The Ethiopian government hopes to solve the recent chaos in the coffee industry

Recently, according to local reports in Ethiopia, the Ethiopian Ministry of Agriculture and the Coffee and Tea Authority are concerned about coffee farmers' default in providing credit to exporters and suppliers, so government officials hold meetings with farmers. and hope to solve the problem as soon as possible.

In recent months, Ethiopian exporters and suppliers have bought coffee beans on credit from growers, but have not received payment after the growers have delivered the beans, and the arrears now amount to billions of bills. As a result, farmers complained so much that there were reports that they committed suicide because they had lost hope of getting their money back, and radical farmers joined forces to rob exporters of unpaid receivables.

Coffee makers blame the problem on the "vertical integration" scheme, which was legally introduced five years ago but was fully implemented only two years ago. The plan aims to replace the previous model of coffee farmers trading coffee on the Ethiopian Commodity Exchange (ECX). In previous ECX transactions, payment was made as soon as the goods were received, while under the "vertical integration" scheme, suppliers and exporters took the coffee directly from the farmer on credit without clear legal guidelines for payment.

However, on March 8, 2024, government officials held a discussion meeting with coffee growers and suppliers, hoping to address the financial difficulties denounced by farmers. But the authorities believe that vertical integration is of great benefit to farmers. "people are now confused and claim that vertical integration is destroying the coffee market and that the interests of the public and coffee growers are harmed after vertical integration is introduced," the minister of agriculture said at the meeting. This is a false statement, there may be few defaulters, and those who criticize vertical integration must produce evidence. " Moreover, the director of the Coffee and Tea Administration also believes that there are only a small number of defaulters, and they have blacklisted defaulters and revoked their qualifications, so that they can no longer buy and export coffee.

Therefore, the government believes that the benefits of vertical integration outweigh the disadvantages, and Ethiopia's past coffee export performance has played a large role in the transition from EXC to vertical integration, with coffee export earnings exceeding US $1 billion. In addition, in this model, coffee growers, suppliers and cooperatives can export coffee directly without having to go through the ECX exchange, which is very beneficial to farmers and can be highly encouraged by international prices.

But now farmers and producers say they will sell coffee on credit because exporters stop lending at the bank, have no money, and because of the 14% credit growth ceiling introduced by the national bank, the coffee market is now controlled by a small number of wealthy exporters, and farmers have no choice but to sell coffee at exporter prices. So I hope the government can regulate the market. after all, 90% of the coffee last year was exported through vertical integration programs.