Coffee is a global phenomenon whose captivating taste flourishes worldwide. From humble bean to beloved brew, this versatile crop has passed through a remarkable journey over the centuries. Meticulously cultivated across diverse regions, coffee production is an intricate dance of climate, soil, and human expertise.
Ethiopia is the birthplace of coffee, with a history of coffee cultivation dating back hundreds of years. The country is one of the top producers and exporters of coffee in the world. Some research shows that the country produces over 400,000 metric tons annually, accounting for a significant 4% of the global coffee supply. Moreover, it’s accounting for around 60% of the continent’s total coffee production. From its Arabica-dominant varieties to its rich cultural heritage, Ethiopian coffee stands as a true global treasure.
In general, coffee is a critical component of the economy in Ethiopia, generating significant export revenue and providing livelihoods for millions of smallholder farmers across the country.
The Ethiopian Coffee and Tea Authority’s data shows that the country’s source of foreign exchange is growing by producing quality coffee and offering it to the international market. Also, the country’s income from coffee exports has increased from millions of dollars to billions of dollars, he mentioned.
The Director General of the Authority, Adugna Debela (PhD), stated that the income obtained by producing quality coffee and offering it to the foreign market is on the rise. Adugna revealed that the country received 1.4 billion USD in the 2022 fiscal year and 1.3 billion USD in the 2023 fiscal year from coffee exports. This year, it has been shown that coffee production has been better than in the past two years.
However, the Ethiopian coffee sector faces a number of challenges that threaten the quality and consistency of its export products. One of the most significant issues is the prevalence of an illegal coffee trade and the outsized influence of brokers within the formal market.
The illegal coffee trade in Ethiopia is fueled by a complex web of illicit actors; including smugglers, corrupt officials, and dishonest middlemen. These operators exploit weaknesses in the country’s regulatory frameworks and law enforcement capabilities to divert coffee beans away from the formal export channels. They often target coffee produced by smallholder farmers in remote regions, purchasing the beans at prices well below the market rate and then selling them across porous borders to neighboring countries.
According to some experts, the impact of this illegal trade is that it deprives legitimate coffee cooperatives and exporters of the raw materials they need to meet their export commitments, forcing them to source beans from alternative – and often less reliable suppliers. This disrupts the supply chain and undermines the consistent quality that is essential for maintaining Ethiopia’s reputation as a producer of premium coffee.
Additionally, the illegal trade creates distortions in the domestic coffee market, driving down prices paid to smallholder farmers. This in turn, erodes the financial viability of these growers, making it increasingly difficult for them to invest in the proper cultivation, harvesting, and processing techniques that are necessary for producing high-quality beans.
On the other hand, compounding these issues is the outsized influence of coffee brokers within the formal export market. These intermediaries occupy a critical position between the country’s coffee cooperatives and the international buyers, controlling the flow of information and dictating the terms of trade.
Many of these brokers have established close relationships with corrupt officials, enabling them to exploit gaps and avoid regulations designed to ensure transparency and fair pricing. They often leverage their access to global markets and financial resources to compel cooperative leaders to accept low prices for their members’ harvests, pocketing the difference as profit.
The consequences of this broker-driven system are severe. It undermines the ability of smallholder farmers to earn a fair and sustainable income from their coffee crops, perpetuating a cycle of poverty and dissuading investment in quality improvements. It also distorts market signals, making it challenging for cooperatives and exporters to respond effectively to evolving consumer preferences and industry trends.
The authority is working to strengthen the direct marketing system between manufacturers, suppliers, and exporters engaged in the coffee and tea sectors to expand their use and increase the country’s foreign exchange earnings, he said.
He stated that the direct market connection created between coffee producers, suppliers, and exporters is making a significant difference by increasing the country’s income from coffee exports. This connection created between coffee producers, suppliers, and exporters is not only increasing the country’s coffee export income, but also increasing the income potential of producers, suppliers, and exporters engaged in the sector, he said.
According to him, before the implementation of the direct trading system, suppliers and exporters did not know each other in person. “Both of them met through their agents. They were forced to trade at prices set by their agents, who prevented the suppliers from receiving the full cut from the exporters,” he explained.
The problem is being solved by removing the middlemen from the center of the work of direct marketing by the parties engaged in the sector. The fact that the middleman has been removed from the market system and the direct input connection is increasing the income of the manufacturer, supplier, and exporter. Also, the country’s income potential from coffee exports is growing, Adugna noted.
He also noted that, apart from creating an opportunity for trading at a better price by removing the middleman from the market, the direct market connection is increasing the producers’ investment in the sector. The director emphasized that “the income potential of producers, suppliers, and exporters engaged in the sector is increasing, and the country’s foreign exchange earnings from these sectors are growing.”
Also, the authority is striving to encourage the Ethiopian Cup of Excellence (CoE) competition that promotes fair trade and exceptional quality coffee in the global market.
The Authority Deputy Director-General Shafi Oumer stated that the CoE’s competition provides a platform for smallholder farmers to showcase their unique coffees to a global audience, thereby enhancing their livelihoods and preserving the rich heritage of Ethiopian coffee.
The excellence would help elevate the global appreciation of Ethiopian coffee and set a benchmark for quality that inspires farmers and coffee lovers alike. It is also a testament to the resilience and innovation of the Ethiopian coffee industry, which continues to thrive despite numerous challenges.
He mentioned that identifying and rewarding the efforts of dedicated farmers who are involved in the competition program provides opportunities to promote excellence and encourage sustainable practices and fair trade.
On his part, Ethiopian National Coffee Association President Hussein Ambo (PhD) stated that the Ethiopian coffee culture is deeply intertwined with social life and is the first to consume over 50% of its coffee produce in Africa.
Despite political and economic challenges, he elucidated that coffee remains the country’s primary export product for earning of over 35% foreign currency, with over 30% of total population securing employment opportunities in the sector.
According to Hussein, the competition also improves coffee production and quality, creates awareness among smallholder coffee farmers, and ensures sustainability for both the marketplace and farmers by providing significant revenue, quality incentives, awareness, market access, and broader economic growth.
USAID Ethiopia Deputy Mission Director Tim Stein remarked that Ethiopia is one of the world’s top coffee producers, renowned for their unique flavor and aroma profiles.
As to him, the US government, along with USAID and the United States Department of Agriculture, is working with coffee farmers, graders, and exporters to build a robust coffee sector that delivers the best quality coffee across Ethiopia and the world.
Expressing continued partnership within the coffee value chain, the director said USAID is supporting training and recertification of Ethiopian graders to ensure the growth of the Ethiopian coffee sector.
Furthermore, the government and other concerned parties working together to address the challenges of the products will require a multi-pronged approach, involving stronger regulatory oversight, enhanced law enforcement, and the empowerment of coffee cooperatives to negotiate more favorable terms with producers and international buyers.
Moreover, only by tackling the root causes of the illegal trade and broker dominance can Ethiopia hope to fully realize the potential of its world-renowned coffee sector and ensure the long-term prosperity of its smallholder farming communities.
Besides, by implementing a comprehensive set of measures that address traceability, licensing, farmer support, law enforcement, and stakeholder engagement, the Ethiopian government can significantly decrease the influence of illegal brokers and safeguard the quality coffee exports of the country.
BY FIKADU BELAY
The Ethiopian herald July 14/2024
