Ethiopia Commodity Exchange (ECX)

[Jon Brudvig]

previous title: Ethiopian Lot Development / Direct Export Legislation

From an email I recieved today:

"Aricha and Beloya have been beloved coffees for Ninety Plus, roasters, and consumers worldwide. They may be brought to the brink of extinction by new legislation in Ethiopia which prohibits separate lot development for direct export in Yirgacheffe and Sidama.

Ninety Plus will continue to do everything in its power to keep these coffees alive, but it has become clear that volumes - if they exist at all - will be extremely limited from Aricha and Beloya in 2009."

Does anyone have any more information on this legislation?

-Jon

[Stephen Schulman]

What is the Ethiopian governments motivation for this policy?

[Oliver]

The idea is to back up their "regions" focusing on promoting consumers to seek out "Harar" "Sidamo" "Yirgacheffe". They are in the belief that this is decommodifying Ethiopian coffee.

[Peter G]

Here's a little background:

A commodity exchange was established in Ethiopia in 2008, mainly for grains. The idea was to promote price transparency and food stability for Ethiopian food crops. Here's a little op-ed piece:
http://www.philanthropyaction.com/nc/ethiopian_exchange_looks_promising

and a news item:
http://www.ifpri.org/pressrel/2008/20080414.asp

Along the way, someone had the idea that coffee should be traded in this same commodities system. Proponents of this system say that it will standardize coffee quality,, and introduce 81 generic grades of Ethiopian coffee.

Here is how I am understanding it so far: regional milllers would tender their coffee to one of twenty or so regional warehouses. Coffee is recognized as one of 9 geographically based "types", and its quality is graded from 1 to 9. Therefore you might have a Sidama A grade 2 or a Harrar B grade 5. Coffee would carry no other designation other than that. The warehouses package the coffee into standardized bags, where it is brought to Addis and traded there as a commodity. Therefore, you can buy however many bags of Sidama A grade 2 on a given day for a given price.

Here is the rub: independent millers like Abdullah Bagersh (owner of Idido mill) or the Ogsadeys (owners of Horse mills) who buy coffee from farmers, mill it, escort it through the auction system and export it under their own mark will no longer be able to do this. They will be required to sell the produce of their mills to the commodity system, where its provenance will be lost.

There appears to be an exception: that farmers may sell their own produce directly. This will allow large plantations and co-ops (who are indistinguishable under Ethiopian law from individual farmers) to export their own coffee. So this system would effectively commoditize the private-mill coffees, and the only farmers in Ethiopia who would have access to the specialty market would be co-ops and large farms. It would also limit access to the organic market to these same players. Remember, Idido and Horse are not co-ops, they are privately owned mills, as are Haicof, Ambessa, etc.

I have also heard that the commodity exchange may not apply to dry processed Eastern Ethiopian coffees.

I am still collecting information, but that's what I have for you guys. The SCAA is taking a research/advocacy role with this one, and there should be some action and more information at the Symposium.

Peter G

[Timothy Hill]

Last I heard Harrar is due to come into the ECX next year for logistic reasons, and some producers like Bagersh have been given a 1 year extension to export some coffee, but who knows..... I heard that awhile ago now and I haven't heard of much the last month or so. Seems like a lot of the producers don't really even know how this is all going to work out. Has anyone even seen offers out there from private mills, or producers for this year? I am right in thinking a lot of the harvest is wrapping up, correct? I have seen a spattering here or there but nothing solid. This also makes me think that this can't help the delay in shipping that has plagued Ethiopian coffee.

[Ed Kaufmann]

Maybe someone could contact Bagersh and get the dirt from him as to what is going on. It's sad. These coffees get better every year. I think an effort to create more infrastructure for farmers to more easily trade their crops is wonderful. I also would guess that a very large percentage of coffee produced in Ethiopia would fit nicely into this model but it is too bad exceptions can't be made for farms/co-ops/mills who have their own infrastructure in place and sell on the Specialty market. I didn't see any mention of it in the articles Peter posted but I have to wonder if this is piggybacking on the branding thing Ethiopia has been working on.

