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Monday, October 28, 2013

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በኢትዮጵያ ፕሪሚዬር ሊግ ተሳታፊ የሆኑት የሲዳማ ቡና እና ሃዋሳ ከነማ የእግር ኳስ ክለቦች በመጀመሪያ ጫዋታዎቻቸው ሽንፈት ኣስተናግደዋል። በትናንትናው እለት መከላከያን የገጠመው የሲዳማ ቡና 3 ለ 1 የተሸነፈ ሲሆን ሃዋሳ ከነማ በበኩሉ መብራት ኃይልን ገጥሞ 2 ለ1 ተሸንፏል።

ሁለቱም  የሲዳማ ክለቦች የዘንድሮውን ፕሪሚዬር ሊግ በሽንፈት መጀመራቸው ለኣመቱ ውድድር ያደረጉት ዝግጅት ጥንካሬን በተመለከተ በኣንዳንድ የክለቦቹ ደጋፊዎች ዘንድ ጥርጣሬ እንዲያድርባቸው ኣድርጓል። በምቀጥሉት ጫዋታዎች ኣቋማቸውን ኣስተካክለው ነጥብ እንደምሰበስቡ እና ወደ ቀድሞ ጥንካሬያቸው እንደምመለሱ ይጠበቃል። 

Price Discrepancy Stunts Coffee Exports

For over four years now, the headquarters of the Ethiopian Commodity Exchange (ECX), located in the Chelelk-Alsam Tower on Chad Street, has shone with the price ticker board displaying the country is own commodity prices.
The prices displayed on the ticker board which is wrapped around the waist of the building appear in green, yellow and red, respectively indicating increases, stability or plunges.
The prices for different varieties of coffee, however, which take up most of the space on the board, are, drawing a lot of frustration from exporters these days. They say it does not reflect international market conditions. Whereas the board was initially intended to help the traders in price discovery, that, say traders, is no longer the case.
One such exporter is Adem Kedir, for whom coffee trading is not just a business, but a family heritage in which his father and brothers are also employed. After starting out helping in his father’s coffee business, Adem set up Horra Trading, a coffee exporting company, six years ago. He describes the coffee business, which he has been a part of for the last 22 years, as precarious. Though it can yield a high profit, a trader must strike the right balance and know when to sell.
“You can over-calculate and sit on the coffee too long, thinking prices will go up, only to lose because of overhead cost, price plunges and frustrated clients,” he explains. “Sometimes you have to sell at a loss or low margins because profits are made from turnover, not through a onetime deal.”
Even while sticking to these principles, however, another challenge has presented itself in his business since last May. This is the mismatch between coffee prices at the Ethiopian Commodity Exchange (ECX) and the New York Intercontinental Exchange (ICE) – the international price index that both exporters and foreign buyers quote from.
Arabica coffee prices, the type Ethiopia exports, have been on a downward spiral for the past two years. Although Ethiopia exported 199,104tn of its golden bean in the 2012/13 fiscal year, which is 29,807tn more than the amount of coffee exported last year, the 746.4 million dollars it got in revenues was 86,493 dollars less when compared to last year, according to data from the Ministry of Trade (MoT).
ECX prices, however, have stayed on an even keel, reducing the profit margin of exporters and more recently causing them to sell at a loss, exporters claim.
The mismatch has been happening for the past two years, but has been prevalent since last May.
Adem, who exports dried Sidamo Coffee mostly to the Japanese market, says that the price for this type of coffee at the ECX ranged from between 140 to 146 dollar cents a pound. At the same time, the ICE price has been 120-126 cents.
Due to this, his coffee exports have decreased during this period when compared to last year. Between May and October in 2012, he sold 14,000tn of coffee, while only taking one order of 8000tn from a client during the same period in 2013. This is despite selling more coffee during the earlier part of this fiscal year than the previous one.
“Horra has basically stopped exporting since May, and has only taken up an order recently at a very low margin,” Adem told Fortune.
He is not alone. Many exporters have been complaining about the issue recently. They claim it is not normal for prices at the ECX to remain stable, while international prices waver, usually in a downward slide.
The export coffee market is a futures trade, where deals are made now for coffee shipments in future months. Usually traders look at price forecasts for Arabica coffee in the “C” category of the ICE market for the months when their clients demand shipment. They add a 10 to 50 cent margin to this price for washed coffee, like Yirgachefe, Sidamo and Limu, or deduct three to 20 cents for dried coffee, like Harrar, Sidama grade four, Jimma and Nekempt, when quoting prices to interested buyers, according to Fekade Mamo, who has been trading coffee for 40 years and who now runs Mochaland Import & Export PLC, as well as being a board member of the Ethiopian Coffee Exporters Association. Exporters then deduct their profit margin and overhead costs from the price they quoted to come up with the purchasing price to buy coffee at the ECX.
That the price at the ECX is higher than the ICE price, therefore, means that if exporters are selling their coffee abroad, as is required, they are doing so at a loss, exporters that Fortune talked to argue.
There is something else going on in the market that needs investigation and active measures taken by the government and the ECX, they insist.
Complaints, formal and informal, have reached the MoT, the ECX and its regulator, the Ethiopian Commodity Exchange Authority (ECEA), over the past two years, growing more prevalent in recent months, according to officials at these institutions.
Both the MoT, which regulates coffee exports, and exporters agree on the reasons why prices at the ECX are not reflecting true prices. Where the disagreement comes is in what measures should be taken.
The two main reasons for the price variation that exporters and the MoT mention is the contraband sale of coffee by some exporters through the local market and the presence of traders who are both importers and exporters purchasing from the exchange floor.
Both kinds of exporters buy coffee at prices that would bring them a loss, should they follow normal market channels
Contraband sales are prevalent in Mercato and also regional towns, according to Anteneh Temesgen, agricultural commodities marketing and control director at the MoT.
