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January 1st, 2010
The Market Maker
Audio Feature: Trouble Brewing in Ethiopian Specialty Coffee?

The Ethiopian government’s decision to force coffee exporters to sell their coffee through the Ethiopia Commodity Exchange, or ECX, has raised fears among coffee aficionados that Ethiopia’s world renown coffees could be lost as high and low quality beans are mixed together and sold as one. WIDE ANGLE multimedia producer Aaron Ernst attends a tasting of Ethiopian specialty coffee and takes a look at the impact of the government’s decision on Ethiopia’s black gold. Click on the link below to listen to the audio feature.

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  • John S. Ford

    It would appear that there’s a relatively easy fix to this problem. The ECX clearly has the potential for being a bonanza for the Ethiopian economy. A sophisticated, modern-day commodity exchange can help resolve the problems of information asymmetry that are more likely to harm the small, parochial growers than large exporters and retail consumers.

    Also, a healthy influx of the dreaded futures speculators will likely help offload some of the risk associated with small-scale agriculture (to the speculators for a price).

    My question is why does the Ethiopian government have to MANDATE the use of the ECX for all coffee? If as the audio track suggests, some specialty coffees grown in Ethiopia are worth much more than the common overall price sold by the exchange, shouldn’t those growers be permitted to sell their product outside the exchange? Isn’t this the essence of a true free market? This would optimize the opportunity for both buyer and seller.

  • Thompson Owen

    I am a coffee buyer at a small company and can add you the previous comment. For buyers of specialty grade coffees, the problem is that the ECX did not accommodate our needs. Specialty coffee is NOT a commodity like bulk commercial coffee. The aroma and flavor qualities of the coffees we buy are as individual as the people and companies that purchase them. In that sense, one lot of coffee from Ethiopia is not exchangeable with another, as it would need to be in a trading system where lots are classified and purchased without reference to exactly who grew the coffee, and the precise organoleptic characteristics of the coffee lot. If, as the previous commenter suggested, the ECX had provided a bypass for Specialty grades of coffee, ones that do not belong with the bulk container-load lots of commodity coffee. One reason they neglected this is the very bizarre notion they have that Specialty represents less than 5% of their coffee exports, whereas most in the coffee trade put it much, much higher … for example 20-25%. Let’s face it, the ECX means income for the government. And there is also the odd fact that the government owns huge farms in the west that produce a lot of lower grade coffees. The ECX board has little representation from farmers … as far as I know one of the 2 farmers on the board is also the largest exporter! Nobody claims that the old auction system was perfect, but it functioned, or rather it had been made to function. The ECX breaks all relationships between the buyer, and the farmer, using their system of making all lots anonymous. While it is a charming and efficient trading platform, how could they understand so little about Specialty coffee, and the buyers? It boggles the mind, and it is the farmers, the rural people who rely on coffee production, who suffer. I was in Ethiopia twice in the last 7 months and people are afraid to even speak their mind for fear of having their trading license pulled. I can’t even get honest responses by email, because people feel their messages might be intercepted. (Note that while Ethiopia is a wonderful place, and quite democratic, there are some very odd sectors such as cell and internet. There is one internet provider, Ethionet, governement-run, and acknowledged as in the top 5 in censorship behind N Korea and China!) Ethiopia is our #1 buying origin at Sweet Maria’s, and this year we are in crisis mode to find quality lots. We had a special project in East Harar where we provided materials for better processing, and a promise to buy the coffee at a better price, and we can’t even follow through on this promise because the coffee must be delivered to a Govt warehouse and made anonymous by the ECX process. This and other relationships we have are now severed! What are we to do?

  • Murkuze Marqamiya

    I am very proud of my countrys product

  • Dr. Kenneth Noisewater

    Isn’t that more a failure of government then? Commodities markets can/do have multiple grades of product, and if the government forces sales thru ECX then the government has a duty to have multiple grades of quality and price…

  • Thompson Owen

    I just wanted to follow up with another comment: Over time I have read and heard the argument for instituting the ECX, which I understand and support. I am sorry that it was done so quickly, and without providing a way for high grade specialty coffees to be exchanged without breaking the ties of traceability from buyer to producer. But in the bigger picture, the new system is needed to reform the illegal and corrupt trading of coffee, in which the suppliers to exporters were often not paid for months after delivering coffee, and where the farmer never really gained fair share of the value of the product. Exporters were doing very well in the old system, and they are the ones hurt under the new system – they need to reform and find a way to trade in the new ECX, and in time the ECX needs to provide a way for buyers to trace coffee back to the exact producer group.

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