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Ethiopian Coffee Shipping Struggles

Johan R @ 2024-06-01 18:24:02 +0300

Ethiopian Coffee Industry Struggles With Logistical Nightmares and Domestic Turmoil

 

What’s Happening in Ethiopia?

Houthi attacks on the Red Sea have forced shipping giants to reroute vessels around the Cape of Good Hope, causing significant delays for Ethiopian coffee exports. Exporters are exploring alternative routes through Mombasa, Kenya, but face additional hurdles there. The Ethiopian government's "vertical integration" scheme and limitations on bank credit growth have wreaked havoc on the domestic coffee supply chain. With limited access to financing, exporters struggle to pay suppliers, who in turn can't pay farmers. This cash crunch has led to protests and even reports of suicides among suppliers.

The shift away from the Ethiopian Commodities Exchange (ECX) to a direct sourcing model has disrupted the previously established instant payment system for coffee deliveries. This, coupled with the credit cap imposed by the National Bank of Ethiopia (NBE), has created a significant cash flow squeeze for the entire industry.

How the Red Sea Crisis Affects Coffee Exporters

Exporters allege that the government's policies have led to opportunistic practices within the domestic market, causing coffee bean prices to skyrocket above international market rates. This price inflation pushes exporters towards bankruptcy while offering little benefit to coffee farmers due to delayed payments.

The future of Ethiopia's coffee industry remains uncertain. Exporters are pleading for long-term solutions to address the logistical bottlenecks and financial constraints. They urge the government to reconsider the vertical integration scheme and loosen the credit cap to restore stability to the domestic supply chain.

How the Red Sea Crisis Affects Coffee Roasters

For now, roasters like us face limited availability and higher prices for unroasted Ethiopian coffee beans. Disruptions caused by shipping delays and domestic turmoil in Ethiopia could lead to a shortage of Ethiopian coffee beans for roasters. This limited supply, combined with the potential for inflated domestic prices, could force roasters to pay more for their beans. Roasters may be forced to look for alternative sources of coffee beans to maintain their stock and fulfill customer demands. This could lead to a shift in the types of Ethiopian coffee available and potentially a decrease in the variety offered by roasters.

It's important to note that the severity of these impacts will depend on several factors, including the duration of the problems in Ethiopia, the ability of roasters to find alternative sources, and consumer demand for Ethiopian coffee.