Dynamics in coffee sector eea conference 16 june 2014

1. ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
DYNAMICS IN COFFEE PRODUCTION
AND MARKETING IN ETHIOPIA
Ermias Engida, Mekdem Dereje, Tadesse Kuma and Bart
Minten
IFPRI ESSP
19th Annual Conference of the African Region Chapter of the
Econometric Society and 12th International Conference on
the Ethiopian Economy.
July 19, 2014
Addis Ababa
1

2. 2
1. Introduction
• Coffee very important commodity in the world
• Important changes internationally:
1. increasing willingness to pay for coffee,
specialty coffee on the rise, increasing demand
for quality coffee, increasing market
differentiation and segmentation
2. large price changes
• Important changes locally (ECX, primary marketing
centers, emergence of cooperatives)
• Purpose of study: Understand how production and
marketing is changing upstream locally

3. 3
2. Background coffee in Ethiopia
• Coffee major export product from Ethiopia
• Ethiopia endowed with very good production
environment
• Ethiopia the country of origin of Coffea Arabica; large
diversity of coffees found
• 4 different types of production systems: forest (10% of
production), semi-forest (35%), garden (50%), and
plantation (5%)

4. 4
2. Background coffee in Ethiopia

5. 3. Data
• Focus on the major 12 coffee producing zones. 5
strata based on the 5 coffee varieties of Ethiopia
(Sidama, Yirgachefe, Jimma, Nekemte and Harar)
• 16 kebeles from each variety (total of 80 kebeles)
randomly selected
• Total of 1600 coffee farmers and 206 processors
were randomly sampled with an even distribution
among each variety (320 farmers each strata)
• Survey fielded in February 2014

6. 4. Production practices
• Changes in management practices: significant
improvements over time
% of farmers At the time of the survey Ten years earlier
Stumping of trees 3 1
Mulching 44 22
Pruning 37 16
Compost use (% land) 9 2
Tilling 77 72
Number of weeding 2.07 1.93

7. 4. Production practices
• Modern input use: very low; however, increasing
improved seedling adoption
At the time of the
survey
Ten years earlier
Improved seedlings (% of land) 30 23
Chemical fertilize use (kgs/ha) 4 8
Herbicide use (% of farmers) 1 1
Pesticide use (% of farmers) 1 2

8. 4. Production practices
• Improvement in access to extension agents as well as
in perceived quality of extension advice
At the time of
the survey
Ten years
earlier
Availability of coffee extension agents …
- Very available (%)
- A bit available (%)
- Not available (%)
- Do not know (%)
46
36
13
5
12
46
29
13
Quality of extension advice on coffee related issues:
- Very good (%)
- Moderately useful (%)
- Not useful (%)
- Do not know (%)
48
31
9
12
16
33
21
30

9. 4. Production practices
• Despite adoption of improved practices and access
to advice, we see few changes in yields (and strong
declines in Nekemte and Harar)
Yields in whole dried
cherries per hectare
At the time of the survey Ten years earlier
Sidama 8.0 7.2
Yirgacheffe 6.9 6.5
Jimma 10.8 10.5
Nekemte 5.6 11.3
Harar 7.0 11.9

10. 4. Production practices
• Less than expected impact on yields: Might be due to
issues with diseases and climate change
At the time of
the survey
Ten years
earlier
For every year,…
- One bad year (% farmers)
- Two bad years (% farmers)
- Other frequency (% farmers)
- No difference between years (% of farmers)
39
38
17
6
43
39
7
12
Diseases are a problem:
- Big problem (% of farmers)
- Small problem (% of farmers)
- No problem (% of farmers)
35
46
19
26
49
25

11. 5. Harvest and post-harvest practices
• Improvements in harvest and drying methods
At the time of
the survey
Ten years
earlier
Harvest practices
Share of green cherries in coffee harvest (%)
Stripping of cherries (% of farmers):
- All
- Partly
- Selective harvest only
4
5
13
82
11
35
40
26
Post-harvest practices
Type of drying (% of farmers):
- Traditional bed
- On a mat or plastic on ground
- On bare ground
- Other
77
17
3
3
29
8
59
4

