Affected by the weather, Ethiopian coffee production will be reduced by more than 10%, and the price will remain high.

Recently, the United States Department of Agriculture (USDA) said that due to the impact of El Ni ñ o, the African region suffered from dry weather, some crops, coffee and other production will be reduced. At the end of 2022 / 23, Ethiopian coffee production is expected to total 7.3 million bags (60 kg each), lower than the previous forecast of 8.3 million bags.

Countries in the African region are reported to be dealing with the worst drought in 40 years this year, with rivers drying up, lakes drying up and 95 per cent of surface water missing in some areas. However, after entering November, the local began to rain, after continuous rainfall, the local drought turned to flooding. This also causes serious damage to some producing areas and affects the output.

Ethiopia is the largest coffee producer in Africa and the fifth largest Arabica coffee exporter in the world, but the country consumes almost half of its coffee production. Coupled with the decline in production, coffee exports have also fallen by 19% to 3.9 million bags.

The decline in Ethiopian coffee exports is also related to the EU because the EU deforestation regulations (EUDR), issued by the EU, investigate products sold and trace the origin of the goods they sell to make sure they do not involve deforestation or lead to forest degradation. In Ethiopia, many are small farmers, and it will be a lot more expensive and difficult to comply with EU deforestation regulations, so many importers say they cannot buy Ethiopian coffee in large quantities.

For Ethiopia, agriculture is a pillar of the country's national economy and exports, and coffee is also a major cash crop. Due to the decline in exports, coupled with the earlier COVID-19 epidemic and the two-year civil war that just ended, there is a serious backlog of financial pressure. As a result, the Ethiopian government failed to pay the $33 million "coupon" on time and intends to officially enter a state of default, which has a debt principal of $1 billion.

According to the ICE Intercontinental Exchange of the United States, the futures prices of Arabica coffee and Robusta coffee remain high, mainly due to supply constraints, logistics problems and so on. In terms of supply constraints, the market is worried about supply problems in the short term due to adverse weather and the current situation of low inventories in consumer countries and exchanges. In terms of transport, due to the impact of floods, road facilities in some areas have been damaged, increasing transport costs.