[geoff watts]

Moraho,

I was just in Kigali attending the EAFCA conference and spent quite a bit of time discussing this issue with the Ethiopian coffee industry folks that were there. Discussions are on-going about modifying the legislation to include some sort of second window or Direct Export exceptions. The exporters are vigorously trying to get this process rolling, but apparently the Ethiopian Government and Ministry of Agriculture are not really listening...they've implemented their new scheme and want to roll with it.
The ideas behind the Exchange as I understand them include:
--furthering the support for the Regional trademarks--consolidating coffees in the regions and promoting them as brand name coffees (Harar, Sidama, Yirgacheffe, etc).
--eliminating what some in government see as 'conflict of interest' wherein private exporters who are also Akrabi (washing station) owners have too much control over cherry prices and could theoretically conspire and disturb the integrity of the auction system by producing and then buying back their own coffees. (The reality is that they sometimes end up competing ferociously and driving prices upwards, as happened last season, whenever there is a perceived cherry shortage, although it is certainly true that most exporters with washing stations do indeed seem to purchase back their own coffee in the auctions)

Anyway, my personal belief is that there will be a system established eventually that will allow private exporters to obtain license to bypass the Exchange when certain conditions are met (i.e., contracts with international buyers that are priced above the expected Exchange rate, 'Specialty' lots that qualify as exceptional based on liquoring results from CLU, etc). This is what goes on in Tanzania (private exporters must obtain license from the Tanzanian Coffee Board in order to bypass the auction and export directly).

In anticipation of potential obstacles to getting their direct export rights back, many private washing station owners I know are now purchasing farms or land for planting in order to qualify as producers, which would then allow them to avoid the Exchange.

The big question I've got right now is whether or not a solution will become viable for this season, since harvest is already over and special coffee lots that Roasters are looking for really need to be bought and exported within the next month or two, or they will lose too much quality due to aging anyway.

All of the exporters I talked to in Kigali expressed a ton of frustration over all this, and there is legit concern that the govt. is not going to listen to reason, despite a strong amount of solidarity within the private industry on the issue. It amounts to a big middle finger being held up to business people, and a total disregard for the Specialty industry. There is no doubt that this scheme is a major set-back for Specialty. But again, I do think there will be some sort of compromise eventually.

my two cents...

geoff


--

[barefoot]

From what I have heard from people who just returned from Ethiopia the situation is pretty dire. We buy a lot of our coffee from a private co-op that also has their own farms as well as many small members. they also export their own coffee and import here in the states. SO they seem like they will be able to continue this year but next year is murky.

If this goes through as planned and as envisioned this will effectively kill the Ethiopia specialty market correct? We might buy a few bags of a generic ethiopian washed coffee grade 1 but not too much and certainly not a natural that I could not know where or when it came from.

I cant imagine trying to sell a coffee as "Ethiopian Yirgacheffe generic grade 2". Christian is there with Geoff in Ethiopia so hopefully he will post back a bit of news as well.

sad days. I am sure it will be somewhat fixed with a second window or something but not I fear for many years. Governments are loath to give up control and skimmed cash.

[ninetyplus]

Very thorough and well-informed commentary on this thread.

Although this is a short-term bump in the road for quality differentiation in Ethiopia, we believe the thousands of coffee genotypes, plentiful micro-climates, rich coffee cultural diversity, and the immensity of cup character to be discovered is very safe in the long-term.

It is secured by increasing level of interest, education, and demand on the part of the special coffee purveyor. And by the great resourcefulness and ingenuity of many in the Ethiopian coffee community.

The situation seems to be changing daily in Ethiopia for private millers bringing their coffee loads to Addis and working with new regulations and staff of the commodity exchange.

We will be back on the ground in Ethiopia from the beginning of March and will be posting regular blog updates on our website.

[SL28ave]

Over ten days without a word. Are we in too much shock? Are there any updates?

I hope to understand this better by next week. If no one thinks it's a bad or useless idea, I will probably try to chip in a little by making a Facebook page for the cause. Collaboration is nice; PM if interested.

[Alistair]

Joseph Brodksy: Coffee Fasting in Ethiopia
http://www.ninetypluscoffee.com/index.p ... n-ethiopia

"In order to approach an understanding of why all of this is happening, one must listen closely and at great length - continuously - to those at the center of the fundamental problems and proposed solutions to the challenges facing Ethiopia. Another ear must be paid to the history of the coffee trade here, the players, the strengths and weaknesses of the coffee game of the past. Additional attention to the cultural/societal elements at play."

George Howell:

"This is commodity thinking at its worst, the very way to guarantee there are no “Ah-hah!” moments that really determine why certain regions become stars commanding higher prices. We pray Ethiopia will relent even at this late time in the current season. Specialty coffee exporters, when recently protesting, were told they were irrelevant because specialty represented 1% of Ethiopia’s sales. That’s vision!”

