African coffee producers are expected to enjoy higher prices this year thanks to falling output in Colombia, the world's third biggest exporter, the chief executive of the Ethiopia Commodity Exchange (ECX) said.
"The outlook for Arabica prices seems to be they will continue upwards because of the shortfall of production in Colombia," Eleni Gabre-Madhin told Reuters late on Thursday. "We think this is a very good opportunity for African fine coffees." The ECX, which was launched in mid-2008, sold about 161,000 tons of beans -- or 70 percent of the Horn of Africa nation's output -- last year at a value of $380 million. Eleni said Arabica prices had already posted a 20 percent gain on the international market this year. Together with other developments in the industry, she added, that pointed towards good earnings for African farmers from their harvests in 2010.
"That seems to be translating into our market as well ... because of the very significant increase in the higher quality coming in, we expect that return to farmers will go up probably by more than that," Eleni said in an interview. "We are seeing a shift from lower grade coffee to higher quality coffee." ECX, which in addition to its core business of trading commodities also carries out quality certification, warehousing, clearing payments and disseminating market data, partnered with a U.S. organization last year to boost specialty coffee supply. Coffee grades were increased to 10 from five through addition of new criteria like the geographical origin of a particular lot, Eleni said, adding the top two grades were fetching a 10-15 percent premium above commercial grade coffee.
"Now we have a way to measure it (quality) and a way to reward it and that has had a direct impact on the incentive of the producers to produce higher quality, to do better post-harvest handling and bring higher quality market to the market," she said. Although traded volumes through the open cry system on the exchange's floor were up 72 percent last month year-on-year, Eleni said it was not clear if the trend would continue.
"I would have to hazard a guess of around 30-40 percent higher on last year," she said, adding the priority for the exchange was to install an online trading platform. She expected the multi-million dollar undertaking to be completed in two years, along with the introduction of forward and future contracts, warehouse receipt financing, where farmers can borrow against receipts of beans delivered to the ECX. The balance of Ethiopia's coffee output which is not sold through the ECX is sold locally or exported directly.
[Reuters]