s total export earnings over the past 10 months stood at 2.1 billion Br.

This is the same amount the government plans to earn from the export of 600,970tn of coffee by the end of the GTP’s five-year period.

The country must export an average of 120,000tn annually to achieve this target.

The government had planned to export 238,789tn of coffee and 253,851tn of oil seeds, but only 158,195tn of coffee and 193,060tn of oil seeds left the shores, according to the 10-month report of the Ministry of Trade (MoT).

Over the reported period, 158,195tn of coffee was exported, 31pc more than the average expected to achieve its target.

The government uses the total coffee production of the preceding year to set export targets, according to an expert at MoT who was involved in the planning.

The total coffee production stood at 265,469tn in 2009/10, according to data from the Central Statistics Agency (CSA).

MoT projected a 25pc increment in production (331,776tn) and estimated that 75pc of the total production would be exported to bring the country’s export potential to 250,000tn this fiscal year, the expert explained.

However, coffee producers and exporters are not convinced by this explanation.

The production of coffee is not like that of cereals, which is predictable due to the cyclical nature of the crops, while coffee production changes annually, a coffee grower and exporter told Fortune on condition of anonymity.

Hoarding is the major cause of the reduced exports, claimed the government.

As the price of coffee is promising, some exporters have been stockpiling more coffee than the amount they are allowed in order to sell it later, according to Amakele Yimam, head of cooperate communications at MoT.

In April 2011, the average international price of a kilogramme of Arabica coffee was six dollars, up from two dollars in the same month of the previous year, according to data from the International Coffee Organisation (ICO).

“As of March this year, I had around five containers in my warehouse that are ready to be shipped and paid for,” the exporter claimed. “Due to unforeseen circumstances, there was a problem with the shipping and the containers are still in my warehouse. That does not mean that I am hoarding; there is no reason for that as the prices we sell at are usually determined in advance.”

An exporter’s warehouse on Debre Zeit Road that has the capacity to store around 300,000tn, was half full on Wednesday, June 1, 2011.

“This is the usual amount of stock we have,” an employee at the warehouse told Fortune. “It will be reduced in three days when the goods are sent off for shipping.”

In a bid to avoid such situations, which the government calls hoarding, and preventing exporters from deliberately not complying with contracts with foreign customers, MoT issued a new directive in April 2011, a month that showed a significant decrease in the export of both commodities.

Coffee exporters who were found with stocks larger than the contracts they have entered into were instructed to sell the surplus by Tuesday, June 7, 2011.

The volume of coffee exports showed a decrease of 29pc in April 2011, in comparison with the same month last year, but generated 92.2 million dollars, 33pc more than the coffee earnings in April 2010.

The international price of coffee showed a 130pc increment over the past 10 months, helping the country to secure the increased income.

However, if the amount of exported coffee continues to decline, the government might not achieve its five-year target, according to expert.

The problem will be solved as exporters have begun selling their surplus stock after the negotiations with the ministry, claimed Amakele.

Failure to sell the surplus will exclude the exporters from trading at the Ethiopian Commodity Exchange (ECX) for a specific period, depending on the size of the stock.

Getachew Admassu, head of public relations at the Ethiopian Coffee Exporters’ Association, declined to comment on the issue.

“It is difficult to make conclusions about the reasons for the reduction before assessing the causes thoroughly,” he told Fortune.

The government’s order to sell stocks has hampered their exports, claimed exporters of oil seeds.

Both the volume and income earned from the export of oil seeds have decreased by 56pc and 52pc, respectively, by April 2011, in comparison with the same month last year.

“Our customers are informed that we are forced by the government to sell our product,” a sesame exporter told Fortune on condition of anonymity. “They set the price at lower than the international price, which will have a negative impact on the country’s total export earnings. This has also led to a reduction in the international market price and we are not going to export at losses.”

Amakele argued that exporters should welcome the competition.

“Exporters should not take hoarding as a legal market principle to determine prices,” he said. “Exporters make transactions and generate income through competition, but it is the duty of the government to interfere when there is a failure in the system.”

“The government might not be successful in achieving its goal, if the volume of export continues to decrease,” another exporter told Fortune on condition on anonymity.

The reduction of export earnings is also reflected in the earnings of other commodities including cereals and flowers, which comprises 8.5pc and 6.5pc share of the country’s total export earnings, respectively.

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