March 27, 2009

Ethiopian Coffee Exports Crumble

In an ongoing shake up for Ethopian coffee exports, the Ethiopian government revoked the licences of six of the country's main coffee exporters, saying they hoarded supplies. The government confiscated about 17,000 tons of coffee beans from about 80 other traders and plans to auction the coffee.

Falling coffee prices, and new restrictions on how speciality and organic coffees could be sold caused concerns by the exporters who hoped a delay would allow increased prices. The government created a new electronic Ethiopian Commodity Exchange, in December 2008, but it is unpopular with traders because it does not separate speciality and organic coffee offerings. They must be mixed in with the regular stocks and so may not  be sold to top-end buyers for premium prices.

With ongoing concerns over the falling foreign sales of coffee, in January Prime Minister Meles Zenawi threatened- presumably in jest  - to cut off exporters' hands if they continued hoarding stocks in the hope of better prices. Coffee is Ethiopia's largest source of foreign exchange, with more than half a billion dollars of Arabica beans exported annually.

Ironically, the new Ethiopian Commodity Exchange supposedly was intended to seek a fair price for all beans. Some antipoverty groups thought that would help all Ethiopian coffee growers. The New York Times elaborated on the problem, which effectively prevented U.S. importers from buying Ethiopian coffes directly from the Ethiopian growers they prefer.

This is having an impact on Starbucks, which delayed opening its farmer support center in Ethiopia.

Sources: BBC News and Seattle Times