Poor Farmer

Tanzania: Lesson From Moshi Coffee Taste Competition

2012-01-25T07:39:00.001-08:00

Peter Temba

January 25, 2012

The Eastern Africa Fine Coffees Association (EAFCA) holds a yearly National Taste of Harvest Competition, which recognizes specialty coffee, in one of its eleven member states, namely Burundi, Ethiopia, Kenya, Malawi, Rwanda, South Africa, Tanzania, Uganda, Zambia, Democratic Republic of Congo and Zimbabwe.

Recently, EAFCA in partnership with Tanzania National Taste of Harvest Committee, Tanzania Coffee Board and the US-based Coffee Quality Institute, through USAID - COMPETE Programme, held the annual Taste of Harvest Coffee Competition at Sal Salnero Hotel in Moshi.

The annual Taste of Harvest (TOH) was then held at Mazao / City Coffee Facility through their generous venue sponsorship, under the tutelage of highly trained and experienced facilitators from Coffee Quality Institute Coffee Corps and the Coordinator from EAFCA, Ms Mbula Mutahi.

According to the Executive Secretary of Tanzania Coffee using standard protocol and procedures Association, Mr James Lema, the TOH event was Head-Judged using standard protocol and procedures by the regional EAFCA Secretariat, that has acquired years of experience in running the annual TOH events in all EAFCA coffee producing countries.

Mr Lema hinted that over the last eight years, EAFCA has worked closely with the Tanzanian coffee industry members to organize several training programmes to address the knowledge gap in the coffee value chain right from planting to harvest and processing. To-date, Tanzania can call upon resource pool of over 100 skilled coffee cuppers, quality-graders and millers to sow the seeds of knowledge received from those training programmes in the country's coffee industry, he noted.

Mr Lema revealed that several organizations based in Tanzania have worked hard in the last few months to organize those important events in the coffee calendar, and for the first time have formed a National Taste of Harvest Committee which has brought together representatives from the entire Tanzania coffee sector.

"The purpose of the TOH annual coffee competition is to identify and deservedly recognize coffees that will score highest in overall quality that is judged on intrinsic quality characteristics, such as aroma, acidity, clean cup composition, uniformity of cup and after-taste," Ms Mutahi said.

During the event, there was a judge's calibration session for the TOH judges panel consisting of the best cuppers from various areas in Tanzania and all licensed G-graders. That arrangement was intended to enhance their professional expertise as well as contribute to the identification of the best quality coffees harvested in the 2001 coffee season at the National Taste of Harvest (NToH) event.

The TOH Competition brought together all the leading coffee producers and exporters who were required to submit their best coffee samples for testing by a panel of local and international judges. All coffees which secured scores of 80 plus were evaluated, profiled and publicized / promoted if they meet cup, green grading and roasted coffee criteria, according to Ms Mutahi, saying EAFCA will provide feedback to farmers who submitted samples, EAFCA members and database as well as buyers from around the world through the EAFCA website.

EAFCA Coordinator revealed that key benefits to the coffee producers and exporters that participated in the TOH competition included potential higher premiums from coffee buyers and the opportunity to explore and consolidate new marketing channels, including the still nascent domestic coffee market that has the prospect of expanding to unprecedented heights.

"Coffee buyers benefit by gaining access to producers of high quality, specialty coffees and establishing business relationships that would require extensive resources to create otherwise," she said. At the end of the TOH competition, Tanzania hosted a 'Coffee Club,' which took the form of a cocktail reception that brought together all the EAFCA members and coffee stakeholders in the public and private sector.

During the function invitees had an opportunity to network and share experiences while the winning TOH coffees and participants received recognition in the forms of prizes, trophies and certificates. Established in 2000 and with its Secretariat in Kampala, Uganda, EAFCA members include both public and private sector coffee stakeholders that include producers, exporters, international importers, roasters, policy makers, transporters and trade representatives, according to Ms Mutahi.

She says EAFCA collaborates with a host of development partners, such as USAID, CFC, European Union, International Coffee Organisation and others to increase the trade in fine and specialty coffees in the region, improve quality and boost domestic consumption of coffee. Ms Mutahi revealed that EAFCA has hosted seven successful African Fine Coffee Conference and Exhibitions in 2004 in Nairobi, Kenya; 2005 in Livingstone, Zambia; 2006 in Kilimanjaro, Tanzania; 2007 in Addis Ababa, Ethiopia; 2008 in Kampala, Uganda; 2009 in Kigali, Rwanda; 2010 in Mombasa, Kenya and last year in Arusha, Tanzania.

"EAFCA is thrilled to be organizing yet another world class event that promotes productivity, quality, trade of fine coffees and their consumption which will take place in Addis Ababa, Ethiopia," she beamed. Tanzania's coffee production increased to about 917,000 bags during last season, a six-year highest record, compared to 810,000 bags recorded during the previous season.

An official of one of Tanzania Coffee Association (TCA) recently said, the fall in export is due to less demand for the commodity in importing countries, especially US and Japan. Coffee exporters faced a double tragedy as they could not export in time due to congestion at the container terminal and drop in prices in the world market.

A coffee dealer who preferred anonymity told this paper on Sunday over the phone from Moshi this week that, congestion at the Tanzania International Container Terminal (TICTS) in Dar es Salaam is a big concern because exports are not meeting schedules. He said they do not go for new contracts because of congestion of the product.

The TCB's official Mr Desderi Mboya was quoted recently as saying that, a total of 33.1 million kilos of coffee comprising 16million kilos of arabica and 27 kilos of robusta were sold between August and December.

WikiLeaks: Government tightens grip on Ethiopia's coffee market

2012-01-13T20:13:00.000-08:00

Editor's Note: Apparently, this unclassified cable, labeled April 9, 2009, was released on the same day I published my first assessment of the situation in Ethiopia's coffee sector: " Coffee Brews Feud, Drowns Out Voices".

Since then, I have published multiple commentaries on the Ethiopia Commodity Exchange (ECX) and the state of the coffee sector. Those commentaries, including updates and news articles from other sources, can be accessed through the standalone page dedicated in this blog and named "ECX Watch".

This cable also puts to rest the points of contention addressed in "Straightening out coffee facts for the record", which was a rebuttal of the arguments of Dr. Eleni Gabre-Madhin, CEO of the ECX.

The contents of the cable can be summarized in the following broad categories:

1. The Government of Ethiopia (GoE) passed the coffee law in order to control the domestic coffee sector

2. ECX had a limited capacity and market breadth when tasked by the GoE to manage the price and flow of exported coffee

3. Domestic market often pays prices well above world prices

4. Coffee buyers can now be assured of more supply consistency and volume of coffee slated for the export market

5. The GoE has not addressed specific treatment for specialty' or 'organic' coffee

6. It's uncertain if the Government will allow the provision in the law for farmers and producers to export directly to the global markets to work

7. The GoE's public clamp down on coffee exporters may have signaled its move to capture a larger share of the lucrative market

8. The state-owned Ethiopian Grain Trade Enterprise entered the coffee trade the bulk of which was so far controlled by private companies

I will discuss these and the other relevant sections in a future article.

===

Viewing cable 09ADDISABABA780, COFFEE EXPORTS FALL AS GOE TIGHTENS GRIP ON MARKET

Reference ID	Created	Released	Classification	Origin
09ADDISABABA780	2009-04-07 09:03	2011-08-30 01:44	UNCLASSIFIED//FOR OFFICIAL USE ONLY	Embassy Addis Ababa

VZCZCXRO1326

PP RUEHROV

DE RUEHDS #0780/01 0970903

ZNR UUUUU ZZH

P 070903Z APR 09

FM AMEMBASSY ADDIS ABABA

TO RUEHC/SECSTATE WASHDC 4299

INFO RUEPADJ/CJTF HOA PRIORITY

RUEAIIA/CIA WASHINGTON DC PRIORITY

RUEKDIA/DIA WASHINGTON DC PRIORITY

RHMFIUU/HQ USCENTCOM MACDILL AFB FL PRIORITY

RUEWMFD/HQ USAFRICOM STUTTGART GE PRIORITY

RUEKJCS/JOINT STAFF WASHINGTON DC PRIORITY

RUEHLMC/MILLENNIUM CHALLENGE CORP PRIORITY

RUCNIAD/IGAD COLLECTIVE

RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 04 ADDIS ABABA 000780

SIPDIS

SENSITIVE

DEPARTMENT FOR EEB/IFD/OMA - JWINKLER AND EEB/CBA - DWINSTEAD

DEPARTMENT PASS TO U.S. PATENT AND TRADEMARK OFFICE - AMY COTTON

USTR FOR PATRICK COLEMAN, CECILIA KLEIN, AND BARBARA GRYNIEWWICZ

DEPT OF COMMERCE WASHDC FOR ITA BECKY ERKUL

DEPT OF TREASURY WASHDC FOR REBECCA KLEIN

E.O. 12958: N/A

TAGS: BEXP ECON EFIN ETRD EINV EAGR ET

SUBJECT: COFFEE EXPORTS FALL AS GOE TIGHTENS GRIP ON MARKET

REF: 2008 ADDIS ABABA 02569

ADDIS ABAB 00000780 001.2 OF 004

SENSITIVE BUT UNCLASSIFIED; BUSINESS PROPREITARY INFORMATION; NOT

FOR INTERNET DISTRIBUTION

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SUMMARY

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¶1. (SBU) The government of Ethiopia (GoE) established a new coffee quality control and marketing law (amended August 25, 2008) in order to enhance its control of the domestic coffee sector and carve out a

new strategy for increasing coffee exports. However, over the last eight months, the new law has been met with stiff resistance from private coffee exporters and has also coincided with a marked decline in the value and volume of exported Ethiopian coffee. It appears that opposition to the new law by coffee exporters coupled with persistent backwards farming methods, opaque trading practices, unfavorable climatic conditions during the last harvest and finally softening global demand continue to stifle the GoE's export-led strategy and ability to earn critically needed foreign exchange earnings (Reftel).

¶2. (SBU) As authorized by the recently amended coffee law, the GoE tasked the less than one-year-old Ethiopian Commodity Exchange (ECX) with the primary responsibility for managing the pricing and flow of

exported Ethiopian coffee. However, since its inception, the ECX has drawn the ire of coffee exporters for contributing to delays and inefficiencies in their transaction and product delivery systems. While the GoE has taken a more active role in managing the coffee sector, it is unclear at this stage how effectively it can enforce the law and how the coffee market, which includes a long list of middle-men and disgruntled exporters, can rationalize the role of the ECX and the GoE's long-term goals for the sector. END SUMMARY.

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BACKGROUND

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¶3. (U) The amended coffee law and the ECX's establishment have modernized the coffee trade in Ethiopia and have leveled the playing field across the supply chain. A modernized ECX now has a clear mandate by the GoE to rationalize a fractured coffee market prone to pricing asymmetries and a declining volume of product slated for the export market. Close to 50 percent of coffee produced in Ethiopia gets sold to the domestic market often at prices well above world prices. The GoE hopes to enhance the effectiveness of the coffee supply chain, which should increase the value and volume of its coffee exports and hopefully improve earnings parity among stakeholders along the supply chain. The GoE has taken the fractured coffee sector supply chain head-on because coffee is the backbone of the GoE's export-led growth strategy. Coffee contributes 35 percent (USD 525 million) of the country's annual export receipts and is also the mainstay of close to 15-20 million coffee sector farmers, traders and exporters. Smallholder farmers produce over ninety-five percent of the total coffee production while the remaining is produced by government and private commercial farms. (Note: The GoE has also included a provision in the amended law for farmers and producers to export directly to the global markets, essentially bypassing the ECX. However, it's uncertain if the GoE will ultimately allow this provision to work since many farmer co-ops are still waiting for their licenses).

---------------------------------

COFFEE TRADE: A HISTORY OF NEGLET

---------------------------------

¶4. (U) The GoE has only recently begun to pay close attention to the mechanics and potential of its coffee crop. In the past, the coffee trade seemingly functioned amid a dizzying array of middlemen, disparate farms and an ill-prepared and organized government regulatory body. In the last decade, the coffee sector has been shifted from varying government agencies and primary responsibility for the sector has not always landed in the places with the best technical capacity or resources to manage the industry. Over the last several years, the Ethiopian Intellectual Property Office has

ADDIS ABAB 00000780 002.2 OF 004

had the responsibility of managing the coffee sector budget and intellectual property trademarks for Ethiopia's specialty coffee market. There is currently no governing office for the coffee sector within the Ministry of Agriculture and Rural Development. Although the established trademarks for Ethiopian coffee (Sidamo, Yiragchefe and Harar coffees) have been a victory for the GoE and the coffee sector in Ethiopia, unfortunately, the major budgeting and regulatory functions for the coffee sector have been underfunded and ill-managed. In addition, the coffee sector suffered from severe information asymmetries among farmers, suppliers and exporters, resulting in poor pricing schemes and limited profitability for farmers along the supply chain.

