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2021.03.07

Ethiopia

About Ethiopia

Ethiopia is a country located in the center of East Africa. It does not face the sea and its neighboring country Djibouti serves as a port. Ethiopia is said to be the birthplace of coffee and the legend of “Kaldi the Goat Herder” is widely known. Ethiopia is also known as the world’s oldest independent country and is said to be the birthplace of humanity. Also, Ethiopia is said to be the only country in Africa that has never been colonized and the people are very proud of it. Recently, huge capitals flowed into Ethiopia from China and other foreign countries. These funds have been used to continuously build highways, commercial railroads that connect Addis Ababa and Djibouti, and skyscrapers. Despite this, the lives of the people have remained simple. The coffee production areas are lined up with traditional round houses made of bamboo and mud walls.

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If we describe Ethiopia in one word; it is elegant. People wear brightly colored clothes that suit them and their homes always remain clean and neat. You can feel the nobility in the way the people live. Whenever I visit Ethiopia, I am repeatedly struck by the beauty of the landscape.

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Coffee Production in Ethiopia

The soil and climate in Ethiopia are well suited to grow coffee which requires very little pruning or chemical fertilizers, and about 90% of the coffee is grown organically. As you drive into the mountains of Yirgachefe, you will be surrounded by forests where there is a mix of coffee, banana, and avocado trees.

You can see rustic houses built with mud walls and corrugated galvanized irons in the gaps between the trees. There aren’t farms that are separated strictly by fences from other areas and the boundary between the forest and the garden is vague. The coffee trees blend in with the scene as if they are part of their lives. This scenery is very rare as a production area. The quality that people all over the world crave is already there without any human intervention involved. We even feel that we get the shares of the blessings from its nature.

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Coffee production areas in Ethiopia can be divided into four main types.

Forest Coffee (About 10% of production)
Forest Coffee (about 10% of production) is a coffee that grows naturally in forests. This is the most traditional production area, but because of its low production efficiency, it is being replaced by semi-forest and garden coffee. JICA has been working to conserve forest coffee since 2003.

Semi-Forest Coffee (About 35% of production)
Semi-Forest Coffee (about 35% of production) is a coffee that has tended to natural forest coffee. They remove weeds and fell trees so that they can adjust the amount of sunlight. There are landowners for these types of lands.

Garden Coffee (About 50% of production)
Coffee that has been planted by farmers in their backyards or gardens. It is often planted with bananas and avocados trees and it is taken to mills or cooperatives for cash when harvested.

Plantation Coffee (About 5% of production)
It is also known as estate coffee. They are private-owned or state-owned large-scale plantations. They do everything in one place from production to export. They can plant specific varieties and use technology to increase production efficiency and quality. Most Ethiopian coffees that have the farm name attached are classified under this category. Gesha Village Estate is one of these examples that is well-known.

Reference: EtBuna

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Coffee Distribution in Ethiopia

It is important to review the history and the current situation of coffee distribution in Ethiopia.

Coffee is a commodity like wheat, corn, and other grains that is traded as a futures transaction. In layman’s terms, a futures transaction means that the future price of a commodity is determined in advance before the actual commodity is produced. It is a way for buyers to hedge the risk of a price increase and it determines their future income for sellers. Investors invest their money in stocks that are likely to rise in price to make a profit. Arabica varieties of coffee beans are traded in the New York Commodity Exchange and Robusta varieties of coffee beans are traded in the London Commodity Exchange.

The types of Arabica varieties of coffee beans have been classified into the following three categories.

– Colombian Milds (Washed coffee from Colombia, Kenya, and Tanzania.)
– Other Milds (Washed coffee from other countries.)
– Brazilian Natural (Natural beans from Brazil, Ethiopia, etc.)

The international price (C-market price) fluctuates mainly due to the balance between the supply and demand. Large ups and downs in international prices will destabilize the livelihood of producers. In 1962, the International Coffee Organization (ICO) established the International Coffee Agreement (ICA) to aim for balancing the supply and demand and stabilizing prices by limiting the amount of coffee distributed (quota system). However, the quota system was suspended in 1989 due to the dissatisfactions by the countries of production and countries of consumption, and the withdrawal of the ICO by the US.

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Even after the suspension of the quota system, the consumption of coffee has continued to increase every year and its popularity as a commodity for investment has not diminished which also resulted in large fluctuations in the international price of coffee. The production and economy of Brazil, which is the largest coffee-producing country, also have a significant influence on the international price. The year 2019 saw a huge drop in the international price and it was even said that the international price was lower than the production price. This was due to a good harvest in Brazil and the depreciation of the Brazilian real (the currency in Brazil).

Even though the production in Ethiopia makes up only about 5% of the world’s total production and has little influence on international prices, it is traded as a futures transaction, which puts producers at the mercy of the market. In the midst of it, several solutions to the situation came out in Ethiopia.

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The Oromia Coffee Farmers’ Cooperative Union (OCFCU) was established in 1999 and has succeeded in getting coffee from Oromia to state certified products as fair trade, organic, rainforest, etc., and succeeded in distributing them internationally as certified coffee. 70% of the gross profits is returned to the local Primary Cooperative. Trainers are sent from the cooperatives to the local cooperatives to teach them about sustainable production methods. The efforts of the OCFCU were made into a film called “Black Gold,” which attracted a lot of attention.

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Then, the Ethiopian Commodity Exchange (ECX) was established in 2008. ECX is a private company with a partnership with the Ethiopian government that deals not only with coffees, but also with other grains such as sesame and corn. Previously, coffee producers had no way of knowing the market price. There were no rooms for negotiating the prices and there were no assessments done on its quality when they went to the market to sell their cherries. Then, ECX came in.

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The ECX shared market price information with producers. Anyone could start accessing it through the ECX website, electronic bulletin boards at the Exchanges, SMS, and toll-free phone calls. Coffee was classified into nine major production areas and graded as Yirgachefe G1, Sidamo G2, and so on. All the coffees except for cooperatives and plantation coffees (private-owned farms or state-owned farms) were required to be certified based on the production areas and be graded by ECX and sold at auctions. It is important to note that ECX is a system for commodity coffees that accounted for about 95% at the time, and it doesn’t place the distribution of specialty coffees as the main focus. With the establishment of ECX, the traceability of the coffee became unclear for importers, who had previously traded directly with specific mills, and the trust-based relationships and investments to the mills became meaningless.

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ECX and the SCAA (now called SCA) had a meeting in 2009 and made some progress towards the specialty coffee industry by introducing the quality assessment by Q graders. ECX finally relaxed its regulations in 2017 and allowed individuals and small to medium-sized enterprises to obtain export licenses which allowed them to trade directly under the new regulation. Suppliers and producers have also begun to function as exporters since 2017 as well. It can be said that 2017 was the start of direct trade in Ethiopia. Ethiopia hosted the first Cup of Excellence in its history in 2020 which has impressed us.

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The curators of Ethiopia are Moplaco and Wete Ambela Coffee. Moplaco is a well-established coffee company that went through the days when international prices were at the mercy of the coffee industry and has experienced everything from the birth of specialty coffees to the present that has carried a rich history. Wete Ambela Coffee is a start-up founded in 2018 that is about to cut through a new era. Knowing the background of these two companies in-depth is tantamount to knowing an overview of the history of coffees in Ethiopia. With coffee on your mind, we hope that you will be able to feel the historical turning point that exists in its background.

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