Coffee exporters in Ethiopia, Africa’s biggest producer, are stockpiling beans in anticipation of a further devaluation of the national currency, the Ethiopian Commodity Exchange said.
The stockpiling has contributed to a decline in export revenue that has been exacerbated by a poor harvest, falling world prices and a ban on Ethiopian beans in Japan, Eleni GabreMedhin, chief executive officer of the exchange, said in an interview on March 27 from the capital, Addis Ababa.
“There is the expectation that the currency will be further devalued,” she said. “That and other factors are contributing to a decline in exports.”
Ethiopia’s government closed warehouses and suspended the business licenses of six of the country’s largest coffee exporters last week after accusing them of “hoarding” coffee and illegally selling export-grade coffee on the domestic market. The government is considering selling the brokers’ coffee itself, according to the Agriculture Ministry.
The Horn of Africa country devalued the birr by 10 percent in January. Both Prime Minister dictator Meles Zenawi and Trade Minister Girma Birru have said the government may further devalue the currency, which traded at 11.1025 per dollar on March 27, according to the National Bank of Ethiopia.
Alemayehu Kebede, a spokesman for the central bank, said he was unaware of any discussions taking place about a possible devaluation of the currency.
“These are simply expectations and rumors,” he said by phone today from Addis Ababa.
Hard Currency Shortage
Ethiopia has experienced shortages of hard currency over the past year, with the country’s reserves falling to as little as $850 million, enough to cover just one month of imports, Meles said in a speech to parliament March 19.
Japan banned coffee imports from Ethiopia last year after finding high-levels of pesticide residue in a shipment. Japan was Ethiopia’s third-largest coffee export market, accounting for 20 percent of shipments, according to the Trade Ministry.
Coffee production in the country also fell about 15 percent last year due to drought and disease, GabreMedhin said.
The global recession has cut world coffee prices and slowed demand for Ethiopia’s arabica beans, which command a premium at Starbucks and other retailers because of their quality, she said. Arabica-coffee futures for May delivery fell 1.5 cents, or 1.3 percent, to $1.1585 a pound on ICE Futures U.S. in New York on March 27. The price has dropped 19 percent over the past 12 months.
Ethiopian shipments have dropped more than 10 percent to 76,674 metric tons in 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.
– By Jason McLure | Bloomberg