To All,
If you are not very familiar with business in Ethiopia, please read a recap of the situation for this year.
Volatility of the market has increased drastically with the risk of defaults; this report is written by a trader in Ethiopia so as to try to explain the terrible conditions affecting logistics in this country.
Having experienced many delayed shipments we visited our shippers to asses for ourselves the reasons behind this appalling state of
affairs. Below is a statement of the circumstances that have led to such poor contract performance.
We believe that since the reasons that have resulted in delayed shipments are several and in the past it is possible that some of this information does not come as news, however hopefully this report puts things into some sort of perspective and brings some confidence that the worst is in the past!
1. Marketing System
The change in the marketing system at the start of this season, whereby coffee started to be sold x-region where the coffee is grown
(rather than x-Addis) gave rise to some rather large logistical challenges resulting in a less than smooth marketing of the crop.
Delays in starting the selling of the crop, delays in off-loading, loading and problems in finding adequate transport have been
plaguing shippers since February. Coupled with increased rainfall and the subsequent deterioration of the roads meant that some
up-country storage facilities were closed for several days at a time. Having coffee stored in several warehouses in and around
Awassa has proven a logistical headache for shippers having to send trucks from one warehouse to another to collect a couple of
hundred bags. In Djimmah, lack of a weighbridge and the very poor state of access roads resulted in multiple delays.
2. Port of Djibouti
Port in Djibouti burocracy and changes in procedures started a bottleneck that took weeks to clear in April; this issue has been
well documented and was a very real problem; it delayed shipments with cargo stuck in Djibouti for weeks and shippers strapped for
cash in Addis. An interesting consequence of the changes in Marketing mentioned in the previous paragraph has been the shortening of the time between harvest/primary processing and the marketing of the crop. Meaning that shippers are carrying stock for longer putting more pressure on shippers financing.
3. Shipper Limitations
One of the consequences that came from the suspension of the "6 majors" has been that the shippers that remained active have
increased their volumes quite substantially; this has put a strain on their resources, both financial and operational logistics / transport and processing/storage capacity) and disrupting the flow.
4. Bags
The increased volumes of coffee offered this season have required additional quantities of export bags which have been in short
supply; relying on imported bags from Bangladesh has not been an alternative since it appears that shippers have not been able to
find suppliers that can meet the strict chemical residue limits imposed by the authorities. There have been serious disruptions to
local production of bags from power rationing after the new dam labelled has the answer to Addis' electrical power problems turned
from panacea to joke when it collapsed shortly after its official inauguration!
Conclusion:
So it has been a nightmare getting coffee out of Ethiopia, there are several reasons, listed above, this may bring little comfort to
those that need coffee to roast but it is our belief that the situation will improve and normalise in the coming weeks.