HomeRoast Digest


Topic: A good explanation of the Ethiopia situation from Royal (330 lines)
1) From: Tom & Maria - Sweet Maria's Coffee
Ethiopian SituationŠ  M. Nicholas-Fulmer
So by now you have probably at least heard a rumor or two about some =
strange goings-on in Ethiopia these days. Unfortunately, much of it =
is true. Before getting into a discussion of the relative pros and =
cons of the new system, a quick primer is in order.
For the last twenty years, since the fall of the Communist Derg =
leadership in Ethiopia, coffee has been sold through a national =
auction system. Specific "chops" of regionally designated lots would =
be brought to the auction sites (Addis Ababa for southern Ethiopia, =
Dire Dawa for the Harrar region). While the trucks lingered outside, =
graders inside the auction would roast, cup, and score the coffees =
based on cup profile and defect count. Then, in the early afternoon, =
buyers and sellers would come together in the auction room and bid on =
each lot. Now, in typically African fashion, the buyer and seller of =
a particular coffee would often actually be the same person. For =
example, an exporter who bought from a particular group of farmers in =
a specific area might bring that coffee to the auction, place a high =
bid, and actually buy the coffee from himself! Everyone knew this =
went on, and it was an accepted part of the coffee trade. The =
exporter could develop contacts at the farmer level and process the =
coffee with faith that he would ultimately reap the benefits of any =
extra effort. The government was also taken care of, as they took a =
tax out of every auction sale. Most importantly for importers and =
roasters, the system was traceable back to origin, and it was =
possible to reward quality and perseverance.
Now, all that has changed: with the start of the 2009 season, a new =
system known as the Ethiopian Commodity Exchange has been implemented =
which has completely altered the way in which coffee is bought and =
sold. Without getting too technical, the new system essentially =
operates the way the New York "C" Market would if it were the only =
game in town. By government mandate, all coffee must be sold to the =
Exchange, at prices negotiated through an electronic bid/ask system =
(just like the "C"). For example, say an exporter has a contract to =
ship 300 bags of Grade-2 Yirgacheffe, and he has the coffee in his =
possession. He must now sell the coffee to the exchange at the daily =
asking price, and then buy from the exchange at whatever the offered =
price is. Sounds like the old system, except that when he sells his =
coffee, it goes into a bonded Exchange warehouse and loses all =
traceability other than the regional designation and grade (Yirg-2, =
in this case). That means that when he turns around and buys the 300 =
bags that he needs to cover his export contract, he has no idea where =
that coffee is coming from. Take a moment to ponder what this means =
for quality development: if an exporter cannot possibly know where =
his coffee is coming from, what incentive is there to undertake =
quality improvement projects at the farm-level? Or to go the extra =
mile in processing? Or even to care if the coffee is transported the =
right way?
The Exchange was initially implemented to be used in the wheat and =
corn industries, and it works very well for commodities such as these =
where there is little or no differentiation between origin and all =
that one can really look at is defect count. It does improve price =
transparency and theoretically it should increase tax revenue; =
however, for something like specialty coffee, in which the slightest =
difference in appellation or processing can mean huge differences in =
perceived quality and price, this new system is an utter failure. =
What makes it most upsetting is that the Ethiopian Government seems =
to recognize this and yet doesn't seem to care. The comments we have =
heard are along the lines of: "specialty makes up 3-5% of total =
export volume (a highly dubious figure) and so it really doesn't =
matter." It looks like the "smartest guys in the room," who know =
nothing about the particulars of the coffee industry, have decided =
that they know what is best. Certain exemptions do exist for =
direct-export, bypassing the exchange. The largest cooperative =
unions, like Oromia and the Sidamo Union, and single estates (most of =
which, ironically, are owned by the government) are allowed to sell =
their coffee directly. This concentrates an awful lot of power in a =
few hands, and we can tell from experience that this is rarely a good =
thing.
The upshot of all this is an utter paralysis of the coffee trade at =
the exact time of year when coffee needs to be getting on the water =
to ensure quality deliveries. On top of that, the Ethiopian =
Government has temporarily suspended the export licenses and closed =
down the operations of the countries six largest exporters on =
accusations of "hoarding" (i.e: not wanting to use the new system, =
and thus holding coffee in their warehouses rather than selling to =
the exchange). While this does not necessarily affect the specialty =
industry directly, it further constipates the system and makes a bad =
situation worse.
