Coffee review

The supply chain and export of Ethiopian coffee beans are serious due to market problems such as the Red Sea crisis.

Published: 2024-04-16 Author:
Last Updated: 2024/04/16, Recently, Ethiopian journalists reported that due to the Red Sea crisis caused by Houthi attacks, Ethiopian coffee exporters were forced to endure months of waiting time to ship their products abroad. At present, coffee exporters are considering turning to the Kenyan port of Mombasa for export, but there are many logistics problems.

Recently, Ethiopian journalists reported that Ethiopian coffee exporters were forced to endure months of waiting to ship their products abroad due to the Red Sea crisis caused by Houthi attacks. At present, coffee exporters are considering turning to the Kenyan port of Mombasa for export, but there are more logistics problems.

Ethiopian coffee exports now rely mainly on the port of Djibouti in neighboring Djibouti, which lies between the Red Sea and the Gulf of Aden. In the past, at least one ship arrived at the port of Djibouti every day, but since the Red Sea crisis, global shipping giants have decided to make a detour to the Cape of good Hope, resulting in only one ship a month in the port of Djibouti. So at present, a lot of coffee beans are stranded in the port of Djibouti.

And exporters are trying the rest of the solution. Consider exporting through the port of Mombasa in Kenya, but the port is located at the southern tip of Kenya, which used to be a long way across Kenya from Ethiopia, and there are also many problems with logistics to the port.

In addition, as a result of the earlier signing of a memorandum of understanding between Ethiopia and local government leaders of Somaliland to recognize Somaliland as an independent State in exchange for the port of Berbera, the port is still affected by the Red Sea crisis. it has strained relations between Ethiopia and Somalia and the use of ports such as Mogadishu in Somalia.

In addition, recently, the Ethiopian coffee supply chain has been disrupted by the recently launched "vertical integration" scheme, bank credit growth ceilings and physical transport barriers. The President of the Ethiopian Coffee Association stated that exporters and suppliers bought coffee beans on credit from growers, but did not receive payment after the growers delivered the beans, so many growers encountered difficulties and had no money or coffee on hand.

Coffee growers and suppliers in the Illubabor region of western Oromia are waiting for 1 billion bill receivables, a problem stemming from an earlier "vertical integration" scheme introduced by the coffee trade, whereby exporters could purchase coffee directly from suppliers, bypassing the mandatory Ethiopian Mercantile Exchange ECX, which required payment immediately upon delivery, unlike the vertical system. The situation was badly affected by gatherings of farmers and community members in an attempt to rob the property of exporters with unpaid receivables and suicides among suppliers.

In addition, exporters need a lot of money to buy coffee beans, but Ethiopia's national bank, NBE, has set a 14% growth limit on loan spending, which is far from enough to buy coffee beans. It can be said that the coffee supply chain in Ethiopia is beset with difficulties, and some exporters expressed the hope that the government will face up to the problem and believe that the coffee industry needs a lasting solution rather than a quick solution.

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