ETHIOPIA: Ethiopia holds great untapped potential in exporting finished product coffee, says trader

Record ID: 459879

  • Title: ETHIOPIA: Ethiopia holds great untapped potential in exporting finished product coffee, says trader
  • Date: 6th May 2014
  • Summary: ADDIS ABABA, ETHIOPIA (FILE) (REUTERS) VARIOUS OF ETHIOPIA COMMODITIES EXCHANGE/ TRADERS ON TRADING FLOOR NEGOTIATING PRICES
  • Embargoed: 21st May 2014 13:00
  • Keywords:
  • Location: Ethiopia
  • Country: Ethiopia
  • Topics: Industry
  • Reuters ID: LVA5OJITR535RLZ4J0UNIZTHV1CD
  • Story Text: Africa has seen a decade of strong economic growth, but if current trends continue, some 300 million people - or a quarter of all Africans - will live in extreme poverty by 2030.
    In this year's Africa Progress Report, "Grain, Fish, Money: Financing Africa's Green and Blue Revolutions", the Africa Progress Panel suggests that boosting Africa's agriculture would help address this, by raising average incomes, strengthening food security, feeding a growing urban population and limiting food price inflation.
    In Ethiopia - the legendary birthplace of coffee and the continent's top producer of the cash crop, a combination of public policies and a revolution in the marketplace provided by the Ethiopian Commodities Exchange has helped the agricultural sector to grow at over 6 percent a year, and the country has halved poverty from 60 percent to 30 percent in six years.
    Ethiopia's Commodity Exchange, the ECX, was established in 2008 and handled 113,000 metric tonnes of commodities that year - mostly coffee, but also maize, pea beans and wheat. By 2013, trade volume was 2.65 million metric tons, worth roughly 5 billion US dollars. The ECX operates through 17 delivery centres and maintains a warehouse capacity of 300,000 tons.
    Omar Bagersh runs a third-generation family coffee business with his brothers, which they have expanded to include farming, roasting and packaging coffee, adding value to the crop within the country, at every step of the production chain.
    Although the company farm their own coffee, they also buy large quantities of the crop from smallholder farmers through the ECX.

    "There is a general agreement that coffee producing countries cannot roast, industrialise their coffee or add value and export the finished product in all coffee producing countries. So it's like we're condemned to always exporting raw coffee. But we think that that's not true. I mean there are ways you can do it, it's not generally easy to do that, but if you focus on specific niche markets here and there, we think there is a way of exporting a finished product," says Bagersh.
    At a smallholder level, the ECX has introduced a certification process that has improved quality control standards and prices paid to farmers.
    Their share of the final value of the beans has increased from less than 40 percent to nearly 70 percent, with the increased revenues helping to drive down poverty and support investment, according to the Africa Progress Report to be released this month.
    Thirty eight-year-old Mohamed Ibrahim farms a small plot near Oromia Province and has added coffee trees to his fruit trees to increase his income.

    "Our challenges are getting good seeds and enough manpower and access to financial resources. Water is a problem here too. But we are managing," he said.
    Although S.A. Bagersh don't buy coffee directly from the smallholder farmers and instead use the marketplace provided by the ECX, they support farmers in their areas by providing them with coffee seedlings and expertise.

    "The easiest and quickest growth that the country can accomplish is in yield. The yields that the smallholders attain are very low compared to the rest of the world, so with extension services that could easily be doubled or tripled within a matter of years. That's one area. Another area is of course farm-management techniques, from picking the right varieties and cultivating farms, and post-harvest management of coffee, that is an area that offers great potential for growth. And finally it is in marketing. We can control our coffee through brands more, even if it is not a finished product. Even in green coffee we can have more say in how our coffee is consumed, especially the speciality type of coffees," said Bagersh.
    Ethiopia exports just over 5 billion US dollars worth of coffee per year, a figure that is currently slightly in decline as a result of global price fluctuations.
    Overall, Africa today accounts for just 2 percent of world agricultural exports, down from the 8 percent share it enjoyed half a century ago. Africa's 54 countries together export less than Thailand.
    But agriculture accounts for 58 percent of Africa's economically active population and Africa holds an estimated 60 percent of the world's uncultivated arable land. The 2014 Africa Progress Report suggests that to compete on a global marketplace, Africa's farmers need better access to regional and global markets, and to financing and insurance so that they can grow their businesses.
    The report also recommends that countries tighten and better enforce regulations in the timber and fisheries sectors, to halt the plunder of the continent's forest resources and marine fisheries.
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