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GOE TIGHTENS GRIP ON COFFEE MARKET

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¶5. (U) Over the past year, the GoE has tightened its hold on a coffee market that, in spite of its leading role as the primary foreign exchange earner, has failed to live up to its potential. In August 2008, the Ethiopian Parliament passed a new Coffee Quality Control and Marketing law (Proclamation No 602/2008), 64 years after the first coffee law took effect, in order to fix the fractures in the current market. Implementing a key provision of the law in early December 2008, the GoE halted the old and inefficient coffee auction markets and appropriated primary auction responsibilities to the newly established ECX. ECX, a modern trading operation, which relies on standard coffee contracts and new automated systems, seeks to establish standard parameters for coffee grades, transaction size, payment, delivery, trading and order matching while preserving distinctive coffee origins and types. ECX, unlike the previous auction market system, is high-tech and much more concerned with quality control and inspection of coffee products slated for the export market. Coffee is now traded as washed or unwashed and bears a label of its region of origin and grade. It may also include a 'type' or new categorization denoting a sub-region in a specific coffee growing area. The ECX will now require that all trades be based on warehouse receipts issued to depositors rather than on a sample basis as was done in the past. Coffee buyers can then take delivery of their coffee product at ECX warehouses with their ECX-issued warehouse receipts.

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NEW COFFEE LAW LEVELS PLAYING FIELD?

------------------------------------

¶6. (U) In a market where profits are not shared evenly across farmers, traders and exporters, the GoE's updated coffee law is an attempt to level the playing field throughout the supply chain in the highly profitable coffee business. The law levels the playing field in the coffee sector by providing transparent price discovery, enhanced supply and regulated storage of coffee products via the ECX. Now coffee farmers and suppliers can be assured of stable and transparent prices through the ECX's primary auction center in Addis Ababa. The ECX allows buyers and sellers to negotiate prices openly while New York global mercantile coffee prices flash on the many monitors of the auction floor. The updated law closes the information gap between the largely uneducated small holder farmers and the wealthier urban traders and exporters. Farmers now have access to updated coffee prices through the ECX's main auction center and via several pricing clocks which have been set up by the ECX around the country. Also, the ECX has taken on the role of warehousing the coffee stock provided by suppliers in order to improve storage standards and supply consistency in the market. Coffee buyers can now be assured of more supply consistency and volume of coffee slated for the export market. Once a trade has been completed at the ECX, buyers can pick up their appropriate stocks of coffee at the various ECX bonded warehouses.

¶7. (U) The GoE also hopes to deter traders and coffee sector participants from skirting the new law and role of the ECX by assessing heavy fines and threats of imprisonment. Stakeholders involved in the domestic coffee business will now face much stricter penalties than in the past, such as up to ten years of imprisonment and USD 10,000 in fines for not abiding with the new regulations. Mr. Abdellah Bagersh, Manager of a very well established, Addis

ADDIS ABAB 00000780 003.2 OF 004

Ababa-based coffee company, Bagersh Coffee PLC, noted that the law's focus on the elimination of illicit coffee trade practices and punitive measures are appropriate for the health and viability of the market. According to Bagersh, the law addresses the preceding law's inability to facilitate a more open and transparent market over the last seventeen years. Bagersh is optimistic that the law will help Ethiopia to maximize foreign exchange earnings from the sector while protecting the interests of small-holder farmers.

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GOE PENALIZES KEY COFFEE EXPORTERS

----------------------------------

¶8. (U) On March 25, 2009, local media outlets reported that the Ministry of Agriculture and Rural Development suspended trading licenses of 94 coffee exporters including top export earners, which

include Mulege Private Limited Company, Kemal Abdela International,

¶S. Sara coffee exporter, Legese Sherefa Ltd., Said Yassin Ali exporter and Ershere Ltd. This group of six top exporters made up the lion's share of Ethiopia's coffee export activities (70 percent of the total export) in 2008. With the GoE desperate for hard currency, the Ministry cracked down on exporters who were delaying exports by holding stock until world coffee prices increase. The GoE action follows a stern warning issued March 3, 2009, from Agriculture Minister Tefera Derbew that all coffee exporters needed to sell their existing coffee stocks to the export market by March 10, 2009 or face significant penalties such as fines, licensing bans and imprisonment. Apparently, exporters have only exported roughly 28 percent of the stock purchased via the ECX and are holding the remaining stock until world prices rise. As recently as April 5, 2009, local media reported that the state-owned Ethiopian Grain Trade Enterprise set plans to begin exporting the seized coffee stocks within a week of the announcement in order to fill the current supply gap. The GoE has not indicated how long the Grain Trade Enterprise will attempt to fill this gap or how much additional share of the export market they will try to capture over time. To date, private companies have controlled the bulk of the coffee trade, while the government has taken a backseat.

-------------------------------------------

ECX AND WEAK DEMAND TO BLAME, SAY EXPORTERS

-------------------------------------------

¶9. (U) Exporters point to the ECX's inefficiency and the falling global demand and prices as the major culprits behind the real declines in coffee exports from Ethiopia. Critics contend that the GoE has come down too hard on exporters for allegedly hoarding coffee. Penalized exporters and coffee sector experts claim that the recent government action to ban the licenses of several large coffee exporters from trading may destroy the business of these banned exporters and ultimately will exacerbate the acute supply gap

in the coffee market. They say that the new coffee legislation does not explicitly address the roles and responsibilities of critical stakeholders in the coffee market and has left major supply gaps in the market. Although optimistic about the law, coffee exporter Abdellah Bagaresh noted the absence of any awareness or educational campaigns by the GoE on the precepts and goals of the law in either its previous or amended form. Bagaresh suggested that coffee stakeholder training and workshops should have been developed in tandem with the passage of the amended coffee law. Moreover, important coffee sector participants were not given adequate time to provide feedback to the GoE on the proposed amendments to the 60 year old coffee law.

¶10. (U) In addition to waning global demand for Ethiopian coffee, allegations of theft along the supply chain remain rampant. Although now proven to be unfounded, local Ethiopian press reported on January 25, 2009 that up to 10,000 tons of coffee (worth about USD 20 million) set for the export market had vanished recently from the ECX's bonded warehouses. Ethiopia exports roughly 150,000 tons of coffee per year. The allegation of missing coffee set the Prime Minister on a collision course with coffee exporters and the ECX. In response to this loss, the Prime Minister said the GoE would "cut the hands of those committing grave crimes against the country as of January 9, 2009." However, the head of the ECX, Eleni Gebre-Medhin, has consistently maintained that the allegations of lost coffee and

ADDIS ABAB 00000780 004.2 OF 004

exporter complaints of delays at the ECX have been untrue and completely unfounded. Dr. Eleni attributes the recent flurry of negative reports in the media regarding the ECX's role in the coffee market to manipulation of the media by exporters spreading false rumors. Eleni alleges that exporters have been unwilling to comply with the new ECX system and remain angry over the increased trading costs such as the doubling of storage fees to 11 cents per bag per day at ECX warehouses for coffee purchased at the ECX. (Note: In order to improve transparency in the ECX's auction market, the GoE has required the ECX to warehouse all coffee stocks provided by local suppliers before sale and delivery to exporters).

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SPECIALTY COFFEE NOT ADDRESSED IN LAW

-------------------------------------

¶11. (U) The GoE has not addressed specific treatment for the small but important share of export coffee known as 'specialty' or 'organic' coffee at the ECX. Currently, the ECX only accommodates roughly nine of the dozens of specialty coffee types at its auction center and does not distinguish between specific coffee growers. Also, despite numerous efforts to market (per increasing international demand) bird-friendly, forest-grown, specialty and organic coffees from Ethiopia, there is no legislative framework that explicitly recognizes or regulates this segment of coffee in terms of certification, accreditation or monitoring. While organic coffee is attached to some legislation, it has yet to have a publicly recognized certification system via the ECX. Both organic and specialty coffees lack a public/private third party certification body to source officially information on market trends and volumes. Acting Director General of the Ethiopian Intellectual Property Office (EIPO), Alemu Abebe, shared with EconOff that challenges persist in the specialty coffee branding and marketing arena, such as reaping additional profits from international buyers of trademarked Ethiopian coffee and ensuring consistent quality along the supply chain. Ethiopia enjoys a comparative advantage in the specialty coffee arena, particularly because exporters can fetch much higher prices in the world markets. To date, Ethiopian coffee makes up a modest two percent of the world coffee market.

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COMMENT

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¶12. (SBU) The new coffee law is a major step forward by the GoE to improve the supply chain, price scheme and earning potential of exported coffee. As a result, the ECX now manages the major

distribution and pricing functions of coffee trade and tries to address the decades of GoE inattention to the sector and severe technological and information gaps along the supply chain. Although the law is a step in the right direction, the GoE should continue to encourage overall market efficiency, and provide additional financial support to the ECX for increased product differentiation and targeted responses to specialized global coffee market demands. The ECX does not provide, as of yet, a full suite of coffee varieties, grades and a high level of product differentiation. Incidentally, international buyers continue to lament the lack of specialized coffee varieties and the inability of the ECX to identify desired coffee product from favored growers. The newly amended coffee law does not significantly address the ECX's limited capacity and market breadth, and certainly does not deal with the external impediments to the coffee sector such as declining world demand for coffee and deleterious climatic patterns. Lastly, the GoE's recent and public clamp down on coffee exporters for allegedly hoarding stock has imperiled the sector's already fragile supply chain and may have signaled the GoE's move to capture a larger share

of the lucrative market. END COMMENT.

YAMAMOTO

Europe coffee: Surging futures spark origin sales

2012-01-13T20:04:00.000-08:00

* Central America, African, Asian origins sell as futures rise

* Price differentials cut in several origins

* Brazil and Colombia still hold out, prices firm

Reuters

January 13, 2012

HAMBURG, Jan 13 (Reuters) - A sudden surge in coffee futures this week prompted more selling by origin producers in Europe's cash coffee market but Brazil and Colombian exporters were unwilling to deal, traders said on Friday.

"Physical coffee buying has been as difficult as hanging up wallpaper with one hand in recent weeks, with a lot of producer dissatisfaction about low futures," one cash dealer said. "But the sudden jump in futures generated a lot more willingness to sell in Central America, East Africa and Asia."

New York ICE arabica coffee futures on ICE rose to an eight-week high this week on sudden short covering.

"Several origins cut differentials to quickly cash in on the rising futures," another trader said. "There was outside demand for Honduras with shippers offering most grades at lower differentials. There was demand for main types of Guatemalan beans for first half 2012 shipment along with buying interest in high-quality Costa Rican beans."

Traders said Ethiopian exporters started selling larger volumes late in the week and Vietnamese robusta sellers also cut price differentials.

Honduras High Grown beans for February/March shipment were quoted at differentials of 2 cents over nearby New York contracts <0#KC:> on Friday against 6 cents over last week.

Ethiopian Djimmah Grade 5 fell to 20 cents under New York from 12 cents under last week. Kenya AB FAQ was at $1.15 over New York against $1.40 over last week.

Robusta differentials also fell, with selling pressure ahead of the Tet/Lunar New Year holiday season in top exporter Vietnam at the end of January adding to the weakness.

Vietnam Grade 2 robusta for February onwards shipment was offered at $70 over nearby London robusta contracts <0#LRC:> against $90 over last week.

"Brazilian and Colombian suppliers did not join in with the selling and were resisting cuts in differentials because of harvest uncertainty," another trader said.

Colombian Excelso beans for February/March shipment rose to 28 cents over New York against 26 cents over last week.

There is concern that heavy rains have limited this season's output in Colombia, the world's third biggest coffee exporter after Brazil and Vietnam.

Brazilian differentials were marginally weaker with Brazil MTGB Fine for Feb/March shipment at 5 cents over New York against 6 cents over last week.

"Brazilian activities were mixed with the jury still out on the likely crop and the strong export figures for December published on Tuesday giving some traders the impression there could be tight supplies before the next crop," a trader said. "I think only pretty smallish trade was done."

Official crop forecasts in Brazil are for a record crop but private estimates are for a fall.

---

Reporting by Michael Hogan; editing by Keiron Henderson

Has trademarking doubled Ethiopian farmers' income?

2012-01-09T15:14:00.000-08:00

By Wondwossen Mezlekia

January 9, 2012

It looks like this decade is shaping up nicely as a period of Coffee Rush in Ethiopia; of course, with little resemblance to the California Gold Rush (1848–1855) and involving mostly internal actors.

Reminisce the trademark dispute between Starbucks and Ethiopia that publicly erupted six years ago.

In 2006, Oxfam stood up, on behalf of Ethiopian farmers, and demanded Starbucks to drop the hindrance it created against the name "Sidamo" at the United States Patent and Trademark Office. Starbucks ultimately gave in and even promised to open a Farmer Support Center in Addis Ababa by 2008. Ethiopia now has the legal right to add the symbol ® next to the coffee names Harar, Sidamo, Yirgacheffe in the United States (and some other countries) though the Farmer Support Center is still missing. And the NGO that is behind the project is now claiming that the farmers' annual income has doubled to about $278 as a result. Really?

The project

The Ethiopian Fine Coffee Trademarking and Licensing Initiative was advertized back then as a project with a potential for bringing farmers an additional earning of $88 million a year - a figure later proved to be based on hogwash. The initiative was designed by Light Years IP (LYIP) based on the belief that Ethiopian farmers deserve better than being shortchanged by coffee buyers, such as Starbucks, who pay dirt low prices for the finest coffees that they buy and later sell for up to $25 per pound at the time. The idea was that by empowering farmers with a stronger bargaining power, the project would put them in a better position to demand higher prices.

