Ethiopia consumes about half of the coffee it produces on the domestic market, usually lower-quality lots, as high-quality coffee is usually reserved for international sales. The government prohibits the sale of export-quality coffee on the local market, even when local prices are more favourable. However, there is a domestic demand for high-quality coffee, which can be illegally supplied with higher-quality coffee when local prices exceed those offered by exports.
In February 2020, the Ethiopian Coffee and Tea Authority established a minimum export price for coffee, as well as a semi-official minimum price for coffee at local sales centres. The minimum export price is calculated daily, based on the global weighted average of the price given to different grades of coffee from different regions. At the time, the measure increased the price of green coffee by a range of approximately 0.5 to 1 USD/lb for grade 1 (best quality) coffee. And exporters selling coffee below the minimum price were made subject to legal action by the Ministry of Trade.
At the farm level, most studies estimate that Ethiopian farmers get only a small portion of the FOB price of coffee, typically between 30% and 40%. This relatively low percentage is attributed to several factors, including poor processing and transportation infrastructure, low levels of organization among cooperatives, and the tendency of Ethiopian farmers to outsource post-harvest processing to other actors further down the supply chain.
While estimates of the costs of a decent life in rural Ethiopia exist, they do not provide adequate data on farmers’ current income structures. This makes it difficult to determine whether net income from coffee, supplemented by other sources, is sufficient to cover these costs. However, interviews and various sources illustrate a widespread problem of poverty in Ethiopia’s rural coffee-growing regions. In fact, only 30-35% of farmers in these areas earn above the 2011 UN poverty line of $3.10 per day.
It can be concluded that the high minimum coffee prices observed in Ethiopia since 2020 are unlikely to improve the lives of the country’s 4.5 million smallholder coffee producers. Instead, these prices seem to benefit the growing number of exporters focused on securing foreign exchange to finance imports and the government with its growing hunger for USD. Unfortunately, this approach does not prioritize the selection of high-quality coffee or the payment of ethical prices at source to smallholder producers.
While estimates of the costs of a decent life in rural Ethiopia exist, they do not provide adequate data on farmers’ current income structures. This makes it difficult to determine whether net income from coffee, supplemented by other sources, is sufficient to cover these costs. However, interviews and various sources illustrate a widespread problem of poverty in Ethiopia’s rural coffee-growing regions. In fact, only 30-35% of farmers in these areas earn above the 2011 UN poverty line of $3.10 per day.
It can be concluded that the high minimum coffee prices observed in Ethiopia since 2020 are unlikely to improve the lives of the country’s 4.5 million smallholder coffee producers. Instead, these prices seem to benefit the growing number of exporters focused on securing foreign exchange to finance imports and the government with its growing hunger for USD. Unfortunately, this approach does not prioritize the selection of high-quality coffee or the payment of ethical prices at source to smallholder producers.
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