Ethiopia's coffee export sector has grown significantly over the past decade. The value of coffee exports increased five-fold due to rising international prices, while export quantities rose 50%. Coffee quality saw some improvements like a higher share of washed coffee, though most is still exported as natural. Certain quality attributes receive premium prices in international markets, such as washing, certification, and geographical indications of origin. Vertical integration and traceability were also rewarded. However, domestic consumption appears to have declined by a third despite rising incomes, likely due to higher prices. The implications are an emphasis on better quality through increased washing, specialty coffee, and de-commodification, as well as higher export quantities by improving yields.

1. ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
Performance of Ethiopia’s coffee export
sector
Bart Minten, Seneshaw Tamiru, and Tadesse
Kuma
IFPRI/ESSP/EDRI
1

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. 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. • 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. Share of washed coffee by export destination
1. Export destination markets
0%
20%
40%
60%
80%
100%
Unwashed
Washed

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. 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. 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. • 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. • 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. • 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. 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. 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. • 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. • 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. • 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. • 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