Tom Owen:
http://www.sweetmarias.com/weblog/

"the consequence is that the entire coffee supply chain is constipated. Nothing is moving; cooperatives and private mills aren’t delivering coffee, the Addis Ababa dry mills are not running, and nothing is shipping. That’s not good for the coffee either, to sit in parchment when it ready for hulling, sorting, and export. So we’ll see how it plays out in the next couple weeks, which are critical."

[Wendy De Jong]

Here is the direct link to the Ethiopian EXC website:

http://www.ecx.com.et/

[Mike Perry]

Great comments on the situation by many. Peter G seemed to explain very well. Having just returned from Ethiopia with others as part of the roundtable it appears what Tom called 'constipated' to be true.
While the government rep who shared said we would have no problem by passing the exchange, Menno with Trabocca says our best bet this year anyway will be with Co-ops. Hopefully Joseph with 90+ will learn more about smaller private lots and mills while he is there.
I do believe with Geoff it will be worked and time will tell. As a side note, at the SCAA Symposium they have added a special session to discuss the Ethiopian problem and I understand they will have representatives from Ethiopia present. Perhaps Peter or someone can share more on this.

[Alistair]

Tim Weldelboe
http://timwendelboe.no/2009/03/some-tho ... situation/

"The new system has just been put to life and since Ethiopia was desperate to change their way of trading coffee, the rules so far only concerns the bulk coffees (where after all Ethiopia is getting most of their income from foreign currency trade.) Since specialty lots has not been a huge export for Ethiopia, these coffees have been put in 2nd place so far and will probably be handeled and promoted when the new system is running smoothly. Therefore it looks like we can buy coffees such as sun dried Yirgacheffe direct from private mills in future years. We only need to be a bit patient."

[SL28ave]

I'm writing a paper about this for one of my classes. It needs to be finished by Friday. I have a question I can't find the answer to:
What are some good examples of Ethiopian coffees (name, year) that roasters payed more than $3/lb for, and what roughly were the prices?

Thanks for any help!!

[Alistair]

an Oct. 2007 TED Talk from the CEO of the ECX...

Eleni Gabre-Madhin: Building a commodities market in Ethiopia
http://www.ted.com/index.php/talks/elen ... omics.html

[JavaJ]

"And it seems to me, that the reforms might have thrown the baby out with the bathwater."
Eleni Z. Gabre-Madhin, PhD

Indeed.

[Alistair]

Ethiopia Commodity Exchange and its effect on the coffee sector
July 27th, 2009 - By Wondwossen Mezlekia
http://www.ethiopianreview.com/news/6459

[Alistair]

The dangerous hype behind the Ethiopian commodity exchange (or commodity invasion?)
By Seid Hassan, Murray State University | July 29, 2009
http://ethiomedia.com/adroit/2696.html

[Mike White]

Is Ethiopian Commodity Exchange good for coffee growers?

August 3rd, 2009

By Wondwossen Mezlekia

http://www.ethiopianreview.com/content/10460

[Mike White]

From Bean to Cup: Starbucks vs. Ethiopian Coffee Farmers

Oct 7th, 2009

http://opride.com/oromsis/oromo/462-fro ... mers-.html

[Brett Hanson]

From Bean to Cup: Starbucks vs. Ethiopian Coffee Farmers

Oct 7th, 2009

http://opride.com/oromsis/oromo/462-fro ... mers-.html

Can somebody fact check the source of this article please?

It looks like it was originally written in late 2006/ early 2007 before Starbucks and the EIPO reached agreement. Copy/pasting phrases from the first paragraph into google yield countless word-for-word reprints of this story (with no updates) about every 6 months since Dec 2006, all with no original source or author. I wondered if it was an oxfam piece slapped together for their part of the muckraking effort, but I can't find anything on their site about it. I think the reposting of this out-of-date article with anonymous sources is at the least plagarism and at the worst a google-SEO-spamming trick.

I have a bee in my bonnet about this one because I was back at the ranch two years ago when all this was happening and neither side was representing their arguments in a way that was genuine and understandable. Listen to the portafilter podcast with the minister, Nick, and Peter and you'll see what I mean.

Mike- I love your work and enthusiasm. I fear we're being duped.

[Mike Ferguson]

http://www.waltainfo.com/index.php?option=com_content&task=view&id=16010&Itemid=45

Ethiopia to trade specialty coffee locally

[Mike Ferguson]

http://www.scaablog.org/

SCAA Update on ECX

[Mike Ferguson]

http://nazret.com/blog/index.php?blog=15&title=will_the_real_poor_farmer_rise_by_eleni_&more=1&c=1&tb=1&pb=1

Ethiopia - Will The Real Poor Farmer Rise - By Eleni Z. Gabre-Madhin