Political and Social
The government declared and implemented an official state of emergency on the 17th April for 5 months, which means that gatherings of more than 4 people are not allowed. Taxi’s and buses can only run at 50 percent capacity, companies are not allowed to reduce their workforces, and private cars are only allowed to be driven on alternate days.
Although government offices, banks and shipping lines all have very limited staff, resulting in delays of documents and information, coffee factories in Addis continue to work albeit with heavily reduced staff. We believe coffee exporters continue to pay all their casual labour force which will avert a human disaster.
Movement and life in Addis are limited, restaurants and coffee shops closing at 6pm, raw meat butchers have been permanently closed, and daily 9 pm prayers broadcast on Television for the 4 major religion.
We understand conditions in rural areas (farms and washing stations) have so far not been as badly affected and there seems to be relatively free movement and normal life.
Economy & Logistics
Truck movements are slower for coffee coming in and out of Addis however movement continues and in fact shipping container availability seems to have improved in the last weeks.
Although currently Forex remains a critical issue as we continue to see record low oil prices and relatively stable prices for coffee, we expect forex reserves to improve in the coming months.
A real liquidity crunch has been averted as most local banks are willing to extend credit lines banks and loans on interest free or penalty free basis. Most multinational and Ngo ‘offices remain closed with staff mainly working from home – whilst trading at the Ethiopian Commodity Exchange continues.
Supply
Good volumes of washed coffee are available in Addis being milled daily and some of these outturns represent the best quality so far seen in the season.
Most top grade 1 coffees are now in Addis and starting to be shipped. The flow of commercial naturals is just getting underway and we expect good volumes of commercial coffee from the new crop to come to the market in the coming weeks.
We expect the exporters with access to funding to find good trading opportunities as liquidity and cashflows will start to pressure the supply chain with several large trading houses asking to postpone shipments to May/June. This is a major issue, which will dictated how affected the coffee market in the country get, it is fundamental that importers now keep their agreements with exporters so they can receive income they were counting with.
Demand
There has been a drastic reduction in demand from the specialty industry globally. Many buyers have downgraded or cancelled their contracts. Others have understandably become more selective on their micro lots. This will result in lots that were just not up to the mark being used in commercial blends.
However there has been good demand for certified coffees as this continues to form a larger ratio of the mainstream industry’s portfolio and other origins face problems. Commercial washed and natural coffee continues to find good nearby demand as industry looks to fill gaps, caused by lockdowns in other origins and bulk buying.