The market fundamentals in Ethiopia have since changed drastically. The government controlled the coffee market and effectively ended the vertically integrated marketing channel where direct trade between coffee growers and buyers was possible. By tightening its grip on the market, the government also pulled the rug out from under the presumed governance of the trademarks by a coalition of Ethiopian stakeholders - coffee farmers, cooperatives, and exporters - because the government is now the major stakeholder. This causes serious challenges to establishing the trademark model as a commercial venture. It is not clear how LYIP envisions the initiative to adapt to current circumstances. If there is any effort underway to recalibrate the model, LYIP would not disclose. The organization lacks transparency when it comes to sharing information on this project. The information posted on its website is only a collection of promotional materials.

Dishonest claim

Despite all the moving pieces and uncertainties surrounding the initiative, LYIP is declaring success.

According to its website and fliers, the initiative had already "... resulted in over $200 million in increased rural income to Ethiopia. Based on IP Value Capture, Ethiopian coffee farmers were able to DOUBLE their share of the final retail value for their product, which greatly impacted millions of coffee farmers. The first stage of the initiative returned $US 101 million to African producers, astonished Africa and led to many requests for Light Years IP training in the method in other countries, most recently Tanzania, which has adopted it nationwide. Ethiopia now owns trademarks for several of its distinctive coffees and has 110 licensed coffee distributors, including Starbucks Corporation, Caribou Coffee and Green Mountain Coffee."^[1]

In other words, LYIP claims that the farmers' annual income has doubled to about $278 per person (assuming equal distribution among 1.5 million farmers), from $145 in prior years, because of the initiative.

The Overseas Development Institute (ODI - a group that calls itself "Britain's leading independent think tank on international development and humanitarian issues") echoed this absurd claim, saying: "... according to the Oromia Coffee Farmers Cooperative Union, it has already able [sic] to secure export prices of more than $2 per kg, representing an increase of an estimated 50-100%...According to Light Years IP, as the Ethiopian Fine Coffee brand develops its standing in consumer markets, it should be feasible to more than triple the export price, to approximately $6-8 per kg."^[2]

That is the height of intellectual dishonesty.

The claim can’t stand up to the facts. First, Ethiopia's coffee sector is still a buyer's market for the most part; meaning, it is still under pressure from the international market where there are more sellers than buyers.

Second, it is virtually impossible to determine the effects of the initiative on rural income without a real impact evaluation or specialized survey of the situation made before or after the registration of the trademarks. No such impact evaluation was ever made for this project. How does mere registration of trademarks increase farmers' negotiating power thereby enabling them to demand for higher prices? Are buyers and retailers now paying additional prices for use of the trademarks (if so, who are these buyers and how much do they pay for each brand)? Which one of the three brands (Harar, Sidamo, and Yirgacheffe) fetched the highest additional return? Was this a onetime return observed during the first stage of the initiative or the current price level is also attributable to the trademark initiative? These are some of the key questions that should be addressed in order to properly appraise the initiative.

Facts about prices

The price of a high quality Sidamo coffee did indeed reach $1.54 a pound in September 2007 - an increase of around 8 cents over the same period in the prior year. But, all the news reports and information published at the time suggest that the price increase was not unique to Ethiopia; it was rather in line with the upward price movement seen in the world market at the time. Multiple news services reported in 2007/8 that international coffee price was picking up due to anticipated shortages in the supply of Robusta coffee and adverse weather conditions in Brazil and other major coffee producing countries. After a brief pause later that year, prices again spiked in 2008/9 and continued to skyrocket through 2011. The rise was initially caused by speculations as investors scrambling to find safe heavens during the peak of the global financial crisis moved their investments to the commodities market. Then in 2010, prices continued to rise and ultimately hit a 14-year high of $3.089 a pound in May 2011, largely because of adverse weather conditions in major coffee growing regions affecting the supply of coffee. Therefore, the increased export revenue that coffee growing countries have seen over the past few years is mainly driven by global phenomena (see graph below). And Ethiopia's situation was no different.

On the flip side, higher coffee price means the share of the cost of coffee beans used to make a cup of coffee also increases compared to the final retail price of brewed cup of coffee, assuming all other factors to remain the same, unless retailers increase their prices.

It is thus dishonest for LYIP - and ODI - to suggest that ownership of the trademarks was a factor that led or contributed to the increased value of Ethiopia's coffee and increased the farmers' share of the final retail value for their product.

Winners and losers

True, Ethiopia's ownership of the brands is a victory. But, that ownership does not automatically translate into enhanced bargaining power. It should also be noted that the aftermath of the dispute with Starbucks was a loss to Ethiopia in that, the disputed brands which used to be abundantly available throughout Starbucks' ubiquitous stores are now like snow birds. The company abandoned the coffee brands immediately after signing the agreement and, for the past five years, has been buying Ethiopia's coffee only for use in anonymous blends, brewed servings, and occasional featuring.^[3]

Besides, Starbucks' position on trademarking still remains unchanged. The reason Starbucks signed the agreement was to thwart the anti-Starbucks public relations campaign waged by Oxfam. A diplomatic cable that was leaked by WikiLeaks reveals the company's position in no uncertain terms.^[4]

According to the cable, Starbucks decided to end its opposition in the "hopes of recasting the issue as a government-to-government policy matter rather than a commercial dispute." The company hopes the US government "would take up the fight to enforce USPTO's position against geographic trademarking." And, the then US ambassador recommended US Government's "technical assistance or other guidance" to convince Ethiopia reverse course and seek geographic certification rather than trademarking.

Perhaps arguably, the only tangible outcome of the project so far (in addition to the trademark registration) is the publicity that LYIP received during the public campaign. The organization now enjoys more than a boost in name recognition and brand visibility. Its annual gross income has more than doubled in the years following the campaign first to $423,000 in 2009 and then to $751,000 in 2010, due to increase in grants. Initially, the Ethiopian Fine Coffee Trademarking and Licensing project was funded by the UK Department for International Development (DFID) in the amount of £375,000 ($578,288 in today's value) between 2006 and 2007. That is at least $1,752,288 and counting.

Current states of the initiative and the coffee sector

Ironically, it was on Ethiopia's side that the project was not taken seriously. The sad state of the initiative is candidly described by the former US Ambassador in another leaked cable:

"Although the established trademarks for Ethiopian coffee (Sidamo, Yiragchefe and Harar coffees) have been a victory for the GoE and the coffee sector in Ethiopia, unfortunately, the major budgeting and regulatory functions for the coffee sector have been underfunded and ill-managed. In addition, the coffee sector suffered from severe information asymmetries among farmers, suppliers and exporters, resulting in poor pricing schemes and limited profitability for farmers along the supply chain."^[5]

The "owner" of the project was Getachew Mengistie, former Director of the Ethiopia Intellectual Property Office (EIPO). Getachew left his position a few weeks after the signing of the marketing and licensing agreement with Starbucks. He now works for LYIP.

In 2009, barely two years after it signed the agreement with Starbucks, the government passed the coffee law that required Ethiopia Commodity Exchange (ECX) to control the coffee export and prices. In direct opposition to the aspirations of the trademarking initiative, the government decided to dampen the distinctiveness of Ethiopia's finest coffees by bundling all coffees as commodities and thereby ending the farmers' comparative advantages in the world market.

This indicates that the trademark project was never a priority for the government. Meanwhile, the government's focus right now is on controlling the domestic coffee market. The policymakers, some of whom have vested interests in maximizing the profits for the ruling party owned Guna Trading House, Plc. and government owned Ethiopia Grain Trade Enterprise (EGTE) - both engaged in coffee export business - talk of increasing the farmers' share in the final export price, but they end up hurting farmers.

Therefore, it is only fair to state that farmers have not been impacted by the trademark's outcome. They are still onlookers when the 'coffee rush' has unleashed a massive clampdown by the government, mushrooming "development" projects, and new private and party affiliated coffee traders. If they had their voices, the farmers would demand 1) an end to the economic exploitation; 2) LYIP back up its claims with facts; and 3) Starbucks fulfill its promises by establishing the Farmer Support Center in Addis Ababa.

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^[1]http://lightyearsip.net/assets/images/home/LightYearsBrochure.pdf

^[2]http://lightyearsip.net/assets/images/home/AnnualReport.pdf

^[3]http://www.odi.org.uk/resources/docs/5946.pdf

^[4] http://poorfarmer.blogspot.com/2012/01/starbucks-to-showcase-use-of-qr-code-to.html

^[5]http://poorfarmer.blogspot.com/2011/10/wikileaks-starbucks-successful-efforts.html

^[6]http://poorfarmer.blogspot.com/2012/01/wikileaks-government-tightens-grip-on.html

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To contact: poorfarmer@gmail.com or http://poorfarmer.blogspot.com/p/about-this-blog.html

Starbucks to showcase use of a QR code to trace Organic Ethiopia Sidamo® Coffee

2012-01-05T18:30:00.000-08:00

Wondwossen Mezlekia

Jan 05, 2012

Starbucks Corporation announced today the release of a limited supply of Organic Ethiopia Sidamo® Coffee, for a short time starting January 10, 2012.

This is the third year when Starbucks featured limited supplies of Ethiopian coffee since the trademark dispute with the government of Ethiopia ended in 2007. In 2010, the company featured Limu® and then Harar® in summer 2011, all in select stores.

The current offering of Ethiopia Sidamo® appears to be more of a showcase for the company's new Quick Response (QR) code that it introduces for the first time.

A QR code is a type of matrix barcode that was first created by Denso Wave, a subsidiary of Toyota, in 1994 to track vehicles during the manufacturing process. The tracking system, one of the most popular types of two-dimensional barcodes, is gaining popularity outside the automotive industry in the U.S., Canada, and China.

In 2010, Starbucks said, the company – along with other coffee companies – was experiencing a temporary shortage of Ethiopian coffees due to supply issues.

The problems created in the coffee sector when the Ethiopia Commodity Exchange (ECX) took control of the flow and prices of the country's coffee exports was felt across the Specialty coffee subsector. Ethiopia's role as the supplier of the world's finest single-origin coffees has also diminished in recent years.

Seizing the opportunity created when ECX disrupted the direct trade business model that connects smallholder coffee farmers and Specialty coffee buyers, Starbucks began a pilot program in 2010 to test the use of a QR code to trace coffee bags from origin through the ECX warehouses to company stores.

If it succeeds, the new tracking system will most likely boost the company's competitive edge over its competitors, particularly the small and medium-sized Specialty coffee roasters and retailers.

According to the company's press release, the price of a half pound of whole bean Organic Ethiopia Sidamo® to make at home is $15/U.S. and $17/CAN. In-store, the price for a tall (12 fl. oz.) cup of brewed coffee starts at $2.75/ U.S. and $3.25 /CAN for a cup through the Clover® brewing system, a tall (12 fl. oz.) cup of brewed coffee.

At today's ECX trading session, the highest price offered for Washed Sidamo® coffee (not Organic certified) was $2.32 per pound.

The company did not disclose if the use of the new system affected the stated retail prices or whether it will help Starbucks to increase its purchase of Ethiopia's coffee.

Kona Coffee Labeling: Farmers Request More

2012-01-05T17:12:00.000-08:00

By Jennefer Sinco Kelleher

Huffington Post

HONOLULU -- Kona coffee growers want Hawaii's labeling law modified to provide more details on packages of coffee blends that contain Hawaii-grown beans.

Currently, coffee blends sold in the state that contain Hawaii-grown coffee must disclose what percentage is grown in the islands, and it must be at least 10 percent. The Kona Coffee Farmers Association said Thursday that it wants the state Legislature to consider a bill it has drafted that would also identify where the remainder of the blend is grown.

If the association is successful an example of a package label would read, "90 percent Panamanian coffee, 10 percent Kona coffee."

The state senator from Kona said Thursday he plans to introduce the bill at the end of the month. "I respect the local community and Kona coffee is a big issue for us," state Sen. Josh Green, D-Milolii-Waimea, said.

For the farmers, it's about truth-in-labeling and protecting the integrity of a world-famous Hawaii product. Hawaii is the only place in the United States where coffee is grown. Coffee aficionados pay a premium for coffee grown in farms in the Kona district, known for its rich volcanic soil and tropical climate.

"The state of Hawaii needs to be with the Kona coffee farmers," said Colehour Bondera, the association's president. "We're the most lucrative agricultural commodity in the state."

A pound of pure Kona coffee can sell for about $25 – more if it's organic.

Not giving consumers all the information about where coffee is grown dilutes the perception of Kona's quality, Bondera said.

When the 10 percent blend law was introduced in 1991, there was a provision mandating disclosing the origin of all coffee in the blend, he said, but pressure from Honolulu coffee blenders resulted in making it voluntary, which none of the major blenders have opted to do.

But modifying the law to restore mandatory disclosure would just be a small step for the farmers, he said. Several years ago there was a failed effort to increase the minimum percentage of Hawaii-grown coffee in blends to at least 75 percent. The farmers would prefer only blends that are mostly Kona bear that name.

"The name Kona should not be used on any products that's not mostly Kona," Bondera said. "When people talk about wines, you can't a buy a Napa wine when it's only 10 percent Napa."

