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ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
Performance of Ethiopia’s coffee export
sector
Bart Minten, Seneshaw Tamiru, and ...
Share of different countries and continents in exports
1. Export destination markets
0%
20%
40%
60%
80%
100% 2005
2006
200...
Cumulative price distribution by destination market
1. Export destination markets0
.2.4.6.8
1
0 100 200 300 400 500
USC/LB...
• Strong price differences between destination markets;
partly explained by differences in quality demands
• Multinomial m...
Share of washed coffee by export destination
1. Export destination markets
0%
20%
40%
60%
80%
100%
Unwashed
Washed
• Regional preferences:
1. Middle East consumes more coffee from Harar (and
Wollega)
2. North-America consumes relatively ...
Exports of coffee from Ethiopia (100=January 2003)
2. Performance
0
100
200
300
400
500
600
20
03
20
04
20
05
20
06
20
07
...
Ethiopian export prices versus intern. prices (2002-13)
2. Performance
0
50
100
150
200
250
300
20
02
20
03
20
04
20
05
20...
• What is impact of price rises on local coffee consumption
(and therefore exports)?
• Income and price elasticities usual...
• Preliminary evidence from HICES:
- Coffee expenditures were 40 Birr per adult equivalent in
2000 and 206 Birr in 2011 (H...
• Quality premiums in export markets:
1. Certification. Fair Trade and organic certificates lead to a
price premium of 9%,...
Grade premiums (CLU grades)
Compared to grade 2 (washed)
2. Performance
-60
-40
-20
0
20
40
Grade 1 U.G. Grade 3 Grade 4 G...
Rewards to vertical integration and traceability
(compared to private traders-exporters)
2. Performance
-10
-5
0
5
10
15
2...
• Rewards to regional indications of origin, compared to
Sidama (washed coffee)
2. Performance
-30%
-10%
10%
30%
50%
70%
2...
• Rewards to regional indications of origin, compared to
Sidama (natural coffee)
2. Performance
-30%
-10%
10%
30%
50%
70%
...
• Performance:
1. Value of coffee exports increased five-fold; mostly due
to international price increases
2. Quantity exp...
• Implications:
1/ Emphasis on better quality:
- washing (only 30% of total exports; room for growth);
- Increase speciali...
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Performance of Ethiopia’s coffee export sector

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Performance of Ethiopia’s coffee export sector

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Performance of Ethiopia’s coffee export sector

  1. 1. ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE Performance of Ethiopia’s coffee export sector Bart Minten, Seneshaw Tamiru, and Tadesse Kuma IFPRI/ESSP/EDRI 1
  2. 2. Share of different countries and continents in exports 1. Export destination markets 0% 20% 40% 60% 80% 100% 2005 2006 2007 2008 2009 2010 2011 2012 Other Sudan Saudi Arabia North America Japan Europe
  3. 3. Cumulative price distribution by destination market 1. Export destination markets0 .2.4.6.8 1 0 100 200 300 400 500 USC/LB Europe Japan NorthAmerica SaudiArabia Sudan
  4. 4. • Strong price differences between destination markets; partly explained by differences in quality demands • Multinomial model: Destination market= f(quality characteristics) • Washed coffee mostly for Europe and North-America; Japan and Middle East mostly import natural coffee as they prefer unwashed coffee for better and richer taste • Difference in grades by destination market: e.g. Sudan more likely to import ungraded coffee 1. Export destination markets
  5. 5. Share of washed coffee by export destination 1. Export destination markets 0% 20% 40% 60% 80% 100% Unwashed Washed
  6. 6. • Regional preferences: 1. Middle East consumes more coffee from Harar (and Wollega) 2. North-America consumes relatively more coffee from Yirgacheffe 3. Africa focuses mostly on lower priced coffees from Wollega and Jimma • Certificates: Fair trade more demanded in Europe; organic more in North-America • Cooperatives work relatively more with North American markets 1. Export destination markets
  7. 7. Exports of coffee from Ethiopia (100=January 2003) 2. Performance 0 100 200 300 400 500 600 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 Growth in coffee exports from Ethiopia: (12-month moving average 2003 - 2013) value volume Linear (value ) Linear (volume)
  8. 8. Ethiopian export prices versus intern. prices (2002-13) 2. Performance 0 50 100 150 200 250 300 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 UScentsperlb NY/London price export price
  9. 9. • What is impact of price rises on local coffee consumption (and therefore exports)? • Income and price elasticities usually explain changes in food consumption: 1. Positive income elasticity: Higher income leads to more consumption and more demand for quality 2. Negative price elasticity: Price increases lead to a reduction in consumption • Not known how they have impacted local consumption; likely important impact through price elasticity given the large real price changes seen over time. 2. Performance
  10. 10. • Preliminary evidence from HICES: - Coffee expenditures were 40 Birr per adult equivalent in 2000 and 206 Birr in 2011 (HICES); - dividing by CSA retail prices for whole dried beans, this implies a consumption of 8.7 kgs in 2000 and 5.9 kgs in 2011, i.e. a decline by 1/3rd. 2. Performance
  11. 11. • Quality premiums in export markets: 1. Certification. Fair Trade and organic certificates lead to a price premium of 9%, ceteris paribus. 2. Washing. Washed coffee is exported at a price that is 20% higher than natural coffee. 3. Type of exporters. Cooperatives and private commercial farms have a premium of 16% and 5% compared to private traders-exporters. 2. Performance
  12. 12. Grade premiums (CLU grades) Compared to grade 2 (washed) 2. Performance -60 -40 -20 0 20 40 Grade 1 U.G. Grade 3 Grade 4 Grade 5 U.G. Washed Unwashed %
  13. 13. Rewards to vertical integration and traceability (compared to private traders-exporters) 2. Performance -10 -5 0 5 10 15 20 Before ECX After ECX Before ECX After ECX Before ECX After ECX Cooperative Private comm. farms State farms %
  14. 14. • Rewards to regional indications of origin, compared to Sidama (washed coffee) 2. Performance -30% -10% 10% 30% 50% 70% 2006 2007 2008 2009 2010 2011 2012 2013 Yirgacheffe Limu
  15. 15. • Rewards to regional indications of origin, compared to Sidama (natural coffee) 2. Performance -30% -10% 10% 30% 50% 70% 2006 2007 2008 2009 2010 2011 2012 2013 Jimma Wollega Harar
  16. 16. • Performance: 1. Value of coffee exports increased five-fold; mostly due to international price increases 2. Quantity exported increased by 50%; 3. Slight increases in coffee quality (share washed stayed the same however) • Quality premiums for washing, certification, and geographical indications; • Vertical integration rewarded in international markets 3. Conclusions
  17. 17. • Implications: 1/ Emphasis on better quality: - washing (only 30% of total exports; room for growth); - Increase speciality coffee (two-thirds of Ethiopian coffee could be qualified as speciality coffee) - de-commodification of coffee 2/Emphasis on higher quantities: - Low coffee yields in Ethiopia; potential for growth with increasing support; 3. Conclusions

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