Cafe Imports

Flash forward four years to 2023. Ethiopia is now facing record-high global inflation (28.57%) and food inflation (33.8%) aggravated by the war against Ukraine. There is a three-year-long civil war in northern Ethiopia that has forced the Ethiopian government to spend foreign exchange while receiving less foreign aid, along with a drop in tourism dollar inflow due to COVID and the war. All of this adds to the already massive shortage of U.S. Dollars. What’s the government to do? They recently changed the previously mentioned 70/30 split for export dollars to 30/70 for the government, making USD even more in demand by Ethiopian businesses.

The artificial demand for coffee to raise USD, the lower split of USD between exporter and government, and the rising cost of living has driven up prices for coffee to around 75-80 birr/kg of cherry compared to last year’s 30-50 birr/kg. (This artificial demand for coffee to raise U.S. Dollars has driven up prices for coffee to around 75-80 birr/kg of cherry)

So what? Farmers who have been underpaid forever are getting more money! Great! Success!

This artificial demand is actually creating prices that are getting to unstable levels. The current prices paid for cherry are currently 75- 80 birr/kg (compared to 16-30 birr/kg in 2021). This pricing sets the break-even export cost of the coffee to be above 5 USD/lbs FOB. What will happen if the world demand for coffee drops at these prices? Exporters will go bankrupt, and, in the end, farmers won’t have a sustainable business.

What can be done about this? Hopefully, the war settles down, of course, and foreign investment is revitalized, giving Ethiopia a source of foreign exchange. Additionally, setting some type of limit on exporting licenses for non-coffee businesses might help here, too.

In the meantime, prices for Ethiopian coffee are going to be higher this year than they were last year.

Either way, we’re continuing to cup and buy the best Ethiopian coffees we can find with our trusted partners, and hope that you continue to buy and roast the same!

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