12. 6. Changes in marketing
• Major policy changes at the marketing level:
1/ the set-up of primary market centers
• As stated in the proclamation, all coffee should be traded
on these primary marketing centers
• Markets should be fenced with specific sheds for
different buyers
• Only licensed agents of akrabi are allowed to buy coffee
at these marketing centers
2/ the set-up of the ECX
• All coffee trade by private traders have to go through ECX

13. 6. Changes in marketing
• Uneven implementation of policy of primary market
centers: large differences by regions and coffee type
At the time of
the survey
Primary marketing centers as place of sale of
sales red cherries (%):
- Sidama
- Yirgacheffe
- Jimma
- Nekemte
- Harar
80
77
14
0
2
Primary marketing centers as place of sale of
sales (%):
- Red cherries
- Dry cherries
56
22

14. 6. Changes in marketing
• Large changes in market outlets and role of regular
markets; however, village trader still important
At the time of
the survey
Ten years
earlier
Place of sales of red cherries (%):
- Primary marketing center
- Regular market
- Village trader
- Site of mill
- Other
56
8
20
15
1
3
2
31
39
1
Place of sales of dried cherries (%):
- Primary marketing center
- Regular market
- Village trader
- Site of mill
- Other
22
44
26
4
4
2
70
20
4
5

15. 6. Changes in marketing
• Improvements in markets overall: farmers trust
weighing traders more; have to walk less far; and
have option of red berries sales
At the time of
the survey
Ten years
earlier
Average distance walked (in minutes) to sell:
- Red cherries
- Dried cherries
27
61
43
84
Farmer trust the weighing of the trader (%) 55 43
Farmers have option to sell red cherries (%)
Share of coffee sold as red cherries
43
19
28
13

16. 6. Changes in marketing
• Farmers have improved choice for trade and have
more options to sell to cooperatives as well
At the time of
the survey
Ten years
earlier
Farmer has the choice between traders (%):
- A lot
- A little
- No choice
29
38
33
12
35
53
Famer has the option to sell to cooperatives (%):
- For those that sell red cherries
- For those that sell dried cherries
61
16
56
6

17. 6. Changes in marketing
• Price information has improved; however, few
farmers have access to ECX information; price
information does not lead to quality premiums
At the time of
the survey
Ten years
earlier
Price information
- Farmer has access to price information from
radio (%)
- Farmer has access to price information from
auction/ECX (%)
67
23
47
13
“Better quality coffee gets a premium”:
- A lot (% of farmers)
- A little (% of farmers)
- No premium (% of farmers)
4
7
89
2
5
93

18. 6. Changes in marketing
• Some improvements for akrabi/processors, partially
due to ECX
At the time of
the survey
Ten years
earlier
Access to credit (%):
- Big problem
- Small problem
- Not a problem
30
15
55
31
33
36
Incidence where buyer pay/false cheques:
- Big problem
- Small problem
- Not a problem
1
6
92
48
17
35
Incidence of theft during transportation/trade:
- Big problem
- Small problem
- Not a problem
6
15
79
31
25
45

19. 6. Changes in marketing
• However, akrabi complain about the increased
transaction cost in the system
At the time of
the survey
“Since the ECX, the transaction costs in the coffee
trade have increased significantly” (% of akrabi):
- Strongly disagree
- Disagree
- Not sure
- Agree
- Strongly agree
9
20
15
40
15

20. 7. Conclusions
• Important changes are happening in the Ethiopian
coffee sector
• At the production level, increasing adoption of
improved practices, improved good access to
extension agents and better harvest and post-harvest
practices; however, no major effect on production
possibly due to disease problems and climate change
• At the marketing level, important changes in markets
due to policy of primary marketing centers and ECX
• Policy of primary market centers is unevenly
implemented over regions and by coffee type

21. 7. Conclusions
• Overall, farmers have more choice between traders,
have the additional option to sell to cooperatives,
have to walk less far for their sales, and sell more
washed coffee; however, no perceived quality
premium
• Akrabi complain less of theft and problems of
payments because of ECX; however, there is an issue
of transaction costs in the system

22. THANK YOU!!!