Rich’s Ethiopia – Falcon Coffees

ETHIOPIAN HARVEST SEASON

Looking at this important coffee crop in 2024.

Before setting up our Asian office, I was responsible for all our East African supply chains. Ethiopia is our largest and most important. I’ve been lucky to spend a lot of time in Ethiopia over the years. It really gets under my skin, and it’s by far my favourite origin to travel to. First, Covid happened. Then, I moved to Asia and my responsibilities changed.

It’s been 4 years since my last visit. However, last week I was lucky enough to make a short trip to Addis. Then, I went down to Sidamo, Guji, and Yirgacheffe with my colleagues and some clients from China.

The Ethiopian Harvest typically runs from early November until January for the highland coffee areas. Some regions in the southwest, such as Teppi and Bench Maji, start earlier. However, these coffees are mainly commercial. They are grown at altitudes of 1500-1800m, which is considered lowland in Ethiopian terms. This year is no exception, and the harvest is complete in all but the very highest altitude areas in Hambella, Bensa and some parts of Yigacheffe. Due the geography and economic factors the shipping season usually starts in February at the earliest but peaks in April/May. That means we should expect new crop Ethiopian to begin arriving in Asia from April onwards.

This year is what I hope will be the end of an extraordinary cycle in Ethiopian coffee which has lasted for 3 years. In 2022 we saw a surge in global demand and global prices. This translated to local cherry prices quickly rising from around 30Birr/kg (around 60c US/kg at the time) to around 70birr/kg of cherry ($1.40/kg). High demand for coffee in local markets is always bad for quality. Farmers have so much demand for their product. Buyers, such as drying and washing stations or middlemen, are willing to take whatever they can get their hands on. When demand is lower locally, farmers must be more selective in their picking. Otherwise, buyers will turn them away in favor of other suppliers that are doing a better job. This generally improves quality. The result was a worse than average quality season. Coffee prices were much higher than the previous year.

In 2023, the local Cherry market continued this trend. Prices reached over 100 birr/kg ($1.80/kg). However, competition was even fiercer, causing quality to suffer more. For context, $1.80/kg of cherry equates to roughly $12.60/kg break even FOB for the exporters. This is an extraordinarily high price for anything but the very best microlots. At the same time, global demand for coffee was falling. Global prices were also falling. This made Ethiopian coffees look particularly expensive and poor in quality compared to what buyers are used to. In the end, many of the world’s larger Ethiopian buyers walked away, preferring to buy from Kenya or Uganda at heavy discounts. Today, Ethiopia still has large stocks of unsold 2023 harvest coffee remaining in the country.

Entering the 2024 harvest the dynamics have changed. Many exporters and station owners were unable to pay back their bank loans from 2023 because they are still holding coffee they can’t sell at a profit. The local banks have been very reluctant to lend money to processors and exports for fear of repeated defaults. During our field visits roughly 20% of washing and drying stations were closed and had not been opened this season. There is a lot less liquidity in the coffee market and it’s palpable in the field. This means cherry prices during the season were a lot lower too, dropping back down to the 40-50 Birr/kg range ($0.70-$0.90/kg range).

So, as we enter the 2024 shipping season, we have a much healthier Ethiopian export market. Prices are lower and exporters are willing sellers trying to build back their business after a low volume 2023. Export prices are at levels buyers are more willing to pay although not as cheap as some would like. However, there will be limited washed coffees as very few stations produced much washed coffee.

There are 2 reasons for this:

• Quite a bit of washed coffee was left over from 2023.

• Exporters get a premium of between $0.10 and $0.30 per pound on G1 and G2 naturals compared to their washed counterparts.

Washed coffees are more expensive to produce, and the raw ingredients (red cherries) are the same price regardless of how you process them.

In a year of limited resources, station owners and exporters want to maximise their income. So, they have processed only limited washed coffees.

Thankfully, the overall quality is much better this season than in the past two years. We are excited to bring some of the best lots of the year to Malaysia for the South East Asian Market.

Coffee means life!

Ethiopia is one of Falcons oldest origins, we got established there in 2009 through a Technoserve project in western Ethiopia. At the time, the area only produced Natural G4 & G5 home processed coffees. There were no washing stations in the area. It was also a time when G1 naturals were not being processed all premium & specialty coffees were washed! How times have changed…

Technoserve planned to build several washing stations throughout Agaro and Jimma. They aim to lift the quality and household income of the area’s producers. In 2009, the local banks were not used to lending money to the coffee sector. They needed a business partner to guarantee working capital for the washing stations. Falcon stepped in and deposited roughly $500,000 in a standby letter of credit on behalf of the farmers to get them operational. These stations are now some of the best known in Ethiopia (Biftu Gudina, Nano Challa, Duromina, Yukro among others.) Without Falcon and Technoserve these legendary stations would never have existed.

These stations now fall under the farmer owned Kata Maduga Union and to this day Falcon provides them with a full-time agronomist to support their ongoing success. Our Addis Ababa team also acts as their QC lab. They cup every single coffee they produce each year. They help them maximise their income by identifying lots they can sell at a premium. We still buy between 40-70% of their total harvest each year depending on the year and have a very close relationship. Kata Maduga has had an enormous social and economic impact in the area. It has lifted household incomes and waved goodbye to perpetual poverty in Agaro. It continues to be a remarkable journey.

Beyond Kata Maduga, Falcon was the first trader to certify smallholder farmers with Café Practices. We’ve been training and certifying farmers in Organic, RFA, and Fair Trade for many years to help them gain market access to a wider audience. We’ve also invested heavily in the Ethiopian Farming community. Initiatives like The Stumping Project and Girls Gotta Run are examples. We’ve supported countless up-and-coming producers on their quality protocols. We will continue to do so, as processing and quality expectations continue to evolve over time.

In Ethiopia Coffee means life. It’s difficult to overstate how true that statement is. By investing back in the coffee industry and the farmers, we invest in the beating hearts of the farmers and of a nation. The nation is critically dependent on the wellbeing of its coffee sector.

Looking at this important coffee crop in 2024.

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