How Ethiopia’s new policies can impact worldwide specialty premiums

Ethiopia is the world’s fifth largest coffee producer, however its market structure has resulted in the vast majority of coffee was  mixed before  auctioning at the  Ethiopian Commodity Exchange.  As a result  farmers paid little attention to improving the standard of their crop as  its origin was untraceable. At the same  prices on the domestic market, bought outside the exchange, were  exceeding export prices.

Now the government has overhauled the way it markets coffee in a bid to increase export earnings, encourage farmers to produce more high-quality beans  and clamp down on the domestic black market.

Government reforms are designed to  improve traceability of beans and stimulate higher quality production.  Now all coffee will be kept separate until it is auctioned, enabling full traceability and overseas companies will be allowed to plant coffee and export it directly.  As the average price is now split between high grade and low grade lots, farmers are expected to focus on quality, with higher incomes resulting on increasing yields.

For the world specialty coffee market, always facing the stress of continuous demand growth,  the expected increased supply from one of the world’s premier producers, is very good news, and can impact the quality premium for coffees worldwide if you take into account that we are talking about millions of bags.



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