2020 Ethiopia Pricing Update

By: Chris Davidson

Mar 3, 2020

One of the many complex dynamics of working with an agricultural product is the connection between our businesses and the natural world.  Many coffee producing countries have biennial crop cycles, where production may be relatively high one year and relatively low the next.  This fluctuation can cause all kinds of instability with market pricing within a producing country.  In cases of larger exporting countries like Brazil & Colombia variable crop cycles can impact global commodity pricing as well.  Increasingly volatile and less predictable weather patterns around the world are adding to this inconsistency.

When certain countries are in a lower production year, roasters may be able to find replacement coffees with similar flavor profiles from different producing origins.  A few countries produce coffees with unique flavor profiles that are difficult (if not impossible) to produce at scale in other locations.  Ethiopia is one of these countries, and because over 60% of the nation’s coffee production is consumed internally, the internal market can respond dramatically when the country experiences a low production year.

In Ethiopia the 2019/20 harvest season is shaping up to be such a year and we’re encouraging buyers to plan accordingly.  Lower production from this new crop has raised internal cherry prices to over twice the levels of the previous 2018/19 crop and exporters have increased their prices in step.

Most of the top-quality washed coffees traded on the Ethiopia Commodity Exchange (ECX) are from a broadly defined area, generally around Sidama, Gedeo and Guji Zones.  This finite supply means that internal competition for specialty grade washed coffees is fierce, resulting in a far greater impact on pricing compared to other, more common grades.

Natural dry processing is traditionally the most common method of preparing coffee in Ethiopia due to the relative simplicity of equipment, infrastructure and resources required.  The abundance of Naturals means that even in low production years, the impact on internal market pricing may not be as severe as the increase buyers see with washed coffees.

On Atlas’ offer lists you’ll notice these price differences for new 2019/20 crop Ethiopia coffees, particularly with our standard specialty and certified grades.  While prices for Naturals are marginally higher than those from the 2018/19 harvest, prices for washed coffees may be as much as a full dollar per pound more expensive.

To summarize, the 2020 price increases in Ethiopia may be partially explained by the following points:

  • Biennial low production in main producing regions of washed coffees like Sidamo and Yirgacheffe.
  • Washing stations competing for the limited production in these areas causing increases in cherry prices.
  • Harvest season in these main producing regions unusually delayed by over 2 months causing panic and further elevating cherry prices.
  • ECX trading levels also elevated as a reflection of the increased cherry prices.
  • Annually increasing population contributing to increased domestic consumption, resulting in firm local prices.
  • Increased cost of working capital for exporters to finance cherry and green bean purchase.

While our offer list prices are usually based on our cost to replace a coffee, we’ve kept our pricing for 2018/19 Ethiopia coffees consistent with our original purchase price.  We have a good amount of 2018/19 inventory still available and in terrific condition.  For price-conscious buyers, utilizing some of this 18/19 harvest for 2020 deliveries may be an excellent way to buffer against the higher 19/20 prices.  Our Customer Service and Sales teams are available to help with recommendations on substitutions or any other questions.