Coffee Consumption and Production in Ethiopia
|✅ Paper Type: Free Essay||✅ Subject: Economics|
|✅ Wordcount: 1605 words||✅ Published: 9th Oct 2017|
The two commonly processing methods of coffee are dry (sun-dried) and wet processing. In the dry method, coffee is gradually dried by sun since it is harvested with a flexible moisture content that necessitates water to be detached at times throughout the entire fruit. The coffee needs nearly three to four weeks in the sun in order to dry in a natural way, which may be extended in the humid and cloudy weather conditions. The entire fruit of the coffee cherry is permitted to dry to about 11.5 percent moisture. After that, hulling will be done to remove all the outer layers together in order to get the ready commercial bean which will be supplied to the central market (ECEA, 2013).
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According to the ICO in 2012, Ethiopia ranks the fifth coffee producer in the world next to Brazil, Vietnam, Indonesia and Colombia and the first in Africa by producing 8,100 thousand bags (5.6 percent of the world production). Ethiopian coffee production has increased over the last five years from 283,000 ton in 2008/09 to 400,000 ton in 2012/13 crop year with annual percentage growth rate of 11.3% (see the figure below). However, there is a seasonal and fluctuation of production supply due to climatic variations and unstable prices.
Coffee producer regions in Ethiopia are Oromia region (63%), South Nation Nationality Peoples Region (35%), and Gambella and Benisangul Gumuz regions (2%). An estimated 800,000 coffee farmers are found in the major and medium growing woredas with nearly 520,000 hectares of land under coffee production. Small-scale farmers are accountable for about 95 percent of production covering around 0.5 to 1.5 hectares of land. Large scale state-owned and private investor plantations contribute only 5 percent (Zelalem, 2011).
This growth in coffee production in the country could mainly be attributed to improvement in productivity (increase yield per hectare) and partly due to good distribution and amount of rainfall. The growth is also partly due to increase in the area of land-covered with coffee that started to give production. The CSA annual agricultural sample survey (2008) results show that area covered with coffee plant increased by about 2.49 percent from 2011/12 to 2012/13 from 515,882.46ha to 528751.11ha of land while productivity has reduced from 376,823,172 kg to 275,529,873 kg by about 26.88 percent due to unfavorable weather condition.
The coffee supplied to the commodity exchange market is mainly two types: wet-processed coffee and sun-dried coffee. The sun-dried coffee is large in proportion with respect to production and supply as compared to wet-processed coffee. Information from Ministry of Trade (2012) shows that 70 percent of natural or sun-dried coffee is provided for export market while only 30 percent of the wet-processed coffee is prepared for the market.
Ethiopia aims to increase the amount of wet-processed coffee produced due to a high preference of consumers. The above table clearly shows that the production of washed coffee is increased by about 19.36 percent from 2005/06 to 2010/11 while sun dried coffee increased by only 1.1percent.
Coffee Consumption in Ethiopia
Ethiopia is one of the leading consumers of coffee in Sub-Saharan Africa. Ethiopians are substantial drinkers of coffee. Almost half of the country’s production of coffee is locally consumed. In Ethiopia, coffee has both cultural and social standards. It is generally consumed in social occasions such as family meetings, mystical festivities and mourning times (Abu and Tedy, 2013).
In the past three fiscal years (2009/10-2011/12), total coffee production in the country is estimated at 1,340,620 tons, of which, only 537,690 tons of coffee was exported accounting for 40 percent of the total production. The rest amounting to 802,930 tons coffee or 60 percent of the production was consumed domestically. This indicates that the domestic market for coffee demand is big and that the coffee sector has a sustainable and growing local market (Alemseged and Getaneh, 2012).
At the local market, a low quality coffee is commonly supplied and transacted. A rejected coffee which fails to meet the quality standards of the Ethiopian commodities exchange will be not exported through ECX, rather supplied for the local market. However, the local market coffee price is generally higher than the prices of export. Some coffee shops in large cities have started to get higher profit by mixing coffee with barley grain as a result of this price difference (Abu and Tedy, 2013).
