As we head into the Ethiopian coffee buying season, there are a few burning questions on every coffee person’s mind.
As representatives of a boots-on-the-ground Ethiopian- and American-owned coffee company, Catalyst Trade, my co-founders and I considered this to be a good time to share our perspectives.
In late January, we hosted a Founder Q&A on the Ethiopia coffee sector virtually. Attendees from all over the world tuned in and shared questions and insight, leading the discussion into topics such as corruption, economics and price mobility.
Here are some of the key questions along with a few additional thoughts from the Catalyst Trade team, which includes Zelalem Girma Bayou (Relationships & Processing Director), Michael McIntyre (Sourcing & QC Director) and me (CEO).
We hope this might lead to more questions and a deeper understanding of the challenges facing the Ethiopian coffee sector.
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 northern part of the country, we are deeply grieved and want to help.
Zelalem points out that in a real way the conflict between the Ethiopian National Defense Force and the TPLF is problematic for the coffee supply chain because it creates a ripple effect of economic, logistical and political issues that are deeply challenging to navigate.
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.
However, we are confident in the future of Ethiopian coffee, and the 30 million people who make their living in coffee, from pickers in the field to day laborers in dry mills. We must find ways to properly support these people and the wonderful and diverse coffees they produce.
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 I would like to point to a key, 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, where we work, 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, in 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!
Despite our assessments that, due to a number of factors, coffee quality and volume are down across the board in Ethiopia, we also have found that cup quality of coffees from a number of our partners is also up, in some cases by a full point or two.
We’ve also seen increases in bulk density, by as much as 10% in some coffees, leading to potential increases in dynamic qualities and intensities.
Michael and Zelalem theorize this is likely due to a number of factors, including climate change. We, along with our customers, have noticed an uptick in quaker content in coffees the last few years, even in the highest cup quality lots. This has coincided with changes in density, perhaps due to intense rains restricting nutrient intake in coffee shrubs.
Catalyst Trade’s team has spent the past five months or so in the field, taking in cherries and processing coffees, running trainings and then doing follow-ups. Sadly, due to economic factors, many of the small suppliers in Ethiopia were unable to meet their usual production levels, with some down by as much as 80%.
This has caused them to focus increasingly on the quality of what they can produce; and although the higher prices don’t offset the loss entirely, every little bit helps.
With the exception of certain focused projects like these, pressure on washing stations and other external factors throughout Ethiopia to have led to some aggressive purchasing of cherries with less regard to price and quality. This has arguably contributed to a decline in cup quality and coffee health markers such as water activity and moisture content.
As with any coffee-producing country or region, relationships remain a critical factor in quality discovery and assurance, and this has proven to be a particularly interesting year in Ethiopia!
What is Happening with Experimental Lots in Ethiopia?
The perspective in Ethiopia on experimental processing has shifted 180 degrees over the past few years. I remember in the 2016 harvest when we produced the first honeys from areas of Yirgacheffe and Kochere, and how we had to physically bring buyers to the Ethiopian Coffee & Tea Authority to prove there would be a market for the coffee, then get multiple layers of approval just to export the coffee.
However, when experimental Ethiopian coffees began to make waves in the competition circuit, and when Cup of Excellence began to operate in Ethiopia, the profit potential of experimental processing became clear. Now, minimum mandated prices for experimentally processed coffee have skyrocketed, more than doubling what they were a couple weeks ago.
In fact, many producers have adjusted their strategies to focus exclusively or primarily on experimental processing lots. This may pose some risk due to the inherent technical challenges related to quality processing and the fact that the price and value of experimental lots is predicated on its exclusivity and rarity.
Ultimately, the pendulum will likely swing closer to the middle in a while; but for now, the global market may witness a deluge of mediocre experimental lots from Ethiopia in addition to the truly special lots.
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 actual dollars.
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.
[Editor’s note: Daily Coffee News does not publish paid content or sponsored content of any kind. Any views or opinions expressed in this piece are those of the author and are not necessarily shared by Daily Coffee News or its management.]
Founder and CEO of Catalyst Trade, Emily McIntyre is a serial coffee entrepreneur and journalist focused on re-inventing specialty coffee sustainability. Based in Portland, Oregon, Emily has lived in Ethiopia and consulted in nearly every aspect of the coffee supply chain from farm to the cafe. Learn more at www.catalyst-trade.com.