Hawaii's coffee blend labeling law is an offshoot of regulations put in place after a scandal in the 1990s when inexpensive coffee beans grown in Latin America were being passed off and sold as pure Kona coffee. It only applies to blends sold in Hawaii.

In August, Safeway agreed to change the label on packages of Kona coffee blend sold in mainland stores in response to concerns from the Kona farmers that it didn't provide information about what percentage of the famous bean it contains. The company also agreed to begin selling 100 percent Kona coffee in northern and southern California starting this year.

Coffee Price to Remain Supported in 2012, Broker Carvalhaes Says

2012-01-03T16:30:00.001-08:00

By Isis Almeida

Bloomberg

January 3, 2012

Coffee prices will remain supported this year due to climate change and market fundamentals, according to Santos, Brazil-based broker Escritorio Carvalhaes.

The price of arabica beans rose to a 14-year high of $3.089 a pound in New York on May 3 as heavy rainfall caused by the La Nina weather conditions cut output in Colombia, the world’s second-largest producer of the variety. Coffee slipped 5.7 percent in New York last year and closed 42 percent above the 5- year average, according to data on Bloomberg.

“Climate changes and market fundamentals will maintain prices in 2012, but we will continue to be tied to the developments of the euro-zone crisis and its consequences to the global economy,” the broker said in a report e-mailed yesterday.

Arabica coffee supplies will match demand in the 2011-12 season started in October after at least three years of deficits, data from Macquarie Group Ltd. show. Arabica beans are grown mainly in Latin America and favored for specialty drinks such as those made by Starbucks Corp.

Coffee growers in Brazil, the world’s largest producer, are investing in improving yields and bean quality, according to the Carvalhaes report, with “no significant increases” in planted area.

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To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

Starbucks Raises Coffee Prices Regionally, Battling High Costs

2012-01-03T16:26:00.000-08:00

By Annie Gasparro

Dow Jones Newswires

January 3, 2012

NEW YORK -(Dow Jones)- Starbucks Corp. (SBUX) is raising itsmenu prices in certain regions in an effort to combat higher coffee prices it's facing this year.

The Seattle chain is raising prices about 1% in the Northeast and Sunbelt regions, which include cities such as New York, Washington, D.C., Boston, Atlanta, Dallas and Albuquerque, N.M.Starbucks wouldn't give details of all the states that will receive an increase, but did say it includes most Southern states besides California and Florida.

Throughout the recession and recovery, Starbucks has continued implementing annual menu price increases, but said it has still taken "far less" of an increase than others in the industry.

The latest push comes as Starbucks faces higher commodity costs this fiscal year than some of its competitors.

Starbucks contracted its coffee prices for the full fiscal year 2012, which began in October, well in advance because prices were getting higher and Starbucks wanted to eliminate the volatility of buying on the spot market. However, the market for coffee soon retreated, while Starbucks was still stuck paying more.

Over the past couple years, Starbucks has topped the industry in sales and been able to manage commodity inflation, "not with pricing, but with a more efficient cost structure and strong traffic growth, which has given us a lot of leverage on our bottom line," Chief Financial Officer Troy Alstead said when the company released earnings in November.

Because Starbucks's higher-end consumer base is less sensitive to prices, the company also said in November it doesn't think further price increases will affect customer purchases, even in a struggling economy. Some chains, especially fast-food restaurants that have a bigger focus on value, risk losing customers when they raise prices.

Shares of Starbucks have risen 37% over the past year, and were trading down 1.4% at $45.38 Tuesday afternoon.

This regional price increase at Starbucks, which was reported earlier by Reuters, raises the cost of a "tall" coffee in New York City by 10 cents. But beverages the next size up won't change.

Still, the real margin pressure Starbucks faces isn't at its cafes, but within its packaged coffee business, largely because coffee costs are a bigger component of the cost structure in its packaged-goods business than in retail cafes. "And so our retail stores have more levers in the rest of the P&L to pull to help overcome that coffee cost," Alstead said in November.

Last year, Starbucks implemented double-digit menu price hikes of its packaged coffee sold at both grocerystores and in cafes. Alstead added that, "it's a very healthy margin business even with coffee costs the where they are."

The last across-the-board price increases at its retail cafes, however, was in 2007.

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Contact Annie Gasparro at 212-416-2244; annie.gasparro@ dowjones.com

Operation ‘bulk coffee’ busted

2011-12-20T00:04:00.000-08:00

By Wondwossen Mezlekia

poorfarmer@gmail.com

December 20, 2011

The bulk coffee directive

Last month, coffee buyers across the globe had a rare glimpse into Ethiopians' day to day experience, where haphazard policymaking is used by the government to interfere in and control people's business whenever it feels like it. A new directive requiring the shipment of coffee in bulk container (a process of filling coffee in 'dry containers' fitted with a liner, as opposed to loading coffee packed in 60-kilogram jute-bags) suddenly surfaced in mid November and shocked the market.^[1] It was revoked thirty days later because of pressures from foreign diplomats, plummeting sales, and a cloud of fear of losing coffee buyers for good.

It's not clear how it all began, but it appears some genius one day figured out the quickest way to "modernize the country's export packaging and shipment standards" and the government decided to begin shipping coffee in bulk containers within two years. And, sometime during the 2010/11 fiscal year, an anonymous "investor" was granted a permit to import coffee blowers (machines equipped with a fan to generate a controlled pressure air current that throws coffee into containers, and a suction system to remove the dust created by the process.) Then, the operation began rolling out:

November 14, 2011 - the Ministry of Trade (MoT) concluded that "the conditions necessary for shipping coffee in loose container load are in place". Therefore, Yakob Yala, State Minister of Trade, wrote a letter directing the Ministry of Agriculture to make sure that all coffee exports are shipped in bulk loads, unless exempted by his office, effective November 11, 2011. The letter described the initiative as a win-win-win proposition benefiting the country, exporters, and international buyers, thus the need to impose a restriction.

· The directive was not publicized nor published on the websites of the Ministries of Trade, Agriculture, or the Ethiopia Commodity Exchange (ECX).

November 30, 2011 - a coffee importer who was in Ethiopia at the time twitted a message which later landed on a Specialty coffee blog and beyond. The news stirred confusion and a rush of complaints from green beans buyers, distributors, and small to medium-scale roasters and retailers. The first breaking news blog post read:

"40,000 lbs in one big bladder or nothing out of Ethiopia is the word…coops are not exempt, this is wild. Lot separation in Ethiopia may now be illegal if this is true. "

December 3, 2011 - Ethiopian Coffee Exporters Association (ECEA) submitted a protest letter to Yakob Yala's office demanding a revision of the directive to lift the broad restriction of bulk shipping. The board members of ECEA and ECX also held a joint meeting to discuss the concerns raised by ECEA.

December 8, 2011 - Yakob Yala convened with a group of coffee exporters to assess the progress of coffee export, which has been lagging behind the government's ambitious plan of earning more than $1.1 billion in the current fiscal year. He complained that the quantity of coffee exported during the first four months of the year was short of the planned 66,400 tons by about 22,371 tons.

· The exporters warned that the export may further decline and their customers may resort to other coffee growing nations unless the bulk shipment restriction is lifted promptly. They said, most of their buyers had already refused to accept the coffee in bulk containers and implored the authorities to consider a demand-based, progressive approach that ensures a smooth transition to bulk shipment. The State Minister won't budge. He urged the exporters to speak in unison in support of the directive and tell their buyers to live with it. He assured them that, if any, the buyers abandoning Ethiopia's coffee due to the restriction won't be more than 5-10 percent - "a gap which can be easily filled." "Tell them that we are doing all this for their own sakes," he insisted.

· Yakob Yala says the directive was issued after raising awareness among stakeholders. But, according to Reporter, only one of the 15 exporters who attended the meeting said his company didn't have a problem with bulk shipping; the other 14 exporters strongly opposed the restriction. Haile Berhe Kinfe, Guna Trading's head of the Agricultural Products Marketing Department tipped Reporter that bulk coffee shipping is a relief for large-volume exporters.

· More than a dozen international coffee buyers submitted written complaints directly to MoT and, through diplomatic channels, to other authorities.

December 14, 2011 - According to The Reporter, members of the ECEA convened and concluded that "the directive was completely impossible to work with" and demanded that authorities revise the regulation. They also decided to explore fall-back plans, including submitting a petition letter to Prime Minister's office. Separately, the ECX CEO Dr. Eleni Gabre-Madhin and Board Director, Ambassador Addisalem Balema confided with Yakob Yala's boss, Kebede Techane, Minister of Trade.

December 15, 2011 - Kebede Techane called ECEA's board members and told them that "the directive has been made null and void". Again, the news was not published on the websites of the Ministries of Trade, Agriculture, or the ECX. The government's two major developmental news agencies, Walta Information Center and Ethiopian News Agency did not cover the story either.

With that, a shocker had come and gone, leaving the public with many questions to ponder.

In retrospect, the now defunct bulk coffee directive had fundamental flaws that make the very intentions behind the government’s decisions appear very suspicious, hence this public scrutiny of the defective policy to help inform the public of the sources of the eternal problems facing the nation.

A sound government policymaking process involves at least three major stages: problem definition & analysis, formulation, and implementation. This directive fails the test in almost all of these categories.

According to Yakob Yala’s letter to the Ministry of Agriculture, the directive was meant, in part, to modernize the packaging standards, reduce costs, maintain the quality of the coffee, and minimize theft. In other words, the government defined the problem (modernize the packaging standards, opportunities for cost cutting, and need to minimize theft) and identified the solution (bulk shipment) and issued a broad directive with ambiguous enforcement instruments.

To begin with, the policy being sought here is merely a response to perceived problems and their consequences (backward packaging and theft, for example), rather than directly addressing the underlying causes of the real problems facing the coffee sector. By definition, this is bad policymaking.

It is true that bulk coffee shipment has a number of benefits and is, in fact, enjoying a growing popularity by large coffee shippers and producing nations, such as Brazil. The popularity is holding steady because, among many other advantages, of direct cost savings due to increased payload of almost 17% (a container can hold at least 3 more tons of coffee when loaded in bulk) and reduced inland transport movement (although the MoT letter erroneously states that it increases inland transport). So, the reason the policy failed so prematurely is not because bulk shipping is not appealing to shippers; it is rather because of the shallow analysis, lack of stakeholders’ involvement, and amateurish implementation of the policy. This can easily be revealed by deconstructing the directive into its hollow components.

First, the directive requires all coffee shipments, unless exempted by the MoT, to be shipped in bulk container, but does not disclose the criteria or procedures for requesting or making such an exemption.

Second, the directive disregards the fact that most of the ultimate buyers of Ethiopia's coffee need their coffees packaged in small bags.

A considerable portion of the global coffee trade is conducted through distributors (companies who purchase coffee in full container lots and sell it in bags to roasters and retailers). It is estimated that only less than 30% of the world coffee is directly purchased by ultimate roasters. The rest of the coffee is purchased by independent importers for redistribution to small and medium-sized roasters directly or via local subsidiaries in consuming countries. Among the group that buy small lots directly or indirectly (from independent distributors) are the Specialty coffee buyers and roasters, whose numbers in North America alone ranges approximately between 3,700 and 4,500. Since most of these businesses often purchase small quantities of distinct microlots (small lots of fine coffees that buyers or roasters select in a given harvest season) to feature to their customers, it is vital that their coffees are packaged at origin in small bags so as to preserve lot separation when shipped in the same container with other lots.

At the other end of the spectrum are the large-scale buyers who often buy multiple full container lots at a time. These buyers are not concerned about lot separation as much as they care about maximizing profit by increasing payload and reducing inland fleet at the receiving end. Obviously, these companies do not need to be told by the MoT when and how to make use of ingenious shipping techniques, such as bulk containers.

Third, the far-reaching directive mostly impacts international buyers and importers whom the government has no control over. It didn't cross the policymakers' minds that, Ethiopia, a country with the least bargaining power in the world trade, is not in a position to dictate how its customers should ship their coffee. That the commodity coffee market is the buyers' market where sellers compete among each other to attract more buyers, not the other way around.

Fourth, selecting the type(s) of bulk liners (big coffee bags usually made from virgin polyethylene in a size that is equivalent to the inner space of a container) is a matter of choice for importers and regulators in consuming countries, not shippers or exporters. Due to variations in the brands of liners that are licensed and recommended by consuming countries, the selection of bulk liners is exclusively reserved for the buyers. Ethiopia does not have the rights to override consuming countries' regulations pertaining to the selection of these liners. It is for this reason that industry experts recommend that coffee exporters and shippers in exporting countries must first get the buyers' consent before planning to ship in bulk.

Fifth, despite MoT's claim otherwise, most of the stakeholders in the coffee sector have not been engaged during policy formulation. Only 1 out of the15 major exporters was excited about the directive. This indicates the extent to which the government attempted to involve the stakeholders - even the ones that are based in Addis Ababa - and considered their needs.

Sixth, the directive does not specify its enforcement mechanism. It does not spell out the measures that will be taken in an event some or all in the coffee sector ignore the regulation.

Finally, there was no apparent reason for making this a retroactive policy. By making the effective date of the restriction three days prior (Nov 11, 2011) to its enactment (Nov 14, 2011), the directive automatically changed the terms of trade for all the transactions that were in the pipeline. In so doing, the directive changes the legal consequences of not shipping in bulk container even for the trade deals closed under a jute-bag shipping agreement.

