The Ethiopian coffee industry has been going through some changes recently. The changes are still evolving and will most certainly take additional time to finalize. However, given the importance of Ethiopia to specialty coffee buyers across the world, it is important to take a deeper look at the changes and how it might impact purchasing in the future.
Ever since the creation of the Ethiopian Commodity Exchange (ECX) in 2008, buyers of specialty coffee have been mostly limited to two options. Option one: purchasing either non-traceable coffee from private exporters. Option 2: choose from a limited supply of traceable coffee from cooperative unions or a few larger farms. This created disincentives for farmers to produce the highest quality lots. Average quality instead became only as good as needed for a given ECX auction grade. Over the years, ECX suppliers gradually became good at unofficial ways of tracing their coffees through the system, but true traceability was rare and difficult. The country’s export earnings suffered. In a country where coffee consistently is one of the highest value exports, this was no small thing.
Revitalizing the coffee sector in Ethiopia: guiding principles
In 2017, the Ethiopian Coffee and Tea Authority convened a group to draft a new set of principles and regulations for the coffee sector. The guiding principles were designed with the goal of revitalizing the coffee sector and its ability to generate increasing amounts of export earnings. Key principles included:
- Improving traceability in the ECX
- Improving overall quality
- Allowing for vertical integration between farmers, suppliers, and exporters
- Reducing the amount of “illegitimate” exporters
- Increasing the gross amount of export earnings
What about the implementation?
The initial statement of principles was approved in a proclamation of parliament at the end of last year. However, much hard work still remains to be done in the form of writing the specific regulations and processes. This has not yet been completed. In the meantime, there is a bit of a scramble as farmers align themselves with suppliers, suppliers with exporters, and exporters with buyers. There are many “grey areas”, but we focus on the following principles in our Ethiopia purchasing.
We insist upon:
- Traceability to the washing station and local farmers
- Transparency of prices paid to farmers
- Trust in the quality-orientation of our export partners
We will always have a range of coffees on our offer list with a varying degree of traceability. There will be classic regional coffees like Sidamo and Limu. We will have more specific regional coffees, cooperative coffees, washing station coffees and estate coffees. Thanks to a strong exporting partner, we have access to great qualities and the guarantee of correct practices all along the chain.
Growing regions of Ethiopia
The center of coffee production spans the southwestern and southeastern parts of the country in the Oromia region and Southern Nations, Nationalities and People Regions (SNNPR). Smallholder farmers with farms of less than 2 hectares on average are responsible for the majority of the coffee production. These producers supply about 95% of the country’s total production. The coffee growing areas are divided into different regions, each maintaining their distinct flavour characteristics. The three main coffee growing regions of Ethiopia are Harrar, Ghimbi, and Sidamo.
Coffee production in Ethiopia remains largely traditional, typically with limited use of fertilizers and pesticides and with a manual coffee cultivation system and drying methods. There are four different ways of producing coffee in Ethiopia: forest coffee, semi-forest coffee, garden coffee, and plantation coffee
- Forest coffee is a wild coffee that grows under the shade of natural forest trees, with no defined owner.
- Semi-forest coffee farming is a system where a farmer living nearby a forest coffee does some thinning and pruning of the forest coffee to finally claim ownership of the forest coffee. The thinning will allow adequate light to reach the coffee plant without exposing the plant to too much sunlight. The farmer who prunes and weeds the forest area claims to be the owner of the semi-forest coffee and collect the annual yield of the plant.
- Garden coffee grows in the vicinity of a farmer’s residence. Farmers use organic fertilizers to produce Garden coffee and inter-crop it with other crops.
- Plantation coffee grows on commercial farms, built by the government or private investors for export purposes. This type of coffee plantation most commonly applies fertilizers and herbicides.
Domestic consumption & export
Half of the nationally produced coffee supplies the domestic market. With a per capita consumption of 2.40kg, Ethiopia leads the African continent in domestic consumption. Coffee has both social and cultural value. It has an important place at social events such as family gatherings, religious celebrations, and at times of mourning. Coffee supplied and traded in the local market usually has a lower quality. This is because the locally sold coffee consists of qualities rejected for the Ethiopian Commodities Exchange (ECX)’s standards. Despite the low quality, the coffee price in the local market is usually higher than export prices.
A true coffee nation
Up to 20% of the population has depended on coffee production and trading for a living for many generations. About fifteen million people grow the crop for a living. In addition, hundreds of thousands of middlemen deal with crop collection. The collect from farmers and supply to the export and domestic market. In 2014, Ethiopia was the world’s fifth-biggest coffee producing country and Africa’s largest producer. Coffee is Ethiopia’s number one source of export revenue, generating about 25-30 percent of the country’s total export earnings.