There are buyers willing to pay a premium price for it. This leads exporters to offer higher prices at the ECX, because they are serving a different market than the mandated international one, according to him.
Exporters are required by law to sell all the coffee they buy to foreign markets within a year. But, some exporters sell a large amount of this coffee to the local market. Although they are audited at the end of the year to see if the amount of export coffee they bought and sold matches at the end of the year, they circumvent this by adulterating the export coffee with local reject coffee when making sales abroad, until the amount levels with the amount purchased from the ECX, industry observers explain.
Export coffee can be found packed in supermarkets and in Mercato. The MoT does not, however, ask retailers to state the origin of their coffee. Instead it tries to monitor exporters as they transport the commodity within the country, Temesgen says.
The Ministry identified 26 exporters, four months ago, who bought coffee but have no record of selling it on the international market, according to Temesgen. These exporters have not been apprehended, however, as they could not be found by their address.
The Ministry has also taken possession of 519,262 kg of coffee from the black market and 35,939kg from each of the five inspection points on roads that exit Addis Abeba, including Wolega Ber, Gojam Ber, Dessie Ber, Akaki Ber and Jimma Ber. This is an insignificant amount when compared to the ever increasing contraband sale of coffee in the country, Temesgen says.
The closing of the inspection point in Jimma Ber in the Oromia Region, over six months ago, has caused an increase in the prevalence, according to Temesgen. This was because the region refused to have an inspection point on its borders.
“We are talking with them to put it back, because this is the main gate through which coffee is transported,” says Temesgen.
There are other exporters who are also importers, that sell the coffee they buy at inflated prices from the ECX to the international market, whilst incurring a loss, according to Temesgen and the exporters Fortune talked to.
It is claimed that they use the exports to subsidise their foreign currency needs for imports. From this they gain large profits, which more than compensate for the losses sustained from exports. Although foreign exchange earnings from exports go to the government’s reserve, exporters that brought in the earnings get priority when requesting foreign currency from banks for imports.
Exporters that do not fall into this category cry out that such practices should be stopped.
“I often analyse NBE data on the total price at which coffee is sold in the international market,” Fekade from Mocha Land told Fortune. “Usually this is much lower than the ECX price for the same amount of coffee, plus overheads, meaning most exporters are selling at a loss. Thus, measures should be taken.”
Another exporter suggests setting the starting price of the day, in a way that considers the ICE prices.
“The ICE prices of the day minus overhead costs should be used as the starting price, at the beginning of each trading day,” suggests Girum Tamerayehu, from Kafe Limu PLC, also a founding intermediary member of the ECX.
Previously, there was a rule that the starting offer of the day at the ECX must not increase or decrease by more than five percent from the previous day’s prices. This was lifted a year ago, however, as it was cited as one of the reasons that the ECX prices do not match the ICE prices.
However, this measure has not abated the problem and ECX officials are reluctant to take another one, perceiving interference in the prices offered by exchange actors as overstepping their bounds.
“The ECX is responsible for providing a formal stage where actors can buy and sell commodities,” Anteneh Assefa, CEO of the ECX, told Fortune.
“While we provide contracts, warehouses, grading and quality certification, as well as clearance services by partnering with banks, we cannot interject ourselves into the market and tell clients what prices to offer,” he added.
ICE prices and ECX prices are shown both on the ECX floor and on the 31 price tickers across the country, so that there is market transparency.
After the ECX provides such a stage, it is the exporters, buyers and suppliers that determine the prices, according to Anteneh. He reveals, however, that the ECX would take some risk management measures in case prices show a dramatic variation.
Temesgen, from the MoT, also insists that the government cannot get involved, if exporters offer high prices and sell at a loss.
“It’s a free market,” he claims.
But, for exporters like Fekade and Girum, it is in the government’s interest to start controlling prices now.
“Exporters that do not have the option of compensating their loss by imports will soon be out of business, or decrease the amount of coffee they sell,” Fekade told Fortune.
Fekade says his company, Mochaland, which operates with a working capital of 30 million Br, only sold 4000tn of coffee in the 2012/13 fiscal year. This is a significant decrease from the 1,500tn they sold the year before.
“The transactions I made were only for clients I could not afford to lose,” he said. ”But my turnover this year was not enough to cover our office rent.”
To verify exporters claim, the ECAE embarked on an in-house study two weeks ago. It plans to analyse data and see if exporters are indeed selling at a loss, or complaining because their profit margins are lower, according to Addisalem Balema, director general of the Authority.
“Decisions will be made after the results come in, three or four weeks from now,” he told Fortune.
The ECX, for its part, is trying to settle once and for all why the prices on its floor do not match the ICE. In September, it hired an external consultant to identify the reasons why the ECX prices are different from the ICE and to make recommendations on how to rectify this, according to Anteneh. The CEO declined, however, to disclose the company name, due to a confidentiality agreement. The results are expected to come in a month’s time, according to Anteneh.