Bottom line, the directive was doomed to fail although it could have had a devastating effect, had it not been yanked, primarily on the smallholder family farmers that are organized under coops. Following a similar misguided policy that enabled ECX to control the coffee sector, only commercial farms and farmers organized under coops are permitted to engage in direct trade with buyers - the only marketing channel that ensures lot separation. The rest of the farmers (approximately 90%) have been deprived of their rights to engage in direct trade with ultimate buyers, and forcing their high-value coffees to be routed to ECX to be sold at commodity prices to buyers who are familiar with the recognizable geographic origins and also demand lot separation.

The question now begging for an explanation is, what is the real motive behind the bulk coffee policy? Was this supposed to be another part - next to ECX - of a bigger plot?

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^[1] http://poorfarmer.blogspot.com/2011/12/ethiopias-government-imposes-coffee.html

The short-lived directive in the Ethiopia coffee sector

2011-12-17T14:54:00.000-08:00

By Asrat Seyoum

The Reporter

December 17, 2011

Photo: Courtesy of The Reporter

On April 24, 2008 Bob Geldof, the renowned ex-rock star, who had strong ties to the country on account of rallying international help to the great Ethiopian famine of the 1984, kicked off the first modern commodity exchange market in the country.

The irony that Geldof, the very person who campaigned to feed millions, ringing the bell to commence a modern grain market in Ethiopia apparent, hopes for Ethiopian Commodity Exchange (ECX) to redefine the country’s agricultural commodities market landscape was very high. And ECX’s first pick to start its operation was the oldest and the most prominent cash-cow in the economy: coffee.

The move from the old coffee board and auction system to the new anonymous trading system was never easy to say the least. Nevertheless, close to three years on ECX floor, the bumpy performance cannot be attributed to adjusting to a system alone; both the exporters and ministry took a shift in taking the blame, according commentators. Problems with the major coffee importer countries like Japan in mid-2000s and the controversy over patents and royalties with Starbucks, a coffee giant based in U.S, were among some of the difficulties the sector had to pass through in the past.

Once again coffee export revenue is declared to be in danger this year. An account of the ups and downs in performance and swift damage control measures therein characterized the sector over the past couple of years. On a number of occasions the sector appears to have been saved by the bell from a major disaster, while the export proceeds managed progressing year on year. However, following the new directive that the Ministry of Trade (MoT) has issued regarding coffee shipment modality, the sector once again found itself in a fickle position. The new directive stipulated that unless and otherwise granted special permit by MoT, all coffee exports originating from Ethiopia should be ferried through loose container loads. The directive seeks to eliminate the jute-bag packaging alltogether and instructed the exporters to feel the containers without any prior bagging of the product. The decision steered severe disagreement among exporters, foreign buyers and the authority last week. And the meeting called to dilute the situation last week was reported to have dispersed without a concrete outcome.

Adding fuel to fire

Out of the total export earning of USD 2.7 billion obtained last year, the export intake from coffee covers a staggering one-third, that is USD 840 million. And the government announced that it is going to expect USD 1.1billion from coffee this year, pushing overall earning above 3 billion. Apart from monetary gains, the government said that it also wants to transform coffee and other export items to modern and sustainable tradable commodities in the international markets. Hence, the sector has seen intense regulatory measures in the past couple of years. Most of the new measures applied in the industry, however, did not pass without strong resistance from the operators.

At the end of last Ethiopian budget year, MoT faced the sector with a new directive that enforced a limit on the level of stock that exporters can hold in their warehouses. Furthermore, the ministry has also instituted severe punishments on the operators who defaulted their contract agreements. The decision to regulate the stocks and the export contracts appears to have originated from the experience in the previous year. Following other commodity prices in the international market, the price of coffee also showed a steep surge at the time; forcing contract default problems, according to official statements. By the time foreign buyers, who have already signed contracts with Ethiopian exporters, begin to demand delivery of the products, the local exports became cornered as the coffee has also soared at the ECX. The cumulative effect was gross contract default risks to the country; and in a bid to protect the county’s market credibility, MoT had to knock on each exporter’s doors to lobby them to honor the contract agreements.

However, as the last budget year approaches its end, the ministry again announced that the sector was not yet out of the woods.

According to the letter that accompanied the directive, the exporters have no one but themselves to blame for the contract default problems that occurred at the time. “The exporters did not refrain from keeping excessive coffee stocks and speculating on international prices,” Yacob Yala, minister of state in the MoT, said in the letter. Hence, the directive placed a limit on stock that each exporter can keep without contractual agreement signed for the coffee. The ministry did not stop there; in fact, it ordered all outstanding contracts to be honored within one month. Some of the exporters that talked to the reporter at the time said that they had to carry heavy losses due to the suddenly enacted directive. The sector made USD 840 million on the balance sheet and proceeded to next year. Nevertheless, the begging of this year was not as smooth as it was expected to be by the government. Just few a months into this year, scores of major operators were banned from the export business on grounds of contravening the directive. The Ministry resorted to taking the measures as exports were not working within the regulations. Sources close to the matter said at the time that falsified contracts backing the coffee stocks were discovered by the ministry. The directive gave mandate to the ministry to ban an exporter from trading from ECX floor, if found to be a violation of the rule. However, before MoT moves to the last stage and bars the exporters, the Ethiopian Coffee Exporters Association (ECEA) strong involvement dissolved the situation.

While events kept unfolding, MoT once again came up with another directive to shack things up in the sector. To make things worse, the current stern rules do not seem to be making any sense at all, according to commentators. And so far, the amount of shipment that left the coffee-dependent country is way below the plan.

The temporary deadlock

Keeping up with the trend, exports, ECEA and the ministry have chosen to keep matters to themselves. While compiling this story most coffee exporters preferred not to discuss the matter on the record. However, contents of the letter directing the association to make sure that its members adhere to the loose container mechanism, which was signed by Yacob Yala, has surfaced on some web posts. And unlike the previous directives, this one appears to have drawn the attention of coffee importers all over the world.

According to the translated version of the letter that appeared on the internet, preparations to fully shift to loose container shipment of coffee have been in the works for quite some time now. Yacob indicated in the same letter that “exporters were able to import additional blower machines for the purpose” and “adequate awareness creation has also been done among exporters”. However, the practice is not picking up as planned and hence strong enforcement measures are required, he explained. “So, the directive will be effective from November 11, 2011.”

The directive nevertheless tries to justify the move by listing out advantages that loose container loads bring, from the Ethiopian point of view. Among other things the system is meant to modernize the export packaging standards of the country and cut cost that arises due to the packaging bags, says the letter. “Besides, it ensures that coffee is exported while its quality is maintained; minimizes the possibility of coffee theft en route; reduces the cost burden on our coffee buyers of disposing sacks; eliminates the cost that coffee exporters pay for sacks; benefits exporters as coffee buyers pay better prices when their coffee is shipped as loose loads; increases fleet turn-around,” reads the letter.

The exporters who were present at the meeting with the minister of state last week did not try to argue on the merits and the demerits of the directive either. “The only concern,” they said, “is that the coffee buyers are refusing to accept our coffee packaging.” “It is a costumer-based business and hence we have to take into consideration our buyer,” they cried. On the other hand, some 15 local agents for Ethiopian coffee importers also said that their clients do not want the new packaging and shipments mechanism. The internet-based discussion forums indeed indicate the same thing. Almost all buyers appear to be converging towards one point that is the directive might set the country’s coffee market to fail.

The break of the stalemate

The coffee people, who met Yacob Yala last week, left the meeting hall with feeling defenseless. The minister of state did not want to budge from the position and regardless of the concerns that was heard at the meeting. “The exporters have to convince foreigners to work with the loose shipment mechanisms,” he told the meeting. “We have invested on containers and blowers being poor country, and why won’t our buyers do the same in the case of the bags and the packaging?” Yacob argued.

Meanwhile, some parts of the exporters carry on as usual saying that they will bear the risk of getting punished. And still some tried to gear up to the new directive. Nevertheless, mostly the sector took a pause until the dust cleared out from the air waves. In fact, it did. On Thursday, the minister of trade, Kebede Tchaine, told the board members of the ECEA that the directive has been repealed and the members can ship their products according to the need of their buyers. Kebede ended the 35-day deadlock in the sector, but according to some of the exporters, for coffee shipments for February, March, and April the agreement should be have been signed during the past one month and this would definitely have bearings on the export revenue. “Within the last month alone, the country has lost some 30 thousand tons of export of coffee,” he told The Reporter.

However, the full implications of such short-lived, not well-researched policy interventions not only on the export revenue but also on the overall smooth trading of the commodity are yet to be seen, concludes commentators.

Government retracts latest coffee directive

2011-12-17T09:09:00.001-08:00

By Birhanu Fikade

The Reporter

December 17, 2011

The Ministry of Trade (MoT) pulled back the latest coffee directive, which ordered all coffee shipments from the country to be in loose container packaging format, after its month long tenure in the sector. Following the enactment of the directive through a letter written to the Ethiopian Coffee Exporters Association (ECEA) by the minister of state, Yacob Yala, the coffee sector appeared in a big shock and the export revenue was declared to be in a danger zone. On the other hand, international coffee importers as well have voiced their opposition to the authorities saying that the measure will be a business suicide for the sector.

However, the ministry appeared to be insistent about the loose container shipment mechanism in the coffee export sector until late this week. Previous meeting with the minister of state were dispersed without any change to the new rule and some of the exporters continued business as usual, regardless of the ministries warning. At the beginning of the week, reports of foreign coffee buyer writings complaints through their embassies to the authorities were also made public.

On the other hand, the ECEA meeting on Wednesday concluded by saying that the directive was completely impossible to work with and the authority should make appropriate revisions. “Unless our petition for the revision of the directive is not considered by MoT, we should proceed to next level,” was the decision of the members, according to sources. Furthermore, options to appeal for the international coffee organization or writing a petition letter to Prime Minister Meles Zenawi were also on the table.

However, before resorting to any of the option, Kebede Tchaine, minister of trade, called the board members of the association on Thursday afternoon and said that directive has been made null and void.

Ethiopia: Foreign Buyers Protest Coffee Shipping Restriction

2011-12-14T15:50:00.000-08:00

By Staff Reporter

The Reporter

December 14, 2011

The mandatory bulk container shipping regulation instituted by the Ethiopian government on November 11, 2011 has spurred a rush of complaints from foreign buyers.

Bulk Container Shipping uses one container size bag into which coffee is stored instead of the conventional 60 kilogram bags. German and Switzerland Associations representing major importers of Ethiopian coffee have written letters in opposition to the mandatory bulk container shipping Ethiopian embassies, Foreign Ministry and Minister of Trade. According to sources 10 Associations of Ethiopian coffee importers amongst which are the major importing countries have voiced dissatisfaction with the Bulk Shipment of Coffee regulation and there are reports of them turning to other exporting countries as a result.

Sources further disclosed that Colombian and Kenyan Coffee Exports have risen in the Arabica type category of the international coffee trade, and that Ethiopia's sales requirement of 30,000 tons for this week has went unsold. The mandatory bulk container shipping regulation has raised strong protests by the coffee exporters community in Addis Ababa as well, many of which said the directive will hurt the country's coffee industry and that their foreign buyers marked dissatisfaction with the arrangement in a meeting with state Minister of Trade Yacob Yala this week.

Sources have told The Reporter that the Ethiopian Coffee Exporters Association (ECEA) will submit a letter which protests the directive to the Prime Minister's office tomorrow, Thursday November 15, 2011.

A notable majority of Ethiopian coffee exporters view the bulk container shipping regulation as suicidal to Ethiopia's coffee business, a few have decided to ignore it and face consequences where as on the other side a small number are exporting successfully. Minister of Trade told coffee exporters this week in a consultative meeting that bulk container coffee shipments had risen from the previous year.

Burundi Coffee Farmers to Withhold Crop, Seek Station Control

2011-12-11T19:36:00.001-08:00

By Desire Nimubona

Bloomberg

December 11, 2011

Burundi’s coffee growers threatened to stop selling produce unless they are granted a controlling stake in the East African nation’s washing stations, said Joseph Ntirampeba, president of the farmers’ association.

The country started selling its coffee-washing and purification plants to closely held companies in 2009, with Webcor Ltd., a Swiss company, buying 13 stations. Burundi in November said it plans to sell the remaining 133 stations.

Farmers should hold a controlling stake in the plants as they have paid a tax of 60 Burundian francs ($0.04) per kilogram of coffee cherries since the 1980s to pay for the construction of the stations, Ntirampeba, who leads the National Federation of Coffee-Growing Associations of Burundi, known as CNAC, said by phone Dec. 9 from Bujumbura, the capital.

“We are not ready to give our coffee freely when we are not really involved,” he said. “Coffee is our business, our efforts, everything to us as it is grown on our lands and we spend all the time working in it.”

Coffee output in Burundi, which grows mainly the arabica variety and relies on the crop to generate more than half its foreign-currency earnings, may drop 13 percent to 21,000 metric tons this year amid declining plantings, the Burundi Coffee Regulatory Agency said in June.

Production is falling because of a lack of motivation among farmers, who are replacing the beans with other crops, according to Ntirampeba.

