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PUBLISHED: Aug 21, 2014 4:28pm

Ethiopia gain from surging coffee prices

Coffee

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ADDIS ABABA, Aug 21:

Ethiopia’s arabica coffee export earnings are forecast to climb 25% to about US$900 million (RM2.85 billion) in 2014-15 because of higher prices after a drought damaged plants in the biggest grower of the bean, Brazil, an industry group said.

Arabica prices on the Ethiopia Commodity Exchange could average US$2 a pound if supplies of the crop in the world market are tight, Ethiopian Coffee Exporters’ Association general manager Alemseged Assefa said in the capital, Addis Ababa.

Ethiopia is Africa’s biggest producer of the crop and the origin of the arabica plant.

“Prices are favourable this year because of the Brazilian coffee drought,” Alemseged said in an interview on Monday. “We presume that price will continue because of the drought.”

Arabica has surged 71% in New York since January after a drought hurt plantings in Brazil, the world’s biggest exporter of the beans, fuelling speculation that consumption may outstrip supply.

The Brazilian woes come as plantings in Central America, Mexico and Peru struggle to recover from a crop disease called leaf rust that has cut yields across the region over the past two years.

Arabica coffee for December delivery rose 1.5% to US$1.89 a pound on the ICE Futures US yesterday, tumbling 12% from a two-year high in April.

Ethiopia earned US$719 million from sales abroad of the beans in the 12 months through July 7, down 3.7% from a year earlier.

The volume of exports fell 4.1% to 191,000 metric tonnes. The country may produce about 500,000 tonnes of the beans this year, with about half of that crop sold outside the nation, Alemseged said.

Consumption within Ethiopia, sub-Saharan Africa’s second-most populous nation, accounts for the rest of sales, with the average home drinking a cup of coffee two or three times a day and coffee ceremonies a traditional way to welcome guests, according to the US agriculture department.

Prices should be in the “stable to high range” of as much as US$1.80 a pound this year, said Fekade Mamo, general manager of Mochaland Import and Export, an Addis Ababa-based coffee trader. “This deficit is real.”

An expansion of plantings in coffee-growing areas may help boost the crop, Alemseged said.

Horizon Plantations, a company owned by Ethiopian-born Saudi billionaire Mohamed al-Amoudi, bought the 10,000ha Bebeka and 12,114ha Limmu coffee farms from the Horn of African government last year.

The exporters’ association wants to bring in new buyers and start making a bigger presence in the world market at its annual conference in Addis Ababa on Nov 6-7, Alemseged said.

“There’s a great potential, excess supply,” he said. “We aim to increase our share in the global coffee market.”

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