 From the outside looking in, we can only hope that the powers-that-be =
come to their senses sooner rather than later. If you are =
participating in the SCAA Symposium, please make an effort to attend =
the special session on the ECX, as the specialty industry needs to =
make its voice heard on this extremely important issue.
Ethiopia ContinuedŠ R.Fulmer
 From our perspective, the government of Ethiopia has attempted to fix =
something that was not broken. By April, we routinely expect to have =
received our first shipments of Harrar, Sidamo and Yirgacheffe, and =
to have more coming. So far this year we have received nada.  There =
seems to be a wrench in the gears. To say there is confusion and =
chaos in Ethiopia is an understatement.
Currently we have a marketing system that treats coffee as if it were =
gravel. Imagine the frustration for exporters who have cultivated =
relationships, made investments, and have created reputable brands =
over many years. For example, take the dilemma facing MAO.  Last =
February, Max and I visited a "drying patio" in the Harrar growing =
region that was typical: a flattened circle of compressed dirt. With =
our fingers, we unearthed cherry pods submerged an inch below the =
dirt. As much as I respect tradition, the advantage of drying coffee =
underground escapes me. Going to raised beds is obvious. Still, what =
seems simple is easier said than done.  At meager income levels, even =
building rudimentary beds is beyond the farmer's ability and would =
not be a chief priority. It would require an organized and funded =
effort. MAO talked to the farmers about an introductory trial and the =
farmers were enthusiastic. Some beds were built, and this year for =
the first time in this area, Harrar coffee was dried off the ground. =
The samples we received tasted cleaner and it seems logical that we =
would see raised bed drying become standard in the region over time. =
Progress was being made. Of course we want to bring in this specific =
raised-bed Harrar lot and offer it, as well as the story, to our =
customers, who we know would appreciate the effort. Not so fast.
In prior years when it concerned procuring Harrar, as Max mentioned, =
a specific lot of coffee was traced by the truck which carried it to =
the old Harrar auction in Dire Dawa. On the auction day, MAO would go =
to the auction knowing the coffee they wanted was in town, and in =
fact was sitting in a loaded truck parked on the street outside the =
auction. MAO would buy the coffee they wanted, have it trucked to =
their facility, clean it, bag it and send it to us. Until about three =
weeks ago, MAO was operating under the premise that the rules had not =
yet changed for Harrar. But noŠnow we find---at the eleventh =
hour---that even Harrar must go to the new exchange where, once sold, =
traceability vanishes and Harrar becomes generic. So MAO now has no =
way to follow the coffee through the exchange, and no way to get the =
specific raised bed coffee for us, or even more disappointingly, any =
of the specific Harrar lots we have offered in the past.
And what about Organic? There was an increasing supply of organic =
coffee coming into the market over the last several seasons, much of =
it of excellent quality. But now certification is not traceable =
through the exchange. That goes for any certification: Rainforest, =
Bird-Friendly, whatever. Does all this sound specialty coffee =
friendly?
Why has Ethiopia decided to make such large and fundamental changes? =
One would hope they are trying to raise coffee revenues for both the =
farmers and their coffee dependant country.  Though the goals may be =
noble, the reality is that the new system seems to be in practice =
dysfunctional. This is clearly illustrated by events last week in =
Ethiopia where some of the largest exporters had their export =
licenses suspended. They are accused of hoarding coffee, and the =
government is threatening to step in. Many of these large exporters, =
it appears to us, are the only companies who so far have been willing =
or able to navigate the new exchange. Furthermore, they are the only =
ones who have made concrete offers, which now we have to view as =
extremely suspect.
Personally I have the feeling pressure is building and something has =
to give. Whatever happens, we hope we somehow get a chance to provide =
coffee from one of the great specialty origins and that Ethiopian =
does not throw the baby out with the bath water. In the meantime, =
make alternative plans. Even if we went back over night to the =
situation of prior years, it would be two to three months at a =
minimum before coffee would arrive. And that is not happening; =
nothing new has been shipped.
We still have availability of some Ethiopian coffee from last year, =
which has held up surprisingly well. For a list, check out our =
website offering list. And, if you are at all flexible we just =
receicved some Uganda Organic Bugisu AA which has a nice chocolatey, =
fruity, Natural Sidamo-like character.
-- =
-Tom
"Great coffee comes from little roasters" - Sweet Maria's Home Coffee Roast=
ing
               Thompson & Maria -http://www.sweetmarias.com     Sweet Maria's Coffee - 1115 21st Street, Oakland, CA 94607 - USA
             phone/fax: 888 876 5917 - info_at_sweetmarias.com
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