Growers are “revolting against themselves” and will be the first to suffer if the plants are destroyed, Finance Ministry spokesman Joseph Ndayikeza said by phone from Bujumbura on Dec. 9.

Arabica-coffee futures for March delivery snapped three days of losses, adding 0.6 percent to $2.2725 a pound by 9:31 a.m. in New York on Dec. 9.

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To contact the reporter on this story: Desire Nimubona in Bujumbura via Nairobi atpmrichardson@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

Do coffee farmers in Ethiopia pay taxes?

2011-12-10T09:53:00.001-08:00

Last year, in an interview with the Voice of America's Amharic Service, Ethiopia Commodity Exchange CEO Eleni Gabre-Madhin told the radio that farmers in Ethiopia do not pay any taxes.

"As far as I know, farmers in Ethiopia do not pay taxes " said she.

That is not true. According to applicable tax laws, individual farmers and agricultural producer cooperatives with a gross annual earning of as little as Birr 600 (USD35) are required to pay agricultural income tax. Additionally, farmers pay a fixed annual land use tax and variable sales taxes which are indirectly passed on to them by businesses.

Below is excerpts from a study titled "Taxation in Ethiopia" published in January 2005 by Ethiopian Chamber of Commerce (ECC) and Ethiopian Business Development Services Network (EBDSN) on behalf of German Technical Cooperation (GTZ) and Partnership Project Rhein-Main Chamber, Germany and ECC (with SEQUA).

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Agricultural Income Tax

According to Proclamation No. 152 of 1978 individual farmers and agricultural producer-cooperatives earning up to Birr 600 per annum are required to pay 10 Birr. The tax rates on every additional income vary from 10% to 89% for income above 600 Birr.

In line with the economic policy and structural set up of the Federal Democratic Republic of Ethiopia, the former tax on income from agricultural activities and the land use rent was revised in 1995. Since income tax from this source is allocated to Regional States in consonance with the provisions of the new constitution of 1994, each Regional State is entitled to issue a Proclamation providing for such a tax and rent.

Accordingly, the Oromia Regional State has promulgated Proclamation No. 8/1995 that revised agricultural income tax rates schedule and rural land use fee. As for the payment of income tax from agricultural activities other taxpayers, except state farms, shall pay at the following rate.

Agricultural Income Tax per Proclamation No. 8/1995, Oromiya

No. Annual Taxable Income Tax Rate

1 up to 1,200 Birr 15

2 1,201 - 5,000 5%

3 5,001 - 15,000 10%

4 15,001 - 30,000 20%

5 30,001 - 50,000 30%

6 over 50,000 40%

A state farm shall pay 40% of the taxable income it realizes from its agricultural activities. Income from agricultural activities is said to be determined by estimating the price, in the area, of the crop before harvest.

If the crop is sold, the price declared shall be the basis for the assessment of income.

1.1.12 Land Use Tax

According to Proclamation No. 77/1976 and No. 152 /1978 individual farmers, who are not members of producer’s cooperatives, are required to pay a land use fee of Birr 10 per hectare per annum. Whereas government agricultural organizations are paying 2 Birr per hectare per annum.

Presently regional states have their own land use rent systems. For instance, according to the Proclamation No. 8/1995 of Oromiya, rural land held for agricultural activities is subject to land use rent payment on annual basis. The annual land use rent payable by a farmer shall be Birr 10 for the first hectare and Birr 7.50 for each extra hectare of land. Meanwhile statefarming enterprises shall pay Birr 15 for each hectare of their land holdings.

Land use rent is to be collected between the 1st of Hidar and the 30th of Miazia of the year.

Ethiopia's government imposes coffee shipment regulation

2011-12-05T19:33:00.001-08:00

By Wondwossen Mezlekia

(Contact at: poorfarmer@gmail.com)

December 5, 2011

The Government of Ethiopia has recently issued yet another directive that is filled with ambiguity and disregard to proper implementation of trade policies that affect everyone in the logistics supply chain.

The story was first broken by Sprudge last week in the article "An End to Lot Separation In Ethiopia?"

The directive is difficult to comprehend in more ways than one. First, the letter uses "bulk container" and "loose container" interchangeably and without distinction. Technically, these terms represent two distinct means of cargo shipment and the directive could have serious implications depending on which term is intended to go into effect. "Bulk container" often refers to the movement of coffee in bulk, using normal dry containers fitted with a liner, whereas shipping coffee in a "loose container" (also known as, Loose Container Load or LCL) implies to the practice where coffee is transported to the dock where the shipping line stuffs the container with coffee (and other commodities where there is room for additional weight).

Secondly, the directive indicates the possibility of granting a special permit when approved by the Ministry of Trade, but does not disclose the requirements and procedures for requesting or granting exceptions to the coffees that can be exempted from the rule. It seems that exporters or buyers will need to visit someone at the Ministry of Trade before deciding to buy a given coffee stock as it may or may not qualify for exemption.

Finally, judging from the reactions of international trade partners to the directive, the policy change was not discussed with or publicized enough to reach most of the small and medium-sized coffee roasters in North America and Europe.

These types of vague directives are not only confusing to the market, but also open opportunities for corruption behind closed doors. Unfortunately, such practices are becoming the hallmarks of government offices in Ethiopia.

This time around, let's hope the government will hear the voices of Specialty coffee buyers across the world and introduce the semblance of transparency to the way business done in that country.

Below is a rush translation of the letter which is written in Amharic, one of the official languages of the land, and signed by Yakob Yala, State Minister of Trade.

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Date: November 14, 2011

Ref. No.: 01-1-35/889

To Ministry of Agriculture

Addis Ababa

Subject: Regarding the export of coffee in loose container

While the shipment of coffee in a bulk container is beneficial in various ways, it will primarily modernize our country's export packaging and shipment standards. Besides, it ensures that coffee is exported while its quality is maintained; minimizes the possibility of coffee theft en route; reduces the cost burden on our coffee buyers of disposing sacks; eliminates the cost that coffee exporters pay for sacks; benefits exporters as coffee buyers pay better prices when their coffee is shipped as loose loads; increases fleet turn-around; and enables performing tasks which would otherwise take time and cost in Djibouti within our country.

In order to properly take advantage of the aforesaid benefits, a clear direction was set out by the government and a mutual understanding reached with stakeholders regarding the export of coffee in a loose container, and it was planned to complete the preparation in 2010/11 and implement the plan in 2011/12.

Accordingly, several preparations have been made during the 2010/2011 budget year; primarily, exporters have been able to import additional blower machines that are used to load bulk containers. Awareness [about this directive] has been created among exporters and stakeholders. As a result, it has been confirmed, the conditions necessary for shipping coffee in loose container load are in place.

However, the practice of exporting coffee in loose container load has been slow due to lack of proper handling. It has thus become necessary to take enforcement measures that will ensure a proper handling. Therefore, effective November 11, 2011, we notify you to make sure any coffee that passes through your office's Coffee Quality Inspection Center is exported in loose container load only, unless granted a special permit by our Ministry office.

With salutation,

signed

Yakob Yala

State Minister of Trade

cc:-

To Ethiopia Coffee Exporters' Association

Addis Ababa

Coffee Futures Advance On Colombia, Brazil Supply Fears

2011-12-05T07:07:00.001-08:00

By Forexpros via Daily Markets

December 5, 2011

Forexpros – Coffee futures advanced on Monday, as adverse weather conditions in top growers Brazil and Colombia underlined concerns over declining global coffee supplies.

On the ICE Futures Exchange, Arabica coffee for March delivery traded at USD2.3105 a pound during U.S. morning trade, climbing 0.62%.

It earlier rose by as much as 1.15% to trade at a daily high of USD2.3275 a pound.

The National Federation of Coffee Growers of Colombia, or Fedecafe, said that the country’s coffee output was likely to be flat in the 2011-12 marketing season that began on October 1, as heavy rains damaged coffee plants.

According to the group, Colombia’s coffee production in the current marketing year will total 8.5 million 60-kilogram bags, the same as in the previous season.

Luis Genaro Munoz, general manager of Fedcafe said, “We don’t expect to increase production. The weather this year has been worse than last year.”

The downbeat forecast comes a week after Brazilian coffee industry group Cooparaiso said that the nation’s coffee harvest in the 2011-12 season will be smaller than last year’s due to bad weather that has taken a heavy toll on trees.

Brazil is the world’s largest producer and exporter of Arabica coffee, while Colombia is the world’s second largest producer. Arabica is grown mainly in Latin America and brewed by specialty companies.

Despite the recent gain in prices, the long-term outlook remains clouded. Agribusiness financial service provider Rabobank rated coffee as its worst commodity pick for 2012, citing expectations for large harvests in Brazil and Vietnam next year.

The lender added that a price “collapse was not on the agenda, as it will take a couple of seasons to replenish global stocks and reverse the decade-long trend of falling stocks levels”.

Meanwhile, the U.S. dollar weakened against the euro after Italy unveiled a EUR30 billion package of austerity measures on Sunday aimed at reducing the country’s debt load, the second largest in the single currency bloc.

Commodity traders were also awaiting the outcome of a meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel later in the day to discuss proposals ahead of Friday’s critical European Union summit meeting.

Elsewhere, on the ICE Futures Exchange, cotton futures for March delivery rose 0.5% to trade at USD 0.9231 a pound, while sugar futures for March delivery rallied 2.55% to trade at USD0.2413 a pound.

Australia: Coffee price rises not as harsh as expected, study finds

2011-12-04T20:34:00.001-08:00

Coffee price rises not as harsh as expected, study finds

The results of the 2011 September Quarter Gilkatho Cappuccino Price Index are in, and while there has been an average price hike of 15 cents per take away cup, this is better than what the market had predicted.

Hospitality Magazine

December 5, 2011

The Index showed an average price increase of 15 cents per cup for take away coffee and 17 cents per cup for dine-in during the past 12 months across Australia, and while Gilkatho managing director, Wayne Fowler admits that 63.1 per cent of the coffee shops surveyed had increased their prices in the past year, they were not as high as originally predicted.

"2011 has delivered some of the price increases expected by record increases in coffee futures experienced at the start of 2011, but commercial pressures and the continued evolution of a more discerning cafe culture in Australia has kept the expected increases in the cost of take away and dine-in coffees to less than half the expected price hike of between 30 and 35 cents per cup," he said.

Fowler added that although the industry had predicted that 2010's 77 per cent rise in coffee futures would outstrip any gains made by the Aussie dollar, most cafe operators decided to absorb the costs themselves at first, but this became increasingly difficult throughout the year because of "the so-called hidden costs in the price of a cup of coffee such as wages for good baristas and premises as well as other ingredients like milk, sugar and chocolate."

State by state

"The September Quarter saw many of the market conditions unique to each Australian capital city at work. For instance, the Gilkatho Cappuccino Price Index found that 30 cafe operators in Canberra had closed since the March Quarter, that's a 21 per cent failure rate over the quarter, which in large part can be explained by the amount of competition, small population ... and it's irregular urban concentration," said Fowler.

The rate of increase was less for other states including Adelaide, Brisbane and Sydney.

"The most dramatic price change in the September Quarter, a six cent fall in the price of dine-in coffee in Perth, was difficult to interpret with no apparent link to historical data and instead appears to be more the result of growing price awareness on the part of Perth coffee drinkers."

Other trends

Fowler also commented to cafe operators are starting to increase prices of non-core items such as espresso shots and tea to recoup higher operating costs and the absorption of the increased prices for coffee beans.

Looking to 2012, Fowler warned the industry against using coffee futures as a predictor of price, instead saying that continued pressures from increased business costs for cafe operators are more reliable indicators. In terms of production, however, the following could have an impact:

· In 2011 heavy rain in South America resulted in Colombia failing to meet its expected nine million bag production levels. Production will drop to eight million compared to 8.3 million bags produced last year

· Brazil will drop its production from 54.5 million a year to 49.2 million for July 2011-2012

· Futures prove unstable as productions around the world look grim: futures jumped from $3 a pound in August 2011 to $3.50 in September to fall to $2.90 in November

"While these global settings are influential," Fowler said, "commercial business conditions faced by Australian cafe operators are really the most important factors in determining the price of a cup of coffee."

Finally, a coffee faucet

2011-12-03T09:15:00.001-08:00

By Brian Krepshaw

CNET

December 3, 2011

Photo Credit: Scanomat via CNET

Modern living has made life easier in a number of significant ways, with plumbing and electricity topping the list. As a society we've become accustomed to things working with a press of a button or turn of a handle, but that doesn't mean basic necessities cannot be improved upon.

Coffee--a well-known necessity of life--may be plentiful and readily available, but many would consider that to be just a start. Improving upon the accessibility of coffee is the Scanomat TopBrewer.

At first glance the spigot may elicit a question about why a water faucet would be mounted in that particular place--especially without a sink to go with it--but then upon further examination, the device would be revealed to be not a water faucet, but a coffee faucet. Finally, we can all stop acting like heathens and enjoy coffee the way it was meant to be enjoyed--like it poured forth from some eternal spring.

