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How Does the Conflict in Ethiopia Affect the Coffee Industry as a Whole?

Ethiopia is the birthplace of coffee and nearly all of us who are coffee professionals or simply love drinking coffee have a special place in our hearts for it. On a human level, when hearing about the conflict and the fallout with innocent people throughout the country, we are deeply grieved and we hope for the best.

One key result is the steep inflation Ethiopia is currently experiencing, with estimates of about 35% in December 2021. Critical inputs for coffee processing have doubled, tripled or more in cost, as have basic supplies such as nails for drying beds or fuel for trucks

There is no simple answer here, and the truth is that the global coffee industry will be impacted significantly by this, as well as by the 2021 shortfalls and other supply issues.

Why is Coffee Pricing from Ethiopia Rising So Much?

Nothing happens in a vacuum, so even for specialty coffee traded on a cost basis instead of on a differential, the C Market and the global coffee shortfalls will inevitably impact coffee pricing in a niche origin like Ethiopia. Supply and demand always have an inverse relationship: the lower the supply, the higher the price.

According to the December 2021 USDA Coffee Report, the global coffee market has a forecasted supply shortfall of 8.5 million bags of coffee for this crop year. To put that in perspective, that’s more than double the annual coffee exports of Ethiopia. Ethiopia itself also experienced an epic shortfall against contracts filed, resulting in lots of interesting movement in pricing.

When you factor in the aforementioned inflation — which has exponentially increased prices for coffee-production essentials — the more reasonable question might be, “Why hasn’t coffee pricing risen higher?”

Obviously, the above information barely scratches the surface of why coffee prices are so much higher in Ethiopia, but to point out an exciting fact here: possibly the greatest direct reason that coffee prices have risen so much in Ethiopia is due to the increase in cherry prices.

In parts of Sidama, for example, last year things felt expensive at 34 birr/kg. This year, they are nearly reaching 70 birr/kg. For once, smallholder producers are on the winning side of the economic equation, though history suggests this will not last long.

How is the 2022 Harvest Tasting?!? And Crop Predictions?

Yes, 2022 is a lower-harvest year after 2021 was a bumper crop in many parts of Ethiopia; and yes, some shortage of rain has stretched out or in other ways influenced the harvest. However, we are observing some really exciting things in certain parts of Ethiopia!

Due to a number of factors, coffee quality and volume are down across the board in Ethiopia, Also they have found that cup quality of coffees from a number of coffee sellers is also up, in some cases by a full point or two.

There has also been increases in bulk density, by as much as 10% in some coffees, leading to potential increases in dynamic qualities and intensities.

With All This Change, Where Are We Headed in the Coffee Industry?

We believe that with prices skyrocketing and political and logistical challenges ballooning, now is the time we’ve all been training for in the specialty coffee industry.

If we are truly to be supportive of coffee producers in the short term and long term, we must open our minds, learn as much as possible about what’s happening and provide support for good work with constructive suggestions. 

Higher prices will hopefully accompany other value additions such as higher cup scores and better traceability, which allows us to carry this through to consumers with a unified story.

We stand at this precipice together. Even though the Ethiopian legacy is millennia old, I believe that the story of Ethiopian specialty coffee is just beginning.