Saturday, September 23, 2023
BusinessEthiopia lowers coffee export target after revenue miss

Ethiopia lowers coffee export target after revenue miss

Ethiopia fell short of its coffee export targets for the just-concluded fiscal year, prompting authorities to lower targets for the new budget cycle.

The Ethiopian bean counters churned out 240,000 metric tons of the valuable commodity last fiscal, raking in USD 1.33 billion – far below anticipated revenues of two billion dollars.

The volatility of international markets, along with domestic challenges, contributed to the shortfall. High coffee prices in Ethiopia’s domestic market and exchange rate rules that limited exporters to utilizing only 20 percent of the foreign currency they secured discouraged exports.

According to the Ethiopian Coffee and Tea Authority, revenue was only USD 100,000 close to the USD 1.4 billion earned in 2021/22 fiscal year, despite difficulties in global coffee markets.

Decline in international price of coffee by as much as 32 percent, along with cancellations of contracts because of fell in demand in export destination countries, have contributed for the underperformance, according to Shafi Oumer, deputy director of the Ethiopian Coffee and Tea Authority.

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Despite the decline in export proceeds from the item, Ethiopia sold its coffee for a better offer last fiscal year. Unit price of coffee exports increased by USD 800 to USD 5,540 a ton.

“We expect more,” Shafi said, adding the Authority expects annual coffee exports to surpass two billion dollars in the coming two years.

For the new fiscal year, Ethiopia has set a plan to earn USD 1.7 billion by exporting 350 thousand metric tons of coffee.

“Last fiscal year, we were overly ambitious because we were successful previously but this year we had to lower the target due to market volatility,” said Shafi.

In addition to volatility in the global market, authorities blamed “illegal trading” as another hurdle affecting Ethiopia’s coffee export targets.

The country lost an estimated USD 13 million due to illegal coffee trade in the domestic market and forgery during the past fiscal year, the Authority said. 

Suspects involved in the cases are under investigation, he said.

Trading premium-quality coffee slated for export locally is considered illegal in Ethiopia.

Illegal trade, contract defaults and forgery of export coffee beans have been a persistent problem, resulting in substantial financial losses given that coffee represents a significant portion of Ethiopia’s economy.

Shafi stated, “We are making great efforts to control coffee illegality. We inspect checkpoints in addition to market monitoring. We worked extensively on this last year and this year as well. One of the supporting tools is the software we developed.”

However, contrabandists who colluded with some checkpoint staff and customs commission employees modified the software version, changing the destination of export coffee to the open market (Merkato) and illegally trading premium-quality beans meant for the export market, according to Shafi.

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