The undercounter installation hides a multitude of components that allow for a variety of coffee drinks to be made on demand, including espresso drinks, thanks to its capability to store and froth milk. Beans are ground and utilized according to what drink is selected (from either the touch-screen interface or a compatible phone or tablet) and then delivered via the faucet for exceptionally fast beverage service. While user intervention is required to refill the beans and/or milk supply, the automated cleaning cycle is certainly a step into the future. And nothing against running water or light bulbs, but coffee on demand and self-cleaning? Now that's true progress.

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Via Wired

After Starbucks, Australia’s Di Bella plans coffee chain

2011-12-02T07:01:00.001-08:00

By Shailaja Sharma

DNA

December 2, 2011

After Starbucks and Dunkin’ Donuts, Australia’s premium coffee company Di Bella Coffee is queuing up to enter India’s $441 million (Rs2,270 crore) cafe chain business that has established retailers like Cafe Coffee Day, Costa Coffee and Barista Lavazza.

Di Bella is likely to open as many as six outlets in Mumbai by January 2012, which will be followed by expansion in Delhi and Hyderabad. Di Bella Coffee’s top officials visited Mumbai this week to narrow down on locations for stores across malls and high streets.

Founded in 2002 in Brisbane, the company runs over 1,242 wholesale and retail outlets in Australia, New Zealand and China, and India will be its next aggressive international foray, Rahul Leekha, general manager - operations, Di Bella Coffee India, said.

He declined to comment on investments made in India, but said the coffee chain business in India is growing by 40%.

The Indian entity, Di Bella Coffee India, has been set up under licence agreement by Sachin Sabharwal who is part of Di Bella coffee business in Australia along with another Indian director whose identity is not disclosed. Apart from running cafes, the company is also looking at selling coffees online and supplying coffee to five-star hotels.

While the Seattle-headquartered Starbucks that has partnered with Tata Coffee for sourcing and retail in India continues to hunt locations and may open its first outlet anytime in early 2012, Di Bella will be India’s first premium international coffee chain offering rich blends, luxury teas and other beverage along with quality food.

If things go as per plan, Di Bella could open 50 outlets in India in the next three years, Leekha said. The largest cafe chain company in India and owned by Amalgamated Bean Coffee Trading Company Ltd, Cafe Coffee Day, operates 1,180 outlets.

US-based donut and coffee chain Dunkin’ Donuts, too, announced its entry in India in February. Under the agreement with franchisee Jubilant FoodWorks, there will be 500 Dunkin’ Donuts outlets set up over the next 15 years.

However, the first Dunkin’ Donuts store will only open in the first half of 2012, Ajay Kaul, chief executive, Jubilant FoodWorks, had told the media at the time of announcement.

Distinguishing itself from other chains in the country, Di Bella will let consumers place orders through iPads on their table and let use 20 minutes of free internet per cup of coffee.

“Our positioning is quite different from that of existing players in India; our blends will be premium and super-premium. The coffee here will be imported from Australia,” he said.

A cup of coffee at Di Bella outlets may cost Rs150-200 compared with `60 and upwards at other coffee chains.After several years of being present in the country, Barista Coffee Company that is now owned by Italy’s Lavazza, in November launched its premium international format Lavazza Espression in New Delhi.

Indian chains are unfazed by competition from each other but are anticipating much of it from the likes of iconic international chains Starbucks and Dunkin’ Donuts. Given the growing acceptance of the cafe chain culture among Indian consumers, country’s largest consumer goods company, Hindustan Unilever, last year launched Bru World Cafe. Both Cafe Coffee Day and Costa Coffee said competition in the attractive and growing cafe business was welcome.

“The per capita consumption of coffee in India is just 82 grams. Compare that with four kilograms in the US. There is great opportunity for all players, given that collectively all players have only gone to 200 cities in the country of the potential 400-500 cities that can offer growth,” K Ramakrishnan, president - marketing, Cafe Coffee Day, said.

Africa's coffee output to rise by a third by 2015

2011-11-29T07:35:00.001-08:00

By Beatrice Gachenge

Reuters

November 29, 201

NAIROBI (Reuters) - Africa's coffee output could leap by a third within the next five years as farmers scramble to replace mature trees with disease-resistant seeds to cash in on soaring global prices for the beans, a senior industry official said.

Poor prices, drought, disease and political instability in major producers such as Ivory Coast have led to neglect of coffee farms, while some farmers ditched the commodity in favour of planting staple foods such as maize.

But Denis Seudieu, chief economist at the International Coffee Organisation, told Reuters that countries like Uganda, Kenya, Cameroon and Tanzania have come up with hardier seedlings that produce higher yields, and are reaching out to new markets.

"If major producing countries aggressively implement and rehabilitate the coffee sector by supporting and trickling benefits to farmers, we are optimistic in five years production will increase by 2-5 million bags," Seudieu said on the sidelines of a coffee conference in Kenya's capital Nairobi.

Seudieu said millions of African farmers stopped growing coffee in earnest between 1980 to 1990 when governments introduced new intermediaries in trading who ate into farmers' incomes, as in the central African nation of Cameroon.

Data from the Inter-Africa Coffee Organisation (IACO) showed Africa's production of the beans has stagnated at 16 million bags of 60 kg each in the last five years, but rose to 18 million bags last year, a 13 percent share in the global market.

In 1980, Africa's global market share stood at 30 percent, and plans are under way to try to restore the lost ground.

Ravaged by years of civil war, Ivory Coast (Cote d'Ivoire), once the fifth largest global coffee producer, has fallen to 11th, but political stability has been restored and farmers are upbeat. New seedlings that will yield coffee beans within two years could turn around their fortunes.

"A country like Cote d'Ivoire used to be a big producer but the political crisis emphasised the already difficult situation in terms of low productivity. It was the poor price at first, then the political situation aggravated it," Seudieu said.

The west African country used to produce 4 million-5 million bags in the 1980s but annual output is now less than half that amount, Seudieu said.

UGANDA SEEN AS MODEL

In east Africa, Kenya hopes to pay its farmers more by removing middlemen and letting them sell directly to foreign buyers, Josefa Sacko, the secretary general of IACO said.

Kenya, a relatively small producer of specialty high quality coffee beans sought after for blending with those from other countries, is trying to reverse a trend where coffee output has fallen because farms have been taken up by property developers to cash in on the booming real estate sector.

A new disease-resistant coffee variety named Batian developed by researchers is expected to boost output sharply, and is in demand throughout the east and central Africa region.

Kenyan farmers looking to benefit from high international prices have expressed interest in growing coffee in areas that have previously not produced it, researchers said.

Uganda, Africa's second largest producer after Ethiopia, has widened distribution of varieties resistant to coffee wilt disease to farmers in a country that produced 3.15 million bags in 2010/2011, up from 2.7 million in 2009/2010.

The country is seen as a model for the rest of the continent, because output has been rising gradually.

"Among the 25 member countries, the country that is doing very well is Uganda," Sacko said.

Honduras promotes top-quality coffee to the world

2011-11-26T11:28:00.001-08:00

By Grace Soong

China Post

November 27, 2011

The China Post--For the first time in history, coffee beans native to Honduras are packaged in Taiwanese creativity, and together the two nations will challenge the international coffee market, as announced at the beverage exhibition in the Taipei World Trade Center (TWTC), yesterday.

Set up in the center of the TWTC Hall 1 is a special Central America coffee-themed booth, where the five major Central American coffee producers — El Salvador, Guatemala, Honduras, Nicaragua, and Panama — demonstrate their ambition to promote their native flavors to the world.

Especially unique to this year's Taipei Tea, Coffee, and Alcohol Exhibition (2011台北茗茶˙咖啡暨美酒展) is the newly revealed flavorful cooperation between Taiwan and Honduras: the best coffee beans from six regions of Honduras are packed in Taiwan-designed packages, and will be available in five major airports in Honduras.

“Our coffee beans are of highest value in the region,” Vice President of Honduras Samuel Reyes Rendon, who is visiting Taiwan on the mission to introduce the country's coffee to the world, said yesterday. Honduras is the largest coffee exporter of Central America, and is among the major suppliers of coffee to the Taiwanese market, with Honduran coffee beans frequently serving as a popular option for coffee blends due to their balanced flavor.

As the global coffee market grows and coffee drinkers' palates evolve, however, Honduras believes that its time for its coffee to go solo.

After repeated cupping and testing, six different kinds of coffee beans native to Copan, Opalaca, Montecillos, Comayagua, Agalta, and El Paraiso of Honduras have been chosen and shipped to Taiwan for creative packaging.

“Each type of coffee bean has its own quality, taste, aroma, and texture,” the vice president pointed out, “and these specialties are now available to all in one compact package.”

Taiwan and Honduras' cooperation on this coffee project has strengthened the two nations' 70-year-long brotherhood, Charge d' Affairs of the Embassy of Honduras Alejandro Young Portillo said, remarking, “Together we open doors to the world.”

A Question of Fairness

2011-11-23T17:53:00.001-08:00

By William Neuman

The New York Times

November 23, 2011

Rink Dickinson, president of Equal Exchange, a pioneer importer of

fair trade coffee, chocolate, tea and bananas.

Mr. Dickinson called the move by Fair Trade USA a "betrayal."

A tempest in a coffee pot is bubbling in the world of “fair trade,” the socially responsible food movement that seeks to lift farmers in the developing world out of poverty by offering them a premium for crops like coffee, cocoa and bananas. And the fight will soon reach your local Starbucks, Wal-Mart and Whole Foods.

Fair Trade USA, the movement’s leading advocate in the United States, angered critics by saying it would cut its ties at year’s end with the main international fair trade group and make far-reaching changes in the sorts of products that get its seal of approval.

The changes include giving the fair trade designation to coffee from large plantations, which were previously barred in favor of small farms. The group is also proposing to place its seal on products with as little as 10 percent fair trade ingredients, compared with a minimum of 20 percent required in other countries.

The group says the changes will benefit more poor farmers and farm workers around the world and make it easier for large corporations to sell fair trade products. Sales of fair trade goods in 2010 were $1.3 billion in the United States and $5.8 billion globally. Fair Trade USA said it hoped to double sales in the United States by 2015.

Critics accuse Fair Trade USA of watering down standards, perhaps motivated by the bigger fees to be earned from certifying a higher volume of products. Some sellers of fair trade products fear that small coffee farmers will lose market share to the big plantations and that companies will have an incentive to include only the minimum amount of fair trade ingredients in their products.

“It’s a betrayal,” said Rink Dickinson, president of Equal Exchange, a pioneer importer of fair trade coffee, chocolate, tea and bananas, based in Massachusetts. “They’ve lost their integrity.”

Paul Rice, chief executive of Fair Trade USA, said the fair trade movement was dominated by hard-liners who resisted needed changes. “We’re all debating what do we want fair trade to be as it grows up,” Mr. Rice said. “Do we want it to be small and pure or do we want it to be fair trade for all?”

He dismissed criticism that his group was seeking to increase revenue for its own sake. “The more we grow volume, the more we can increase the impact” of fair trade, he said. In 2010, companies that sell fair trade products paid the group $6.7 million in licensing fees, which are meant to pay the cost of auditing a company’s production to make sure its fair trade claims are accurate.

As part of his efforts to expand the fair trade designation, Mr. Rice is cutting ties between his group and an umbrella organization, Fairtrade International, which coordinates fair trade marketing activities in close to two dozen countries. He said his group paid outsize fees to Fairtrade International — about $1.5 million last year — and received little in return. The international group has also rejected the changes put forth by Mr. Rice.

“The best thing we can do is make sure we’re staying true to the principles that got us to where we are,” said Rob S. Cameron, the chief executive of Fairtrade International. “I’m not going to water those principles down.”

The brouhaha has surprised many companies that sell fair trade products and will soon be forced to take sides. For consumers who pay attention to where their food comes from and how it is produced, the result could be confusion as they try to sort through a proliferation of competing fair trade labels with differing claims.

The logo overload will include a redesigned Fair Trade USA seal; a Fairtrade International seal, which previously did not appear in this country; and labels from smaller programs, like one run by Catholic Relief Services.

Coffee, which Mr. Rice said accounted for more than 70 percent of the fair trade market in the United States, is at the center of the dispute.

Green Mountain Coffee Roasters, which calls itself the largest buyer of fair trade coffee in the world, said that it would continue to work with Fair Trade USA as it sought to increase the amount of fair trade coffee it used.

The company is participating in a pilot project with Fair Trade USA involving a 500-acre organic coffee plantation in Brazil, a farm that previously would have been too large to get fair trade certification.

“Our ongoing commitment to small-scale farmers remains intact,” Sandy Yusen, a Green Mountain spokeswoman, said. “We also believe that Fair Trade USA’s vision presents new opportunities that allow us to impact even more farmers and workers.”

Ms. Yusen said that Green Mountain bought 26 million pounds of fair trade coffee in 2010; in that year, it paid $1.5 million in licensing fees to Fair Trade USA, making it the largest source of revenue for the nonprofit group, according to federal tax filings.

Starbucks, which has about 11,000 coffee shops in the United States, also said that it planned to continue using Fair Trade USA to certify coffee it sells in this country. However, the company said that it had not decided whether to place a fair trade label on coffee grown on large plantations. Starbucks said that about 8 percent of the coffee used in its global operations came from fair trade farms in 2010, or about 21 million pounds.

Wal-Mart and Whole Foods also sell fair trade coffee and use fair trade ingredients in store-brand products; both companies said they were evaluating the situation.

