Ethiopia Harvest Update 2024/25

 This Article at a Glance 
 
The 2024/25 Ethiopian coffee harvest is in motion, and we reached out to our Trader and Operations Manager, Kirubel Girma, and Petros Batiso, our Field and Projects Coordinator, in Ethiopia, to get insights on what to expect for the upcoming harvest in Ethiopia.  
 
Here’s a quick summary of their insights:  

• The 2024/25 Ethiopian coffee harvest is looking promising with a forecasted production of 8.5 million bags, a 500,000-bag increase from last year.  
• Key regions like Sidamo and Yirgacheffe are seeing on-cycle* production, contributing to both increased volume and quality.  
• Regulatory changes around currency exchange and pricing are driving some volatility in the short term but will hopefully lead to improved outcomes for farmers in the future. 

Harvest Outlook: Volume and Quality 

Our forecast for Ethiopia’s harvest for the 2024/25 crop is positive, with an estimated total production of 8.5 million bags. This is an increase of half a million bags over the 2023/24 crop.  

Much of this increase can be attributed to positive climatic and cycle conditions. Most producing regions have had very good rainfall, and in these areas we’ve seen no significant stress on the coffee trees. While some parts of Djimma and Lekempti will see a slight production decrease of 5 to 10% due to being off-cycle, Sidamo and Yirgacheffe regions are experiencing an on-cycle year*, which is expected to result in an increase in both the volume and quality of the coffee beans. Overall expectations are positive. 

For the most part, we have good expectations for quality, as well. One challenge at the start of the harvest was that areas between 1,600 to 1,900 meters above sea level experienced rainfall during the drying stage of processing, which refers to the natural coffee drying process on raised beds. This may affect quality in some regions, though this is still not conclusive. However, high-altitude areas in Yirgacheff, Sidamo and Guji, which began their harvest later in November, did not face the same weather conditions during the drying process. Overall, the harvest has mostly stayed on schedule. 

Ethiopia’s Green Legacy Initiative is Bearing Fruit 

The Ethiopian Government’s Green Legacy Initiative may also be contributing to the increased production expectations. Launched in 2019, this national reforestation effort aims to restore degraded land, improve soil health and enhance climate resilience. The initiative has expanded coffee plantations, with new seedlings being planted each year since its inception. Since the program's launch, approximately 25 billion seedlings have been planted, not only including coffee seedlings but also a variety of other plants to restore soil health and reduce erosion. These include coffee shade trees, fruit trees like avocado, mango, apple and papaya, as well as various other types of seedlings. 

The increase in area under coffee production and the program’s focus on sustainable farming methods, complimented by other good conditions, contribute to this season’s growth estimate. 

Regulatory and Market Changes 

One major change impacting Ethiopian coffee over the last 12 months is the floating of the currency, which has resulted in a 110% devaluation of the Ethiopian Birr (ETB). Prior to July 29, 2024, the Birr’s exchange rate was fixed by the government. The decision to ‘float’ the rate means that exchange value is now decided by the market. Long term expectations are that the floating rate will contribute to economic stabilization and growth, but in the short term it has had an impact on trade conditions. 

This liberalization of forex (foreign exchange) has concurrently enabled the Ethiopian Commodity Exchange (ECX) to move towards a new pricing system for coffee that it hopes will be more equitable for coffee growers. Previously, the country’s exchange rate policy had required the implementation of a comparative pricing mechanism that sought to balance domestic market pricing with export prices. Under this system, domestic prices for coffee often outstripped international prices. The new pricing system is updated weekly and is based on the New York Arabica Coffee Price (C), the prevailing exchange rate at the Commercial Bank of Ethiopia (CBE) and other factors. 

While hopes are that the new system will equalize pricing and ensure better outcomes for farmers, exporters have commented that the changes so far do not reflect the high prices challenging their margins in the domestic market and have contributed to pricing volatility.  

Strengthening Supplier Relationships 

We have focused on strengthening relationships with key suppliers and ensuring that our team of agronomists are giving them the support they need. One of their key roles is providing training on Good Agricultural Practices (GAP) for coffee, including increasing yields, improving sustainability, reducing costs, and improving record-keeping and coffee quality control from harvesting to processing. Our partnership work also includes routine follow-ups and immediate responses to farmers' questions about coffee quality. In all cases, we visit our partners’ operations regularly to ensure alignment of values and interests. These efforts should result in more reliable supply, equitable relations and foster increased trust. 

Keep an eye our Offer list for incoming spot offerings and reach out to your trader to learn more about booking opportunities!  
 

_{*Coffee trees have natural production/yield fluctuation cycles. “On-cycle" refers to a year when a coffee tree is producing a normal or higher yield. Conversely, "off-cycle" refers to a year in the natural cycle when the tree produces significantly fewer cherries.}