20 May 2017

Ethiopia Takes the Plunge to Improve Traceability of Speciality Coffee Beans

Photo: Daily News
Coffee.

Ethiopia, the world's fifth-largest coffee producer and home of Arabica, has overhauled the way it markets the commodity in an effort to increase export earnings and clamp down on a thriving domestic black market.

Experts say the reforms, which centre on improving traceability of beans and stimulating higher quality production, could transform the global speciality coffee market because of the expected increased supply from one of the world's premier producers.

Arkebe Oqubay, the government minister overseeing the reform, said he hoped the changes, which are modelled on Colombia's experience, would see Ethiopia's annual coffee exports soar from their current $1bn.

"We could easily earn five times what we're earning if we do it in the right way," he told the Financial Times. "Our aim is to improve traceability and encourage farmers to increase productivity and expand coffee farms."

Under the old arrangements, introduced in 2008, the majority of coffee was transported to the Ethiopian Commodity Exchange, mixed and then auctioned. This caused it to lose much of its value because its origin was untraceable, a requirement in the speciality sector.

With little incentive to produce high-quality beans, many of the estimated 5m Ethiopian coffee farmers paid little attention to improving the standard of their crop. It also led to prices on the domestic market exceeding export prices, stimulating the former.

Now all coffee will be kept separate until it is auctioned, enabling full traceability and foreign companies will be allowed to plant coffee and export it directly. All government activity related to coffee will also be brought under one roof to reduce bureaucracy.

Menno Simons, chief executive of Trabocca, a Netherlands-based supplier of speciality and certified green coffee, said the reforms were likely to "make a real impact" because "it should now be easier for us to identify the great coffees and trace them".

"The diversity of Ethiopia's coffee is unique; there's no other country in the world that has it," he said. "In terms of quality, it's number one, with Kenya and Colombia number two." Kenyan speciality coffees usually sell for more than double Ethiopian varieties thanks to traceability.

Ethiopia produced about 400,000 tonnes of coffee last year, of which some 50 percent was exported, according to the International Coffee Organisation. However, Mr Oqubay said that because of black market activity as well as a weak bureaucracy, production was possibly 50 per cent higher than this, with the additional beans being sold locally. "We want to eradicate the weaknesses in the system," he said.

Abdullah Bagersh, a general manager of Bagersh Coffee, one of the country's oldest growers, roasters and distributors, said the reform should weaken the black market. "Farmers now have an incentive to produce high-quality coffee so more and more will move up the [quality] pyramid, which will make it harder for the local market to take it," he said. Mr Bagersh added that it was unclear when the effect of the reforms would be felt because it was hard to make major changes in the middle of the season. "My fallback position is that everything will be in place for the start of the next season in October," he said. "But some changes will be in place sooner."

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