About two dozen countries have fair trade labeling organizations that license companies to market fair trade products. Fairtrade International provides a uniform logo for use on packaging in most countries.

Most fair trade programs around the world already allow bananas, tea and flowers to be grown on large farms. But traditionally, fair trade coffee and cocoa had to come from small farms organized into cooperatives. The farmers receive a premium for use in community projects, like paying for schools or medical care.

Those poor farmers were once isolated from markets in the developed world and had to sell at a low price. Fair trade organizations help them improve product quality and, most important, give them access to a world market.

Mr. Rice said bringing large plantations into the fair trade sphere would mean that workers on those plantations, whom he called “the poorest of the poor,” could also begin to receive benefits. “We’ve developed a vision for that bigger, better model of fair trade,” he said.

But critics say that large plantations do not need help getting access to major markets, and the small coffee farmers who have been at the heart of fair trade could be squeezed out.

“Starbucks, Green Mountain and other coffee companies will be able to become 100 percent fair trade not because they’ve changed their business practices one iota but because Fair Trade USA has changed the rules of the game,” said Dean Cycon, founder of the Dean’s Beans Organic Coffee Company, in Orange, Mass.

Seth Goldman, the co-founder of Honest Tea, said the rift had prompted his company, now owned by Coca-Cola, to take a closer look at the workings of fair trade. He said that in the first 10 months of this year, Honest Tea paid about $51,000 in premiums destined to help farmers or farm workers. At the same time, it paid $37,000 in licensing fees to Fair Trade USA.

Mr. Goldman said he would like to see more money go to help farmers and less to pay administrative and auditing costs.

He said the company would decide in the next few weeks whether it would continue to work with Fair Trade USA or arrange to use the Fairtrade International logo on its products instead.

He called the dispute a mess, but added, “Opening up a can of worms gives us a chance to understand what’s in the can.”

Coffee Supply Crunch Spurs Rally

2011-11-22T18:32:00.001-08:00

By Marvin G. Perez

Bloomberg

November 22, 2011

Coffee’s biggest slump in three years may be ending as weather damages crops from Colombia to Indonesia, reducing U.S. inventories to the lowest since 2000 just as Kraft Foods Inc. and J.M. Smucker Co. cut prices.

Stockpiles in warehouses monitored by ICE Futures U.S. fell 16 percent since December, declining for a fourth year, exchange data show. Arabica-coffee futures, already poised for the highest annual average price on record, may rise 14 percent to $2.71 a pound by March, according to the average estimate of 13 traders and analysts surveyed by Bloomberg.

Prices rallied 7.8 percent from a nine-month low in October as the heaviest rains in two decades damaged Central American plantations, Colombia reported a 19 percent drop in output last month, while exports slowed from Brazil, the world’s top grower. The London-based International Coffee Organization already expects production of arabica, the most-consumed variety, to decline 3.7 percent this year.

“These problems are mostly weather-related, which will mean lower volume,” said Christian B. Wolthers, the president of Wolthers America, an importer in Fort Lauderdale, Florida, who has traded coffee for more than two decades. “We just don’t know how bad it is yet.”

Arabica futures jumped 74 percent since the end of 2009 on ICE Futures U.S. in New York, second only to the 96 percent rally in silver among 24 commodities tracked by the S&P GSCI Index, which gained 23 percent. The MSCI All-Country World Index of equities fell 4.2 percent in the period, while Treasuries rose 16 percent, Bank of America Corp. indexes show.

Output Cut

J.M. Smucker, based in Orville, Ohio, cut prices of Folgers, the best-selling U.S. retail coffee, by 6 percent on Aug. 16. It was the first reduction after four increases totaling 38 percent in the year through May. Kraft (KFT), based in Northfield, Illinois, followed a week later with lower prices for its Maxwell House brand.

Global coffee production in the year ending Sept. 30 will drop about 4 percent to 127.4 million 60-kilogram (132-pound) bags from a year earlier, the ICO said in a report Nov. 10. It had previously forecast 129.5 million bags and now anticipates declines in India, Indonesia, Vietnam, Brazil, El Salvador, Guatemala and Mexico. About 80.11 million bags will be arabica and the rest robusta, a lower grade used in instant coffee.

Largest Exporter

Drier-than-normal weather in Brazil from April to early October will curb gains in the harvest that starts in May, according to Somar Meteorologia. Marco Antonio dos Santos, an agronomist at the Sao Paulo-based weather forecaster, cut his forecast for the nation’s crop to 55 million bags from 58 million in a report Nov. 1. Cooxupe, a growers’ cooperative and Brazil’s largest exporter, said Nov. 17 its output will be 15 percent smaller than during the previous on-cycle crop because of dry weather.

Even a smaller-than-expected Brazilian crop should be enough to cap the rally in prices in the second quarter. Arabica will decline to $1.95 a pound by May, after peaking in March, according to the average estimate in the Bloomberg survey. Prices are still 23 percent lower than the 14-year high of $3.089 reached May 3 on speculation that slowing growth will erode demand for raw materials and as robusta exports surged from Vietnam, the world’s second-biggest coffee producer.

“The dream of $3 per pound again seems to be just that, a dream,” said Rodrigo Costa, a director at Belo Horizonte, Brazil-based Tangara Importadora e Exportadora SA, an exporter.

World coffee demand fell 2.6 percent in 2009, the most in 16 years, as economies grappled with the worst global recession since World War II, U.S. Department of Agriculture data show.

Costa Rica Harvest

Since then, Costa Rica trimmed its harvest forecast by 1.5 percent after getting as much as 120 percent of normal rainfall in October, according to the country’s National Meteorological Institute. Colombia’s National Federation of Coffee Growers cut its 2011 crop estimate by 5.9 percent on Nov. 21 because of wet weather, after reducing its 2012 forecast on Nov. 4 by 23 percent. Producers also cut their estimates in El Salvador and Guatemala.

Rainfall in Brazil was as much as 20 percent below normal from April to September and damaged trees, Somar’s dos Santos said. The lack of moisture may limit growth, Kona Haque, an analyst at Macquarie Group Ltd. in London, wrote in a report Nov. 3.

Brazilian exports fell to 3.09 million bags last month, from 3.49 million a year earlier, according to data from the nation’s Green Coffee Exporters’ Council, known as Cecafe. Shipments may drop to 3 million bags this month, compared with 3.18 million, Flavour Coffee, a Rio de Janeiro-based broker, said in a report Nov. 17.

Rabobank International

Global inventories will fall to 18 percent of demand by the end of the current marketing season on Sept. 30, compared with 23 percent a year earlier and more than 40 percent in 2003, according to Keith Flury, an analyst at Rabobank International in London.

Arabica futures have averaged $2.57 this year, heading for an annual record that would top the previous high of $2.39 in 1977, exchange data show.

Inventories tracked by ICE Futures U.S. were at 1.43 million bags yesterday, down from 1.7 million at the end of 2010 and a high three years ago of 4.64 million bags.

Starbucks Corp. (SBUX), the world’s largest coffee-shop operator, raised prices in U.S. markets this month to help recoup higher commodity and rental costs, Alan Hilowitz, a spokesman for the Seattle-based company, said on Nov. 16.

Cost Increases

Caribou Coffee Co., the second-largest U.S. coffee-shop owner, expects to spend $10 million more next year, Chief Financial Officer Tim Hennessy told investors on a conference call Nov. 8. That’s equal to a 15 percent increase for the Brooklyn Center, Minnesota-based company.

Kraft faces “another meaningful increase” in raw-material costs this quarter, and expenses probably will keep rising in the first half of 2012, Chief Financial Officer David Brearton said on a conference call Nov. 2.

There are no signs of slowing demand yet, with the world economy forecast by the International Monetary Fund to expand 4 percent this year and next. Global consumption expanded 2.4 percent to 135 million bags last year, after growing an average of 2.5 percent annually during the last decade, according to a Nov. 10 report by the ICO.

Demand in the U.S., the largest coffee-drinking nation, increased 2.7 percent during the year ended Sept. 30, according to StudyLogic LLC, a market researcher. U.S. consumers spent 18 percent more on coffee in September than a year earlier, three times the increase across all food, Bureau of Labor Statistics data show.

“People still need their cup of Joe,” said Samuel Nahmias, the chief operating officer of StudyLogic in Cedarhurst, New York. “Whether people are employed or unemployed, they will still keep drinking coffee.”

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To contact the reporter on this story: Marvin G. Perez in New York at mperez71@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

Ethiopia: Trade Ministry Bans 16 Coffee Exporters from Exchange Floor

2011-11-21T10:01:00.001-08:00

Ban brings total prohibited from trading in coffee to 57 in the last month

By Elleni Araya

Addis Fortune

November 20, 2011

The Ministry of Trade has banned 16 coffee exporters from trading on the trading floor of the Ethiopian Commodity Exchange (ECX) on Wednesday, November 8, 2011, for failure to have their stocks audited by it.

The banned individuals and companies include Terefe Hailu (PhD), Kaf International, AbdulKedir Mohammad Ali, and Abdu Ali. Most of the banned traders are known for registering a high volume of trade in the exchange, according to officials from MOT.

A letter was sent to the Ethiopian Commodity Exchange Authority (ECEA), with the list of the banned traders, not to allow them from buying or selling on the trading floor for unspecified time. The ban only prevents the traders from buying coffee on the trading floor. It does not stop them from either buying or selling other commodities.

This ban brings the total of banned exporters in the past month to 57. Previously the ministry had banned 41 traders on October 17, 2011. Out of these 17 were banned for six months and another 24 banned for three months. Hoarding was gives as the reason for their ban.

“Traders make an agreement with ECX to export the coffee they buy on the floor within two months’ time,” Abdurrahman Seid, assistant public relations Manager at the Trade Ministry, told Fortune. “The Ministry take actions when they fail to do that.”

The same year ECX opened its trading floors in April 2008, the coffee quality control and marketing proclamation was passed that essentially mandates almost all coffee export transactions to be conducted through the exchange.

The Ministry, frustrated by exporters that do not comply with the proclamation and hoard coffee, issued a directive in May 2011, that would fine those that keep coffee for a long duration or those that have more stock than they enter contracts for.

According to the directive, exporters who store more than 500tn of coffee for more than two months without foreign supply contracts will be banned from buying coffee from ECX for three months.

Coffee accounts for the largest amount and value traded on the floor. It made up 47pc of the traded volume and 74pc of the traded value during 2010/2011,, according to the exchange’s performance report.

Ethiopia had exported 196,118tn of coffee worth 841.7 million dollars in 2010/2011. The amount exported is more than half of the 370,569 tonnes total production in the country. The government aims to export more than 600,000tn of coffee annually by the end of 2014/15.

Kenya coffee board cracks the whip on millers behind illegal trade

2011-11-20T14:56:00.001-08:00

By Allan Odhiambo

Business Daily Africa

November 20 2011

A farmer picks her coffee crop. Photo: Courtesy of Business Daily.

Some millers and roasters could be investigated for allegedly engaging in illegal dealings that are fuelling theft of beans in coffee growing areas across the country.

The industry regulator, the Coffee Board of Kenya, said last Thursday if found guilty the millers and roasters would be stripped of their licences.

“We have received claims of some millers and roasters allegedly engaging in dealings that are causing theft of coffee and we have forwarded the information to the relevant arms of government for action,” the board’s managing director, Loise Njeru, told a media briefing in Nairobi.

Cases of theft and illegal dealing in the commodity have been on climb since the 2004/05 crop season, coinciding with a steady increase in prices that has persisted into this year. “Theft of coffee has become very serious especially around central Kenya.

We believe a lot of coffee is smuggled through our borders, especially to Uganda,” Agriculture PS Romano Kiome told journalists ahead of an international conference for coffee producers in Africa to be held in Nairobi starting today.

Coffee theft has over the years affected growing areas around Machakos, Kiambu, Thika as well as several parts of western Kenya. Containers on transit are also either stolen or their content tampered with around Nairobi, Nakuru and Mtito Andei on the Nairobi-Mombasa highway.

A sharp rise in prices to historic levels has, however, worsened the crime with thieves now targeting produce right at the farm level. During the ended 2010/11 season, Kenyan coffee prices hit an all-time high of $1,022 a bag for benchmark grade AA.

The thefts and illegal dealings are now targeted at the farm level because marketers and millers invested a lot in security facilities during transit and warehousing. “We are calling for vigilance among players in the industry because the thefts are injurious to the sector,” Mrs Njeru said.

The regulator recently placed a public notice urging millers, warehousemen and dealers to ensure they insisted on valid movement permits for all coffee received in their premises as a sign of authenticity, transparency and traceability of the coffee at all times.

“All value chain players must exercise this provision religiously,” the coffee board said in public notice.

Statistics by regulator showed that the country earned Sh26 billion from coffee over the crop year ended September.

Back-to-back seasons of adverse weather conditions in key producer nations has seen supplies of the commodity dwindle leading to improved prices on good demand as roasters scrambled for the few available offers.

The country’s just ended 2010/11 coffee marketing season had massive challenges brought about by supply shortages that even saw the auction sessions temporarily cut short in April.

The shortfall has partly been blamed on an unusually early crop this season.

Coffee volumes at auction surges around March but they peaked earlier this year after unusually heavy rains in the first months of last year.