POORFARMER; something’s brewing in Ethiopia

Since the CAS-IP blog was launched over a year ago, we have posted several items relating to both Ethiopian coffee branding and to Eleni Gebre-Madhin, sometime economist at IFPRI and now Chief Executive Officer at the Ethiopian Commodity Exchange (ECX), an entity that she founded.  Gebre-Madhin was the principal investigator on a comprehensive report published by IFPRI in 2003 on supply chains  – Getting Markets Right in Ethiopia: An Institutional and Legal Analysis of Grain and Coffee Marketing.

We had also referenced the imbroglio surrounding the Government of Ethiopia’s (GOE) move to trademark several of their coffee names; this was intended to firmly establish these varieties as premium coffees, license the use of the names and, over time, to establish distribution chains that would result in a higher return to impoverished producers.  This met with substantial opposition from the US coffee industry, and the National Coffee Association filed a 200 page letter of protest with the USPTO.  Oxfam, supporting the producers, initiated a media campaign to persuade Starbucks to support the GOE plan.  The outcome of this initiative is that the GOE now owns trademarks to Sidamo, Harrar/Harar and Yirgacheffe in the US and in other territories, in spite of objections that these names were generic and/or merely geographically descriptive when the applications were filed in 2005.

A part of our mission at CAS-IP is to help small-holder farmers in developing countries raise their incomes through increased productivity, value add and benefit sharing.  Lessons learned from the Ethiopian trade marking program might inform related projects and support our work with commodity producers in the South (see our market development project).  By way of disclosure, I was the co-founder of Light Years IP and, prior to joining CAS in 2007 acted as COO.  With funding from DfID, Light Years represented the GOE, and I managed the coffee trade-marking program  until 2006.

The latest development brings Ethiopian coffee and Gebre-Madhin together at the ECX Specialty Coffee Event.
The story can be read at:
http://af.reuters.com/article/investingNews/idAFJOE59K0I020091021?feedType=RSS&feedName=investingNews&rpc=401
I would like to thank Shlomo Bachrach and eastafricaforum.net for bringing this to my attention.

According to Reuters:

Ethiopia plans to move the trade in its specialty coffee to an Addis Ababa-based commodities exchange instead of the current channel of selling the beans at auctions overseas, a senior trade official said.
Eleni Gebre-Madhin, Chief Executive Officer at the Ethiopian Commodity Exchange (ECX) said up to 30 percent of the country’s produce is classified as specialty beans but that higher prices for the fine coffees were not trickling down to farmers.
“The initiative positions Ethiopia to have perhaps the only domestic marketing system in the world for discovering and trading specialty coffee at the arrival stage, thus benefiting the farmers who produce these coffees, rather than at the export end of the chain…..”

Wondwossen, an Ethiopian blogger (http://poorfarmer.blogspot.com) provides coverage of the Ethiopian coffee saga.  His three-part, in-depth report on recent events suggests that relationships between specialty coffee importers in the US (and Europe) and Ethiopian producers have been disrupted by the GOE’s move to channel sales of all coffee through ECX.  When I spoke to Wondwossen, however, he observed that “coops and large estates growing specialty coffee are allowed by the GOE to bypass ECX and sell directly to the ultimate buyers”.

It is difficult to determine whether Wondwossen’s analysis is accurate (although his past reporting has proven to be reliable), but the real questions remain:

• has the trade-mark program effected an increase in s/h farmer incomes?  Not so, according to Gebre-Madhin.  The trade-mark and licensing program would, however, likely not deliver results for several more years;
• will the channeling of all (or most) coffee export sales through ECX have a negative impact on the availability and/or sale of premium coffees in the West?

One informed observer suggested that the Government’s activities are destructive.

We know from studying the market for premium chocolate that direct buyer-seller relationships have been critical in helping producers to achieve a consistent high quality bean, and that this has helped certain estates to sell their output for double the commodity price.  We also know that Starbucks has developed relationships, many of which include grants, with producers with the intention of ensuring a consistent and high quality product.  But there is little if any evidence that high prices in the West for premium coffee or premium chocolate have had much impact on producer incomes.

By way of conclusion:  the Ethiopian coffee supply and distribution chains have been tinkered with, and producer-importer relations disrupted.  The outcomes are unclear, as is the impact of the trade-marking, branding and licensing programs.  Wondwossen is considering a more academic study (he is currently seeking an academic institution to sponsor this, and can be reached though his blog).

More information at:
http://www.bloomberg.com/apps/news?pid=20601116&sid=aAwrvMjuvdbc
http://www.lightyearsip.net/
http://www.ethiopiancoffeenetwork.com/

post written by Peter Bloch, consultant to CAS-IP

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One response to “POORFARMER; something’s brewing in Ethiopia

  1. Here is a comment posted on http://www.nazret.com which I think summarizes what’s going on in Ethiopia:

    “ECX=GUNA=Dr.Eleni

    I think Dr. Eleni work is done now, she accomplished what she need to accomplished. Now ECX is a sole properity of Guna, tplf.”

    For an independent assessment of what is brewing in Ethiopia’s coffee sector, you will only need to read the report on Bloomberg: http://www.bloomberg.com/apps/news?pid=20601116&sid=anDS2stgKazE

    That is what is happening there, right now.

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