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April 04, 2009

Ethiopian state plans coffee exports to ease currency shortage

by Jason McLure

Ethiopia, Africa’s largest coffee producer, will start exporting beans itself after closing the warehouses of six of the country’s largest exporters, which it claims are stockpiling coffee and contributing to a shortage of foreign currency.

A drop in export income, because of a poor coffee harvest, weak world prices and a ban on Ethiopian beans in Japan, is being exacerbated by stockpiling, Eleni Gabre-Madhin, chief executive officer of the Ethiopian Commodity Exchange, said on March 27.

The Horn of Africa nation said it would start exporting coffee via the state-owned Ethiopian Grain Trade Enterprise in a bid to improve the situation.

“Ethiopian Grain Trade Enterprise knows that it has the capacity to do this and it has a very good opportunity to fill this export gap,” said Berhane Hailu, the company’s general manager, by phone from Addis Ababa today.

The company has started trading coffee on the Ethiopian Commodity Exchange and is in talks with foreign buyers about exports, he said.

Ethiopia suspended the licenses of six of the country’s largest exporters recently after accusing them of hoarding coffee and illegally selling export-grade beans on the country’s domestic market.

The country has experienced shortages of hard currency over the past year, with the nation’s reserves falling to as little as $850 million, enough to cover just one month of imports, Prime Minister Meles Zenawi said on March 19. The shortfall has led to rationing and shortages, including cement and medical supplies, because companies can’t import goods or raw materials.

Ethiopian Grain Trade Enterprise may use the foreign currency from coffee exports to purchase and deliver wheat to Ethiopia’s urban poor as part of a government program to subsidize food prices, Hailu said.

Ethiopian coffee shipments have dropped more than 10 percent to 76,674 tons during the first eight months of the country’s fiscal year, compared with the same period a year earlier, according to the Trade Ministry.

The country has earned $221.7 million from coffee exports over the period, short of a government target of $446.7 million. Last year, the government also blamed rising food prices on hoarding by traders.

Bloomberg

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