The occurrence of small roadside stalls who sell coffee to passer by consumers is a remarkable new development concerning coffee consumption in the main cities and towns of Ethiopia. They serve coffee in a traditional way. They become very popular by coffee drinkers who are upset by the rising price and declining quality of coffee served in coffee shops and cafes. They do not pay Value Added Tax (VAT) as well as house rents unlike the regular coffee shops. As a result of low cost of serving coffee, they can serve their customers with low and reasonable price than the regular coffee shops (Ibid).
Coffee Marketing in Ethiopia
In Ethiopia, coffee production and marketing was controlled by the government through Ministry of Coffee and Tea Development prior to 1992. During that period coffee was sold by producers at permanent prices with fixed times. The huge bulk of the crop was controlled by the Ethiopian Coffee Marketing Corporation (ECMC). After the fall of Derg regime in 1991, the transitional government announced measures to promote a market economy including coffee sector liberalization. This was started as a means of enhancing production through increasing producer prices and maximizing export earnings of coffee. Since 1999 the Ethiopian coffee has been accessible when some producers were decided contract to bypass the auction system of the government. Certified farmers who are the member of a cooperative can directly sell their coffee to the western importers (Celia et al., 2004).
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The government of Ethiopia has established Ethiopian Commodity Exchange (ECX) organization in 2008, the first of its kind in Africa, which aims at making the marketing of agricultural commodities more efficient and well-organized. With the establishment of ECX, the government has issued a coffee quality and marketing Proclamation no. 602/2008 which has been enforced since August 2008. The Proclamation mandates all coffees to be traded through ECX. It excludes private collectors and links suppliers (Akrabies) to trade directly with farmers at first level coffee market centers and with ECX (Alemseged and Getaneh, 2012).
The main objectives of modern coffee marketing system in Ethiopia is to competitively and efficiently supply quality coffee to the international market, to create short supply chain of coffee and appropriate payment system, to make fast and cost effective coffee marketing system, to promote small-scale farmers participation, to be reliable by providing timely and accurate information, to build confidence between partners of trade and to control illegal activities. Presently, there are two stages of transaction centers in the marketing system: primary level (primary coffee market center) and secondary level (central market auction center), i.e., the Ethiopian Commodity Exchange (ECEA, 2013).
Coffee Marketing Chain
According to the Ministry of Trade (2012), there are three coffee marketing chains in Ethiopia that gives options for the producers to supply their product into the market. These are primary level, Ethiopian Commodity Exchange and international coffee market chains.
Primary Level Coffee Transaction Centers (PLCTC): Located near to coffee farms where coffee farmers and suppliers buy and sell coffee. Farmers can take their product to the primary market in order to sell for suppliers (Aqrabis) and primary cooperatives. Now days there are about 1903 primary coffee marketing centers in the country.
Ethiopian Commodity Exchange (ECX): This is the secondary level of the chain where coffee is transacted. If farmers have more than 30 bags of coffee, they can directly supply the coffee to the ECX. The functions of ECX are receive all arrival coffee from suppliers, producers and cooperatives; undertake arrival coffee liquoring, grading and warehouse services; carry out coffee exchange between suppliers and exporters; and submission of sold coffee to exporters. There are currently ECX warehouses located at 8 different places of the country which are Dire Dawa, Hawasa, Dilla, Wollayita Sodo, Bonga, Jimma, Bedele and Gimbi. Trading is carried out by open outcry at the ECX in Addis Ababa.
International Coffee Market: exporters sell coffee to international importers in this level of chain. Green coffee is exported only by the Ethiopian citizens. We can export coffee to the international market in three ways. The first is producers supply their coffee through primary market to suppliers (Aqrabsi) or directly supply to ECX and exporters buy from Aqrabis at ECX, and then sell to international market. The second is producers supply coffee to their primary cooperatives at primary coffee transaction centers, primary cooperatives to cooperative unions, cooperative unions directly sell to international market. The last way is producers directly supply to international market.
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