Ministry of Agriculture to Re-Establish Coffee & Tea Authority

The Ministry of Agriculture(MoA) is collecting comments on a draft regulation to re-establish an authority for coffee and tea development years after a similar body was discarded as irrelevant.

The new body, to be called Coffee & Tea Development & Trade Authority, will not be any different from the now defunct Coffee & Tea Authority, which was abandoned by the government seven years ago, said Fikru Amene, coffee development director at MoA.

The Authority was abandoned with the introduction of the Ethiopian Commodity Exchange. The re-establishment of the Authority came at the request of the Prime Minister at the end of April, 2015. Subsequent to the request, the Ministry finalised the draft regulation based on an assessment of the sector, which was carried out with the collaboration of the Ministry of Trade (MoT) and the Ethiopian Institute of Agriculture Research (EIAR) in 2013.

Currently, MoA is responsible for the development of coffee and tea, while MoT controls and regulates the trade facet.

Government’s assumption and ambition to promote the products through these separate entities has not been satisfactory, admitted Fikru. Though the country’s coffee product is said to have the highest quality, the benefits from it have not been equivalent, he added.

Three weeks ago, MoA shared the draft regulation with sectoral associations, including Coffee Exporters & Ethiopian Coffee Roasters Association. Among the suggestions it received included that of forming a separate ministry for coffee and tea, instead of just an entity under the MoA.

The major reason for the establishment of the separate entity was to give due focus to the sector and to create a harmonised policy execution, and service provision starting from the production of the goods to the transactions within a single body, reveals Fikru.

In relation to production development, the draft states that the Authority will have the responsibility to provide an extension support programme at the regional level and also to promote coffee and tea within the country and in the international market. It will also have a mandate to control and regulate the market ranging from issuing and revoking trading licences of coffee suppliers as well as tea distributors. to carrying out quality inspection, all in accordance with the Coffee Market Control & Regulation Proclamation No. 602/2008.

The Authority is supposed to have a director that will be appointed by the government and an advisory board. It will be responsible to MoA, which will also shoulder the work of drafting policies, rules and regulations and enforcing them as well, according to the draft.

Its base will be in Addis Abeba with additional branch offices in regional states, having a budget allocated by the federal government.

An expert at MoT complained that the Bill missed including research in the area.

Ethiopia Beats Coffee Export Target with Higher Than Planned Revenue

The half fiscal year of 2014/15 saw a success in terms of achievement in the export of coffee although it leaves uncertainty in the future of the coffee market.

The country’s plan for the first six months of the budget year was to export 73,593.5tn of coffee and gain an income of 269 million dollars. The actual export was 73,227.9tn, from which a higher than targeted revenue of 307.5 million dollars was gained.

“The gain from the export exceeds the plan because the international coffee price was better in the export period,” said Getahun Bikora, coffee marketing director at the Ministry of Trade (MoT).

This year’s plan of the Ministry is to export 235,950tn of coffee to gain 862.5 million dollars.

“The new coffee is yet to come to the market and it will increase the volume of the coffee that we export,” said Getahun.

At the beginning of the fiscal year 2014/15, Ethiopia, which supplies less than five percent of the world’s coffee, was said to benefit from the plague on the Brazilian coffee. The production of Brazil’s coffee was said to decrease significantly although it only decreased by five percent.

“We did not benefit from the coffee market as we expected when we heard of the Brazilian coffee issue although we have achieved our target,” Getahun said.

The performance of the coffee that is exported according to the plan is 99.5pc and the income performance shows a performance of 114.3pc. The seventh month export of coffee was planned to be 90,483tn while 79,365tn of coffee was exported, showing 88pc performance. The gain from the seventh month export was planned to be 330 million dollars while the amount gained was 339.4 million dollars, which is 102pc of the planned performance.

In the three weeks of the eighth month, 9,120tn was exported, bringing in an income of 42 million dollars.

Ethiopia expects to produce 461,620tns of coffee this year, of which it expects to export 239,950tns for 862.55 million dollars, showing an increase of 23.6pc in volume and 20pc in revenue from the previous year.

In 2013/14, the country planned to export up to 277,500tn but has done only 190,876tn with the planned revenue falling down from the planned one billion dollars to only 717 million dollars.

The international price of coffee has been declining since mid January. The international market price of coffee on February 3, 2015, per pound was 163.6 American cents and it dramatically fell down to 137.6 American cents per pound on March 3, 2015.

“The major thing we should do is to make the price of the Ethiopian Commodity Exchange (ECX) line up with that of the international market and craft a subsidizing policy to increase the amount of export,” said Getahun.

The international coffee price is yet expected to fall well up to 120 American cents a pound, which the Ministry sees as a future challenge in the coffee market as the international coffee market does not depend on fundamental issues of demand and supply but rather on the technical issues that govern the market. These issues could be political or such.

Ethiopia stands fifth in the world with a production of 379,500tn a year, having the world’s supply share of 4.5pc in 2012/13. Out of this, the amount Ethiopia exported was 3,134 bags, which amounts to 47.5pc (180,262tn) of the total production.

The other top producers of the world are Brazil with 34.46pc share of the total coffee with three million tones of production. Next comes Indonesia with 8.75pc share having 0.76 million tonnes, followed by Vietnam and Columbia having the world’s share of 7.99 and 7.17pc with 0.69 million tonnes and 0.62 million ton as the International Coffee Organization (ICO) data indicates.

The Ethiopian coffee lacks competitive advantage in the market as it has many constraints in the marketing and producing process as experts in the sector state. Lack of traceability, quality of production and its being challenged by illegal trade are said to affect the country’s benefit from the sector.