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The amount of coffee planned to be sent has reportedly dropped, terminations of contracts signed by several coffee exporters is supposed to be the factor for the unexpected reduction of coffee export.
It is said that one of the reasons is that the domestic market is higher than the world price. It was announced that the coffee trade, where Ethiopia earns a lot of foreign exchange, is performing below the amount planned to be exported this year. Regarding this, in a study conducted by the Ethiopian Coffee and Tea Authority, it was said that 181 exporters made 288 contracts to send coffee to European countries, but it was not possible to send it.
Prepared by the Standing Committee on Agricultural Affairs of the House of People’s Representatives, the evaluation of the implementation of the six-month plan by the Ministry of Agriculture and the respondent institutions was held on Monday, January 29, 2015. It was held and officials of the coffee and tea authorities also gave clarifications to the questions raised by the members of the standing committee regarding the coffee trade.
Shafi Umar, the deputy director general and head of the marketing department of the authority, explained to the members of the standing committee that Ethiopia is planning to export coffee due to the fact that most of the coffee buying countries in Europe canceled the contracts they entered into, did not take the prepared coffee and mainly due to the decrease in international coffee prices.
In his explanation, Mr. Shafi said that the amount of coffee planned to be exported in the first five months of the fiscal year in which the authority conducted the study was 137 thousand tons, but 109 thousand tons of coffee was sent. He added that the remaining 28 thousand tons of coffee was planned in the canceled contracts.
“According to the research we have conducted, it is not a problem of smuggling or lack of coffee, but the reason for this is the drop in world coffee prices,” said Mr. Shafi, describing the country’s lack of purchasing power as the biggest problem. He said, “Because our coffee is widely sold to Europe, countries in Europe have canceled the contracts they entered into before.”
Compared to the same period last year, the world price of coffee, which is the international measure of coffee, was 2.5 dollars per pound, and this year, it has decreased to 1.5 dollars per pound. It has also dropped to two dollars per kilogram.
Mr. Shafi, while answering the questions raised by the members of the Standing Committee, said that the domestic market price of coffee is higher than the international price and one of the reasons for not exporting the required amount. “Since the domestic price is very high, there is another problem of not reading the international price and the local price,” said Mr. Shafi.
It is mentioned that although the performance of the coffee trade has shown an excessive decrease, the foreign currency earned has not been reduced for the time being, and it is 80 million dollars (14 percent) more than last year. According to Mr. Shafi, the reason why the coffee income is not as low as the quantity is because the quality of the coffee that Ethiopia exports is growing and the price is high.
The members of the standing committee expressed their concern that coffee’s ability to generate foreign exchange for the country would not be called into question as coffee accounted for one third of the 4.1 billion dollars in foreign exchange that Ethiopia earned from exports last fiscal year. “As said, it is a concern, but we are trying to solve the problems,” said Mr. Shafi, detailing the efforts of his office.
It has been stated that extensive work is being done to overcome these problems, and one of them is to pressurize the contracts not to be canceled and the coffee of 181 exporters to be released. It also includes developing a strategy to find new markets.
“Since the existing markets are having problems and we have to enter new markets, we are looking for markets like China, the United Arab Emirates and Taiwan. Our first buyer was Germany, now that Germany’s purchasing power is going down, extensive work has been done to make the coffee go to other markets,” the official explained said Reporter in its report.