Market Insight
Coffee Crisis and the Birr
A small window into how the current coffee price crisis has a real effect, not only on the lives of millions of farmers in producing countries, but on the economies of those same countries and the lives of millions of their citizens.
A Market Wreaking Havoc on Local Economies
The market is wreaking havoc in the local economies of small countries that depend heavily on the hard currency generated by coffee exports. Like Ethiopia.
The Birr Exchange Rate
Today, the black-market rate for USD to Birr in Ethiopia has reached, if not surpassed, 43 birr per USD, while the official rate stands under 29 birr per USD. That’s a 50% premium.
This time last year, with New York at 110 cts/lb, the black market was paying 34 birr per USD, a 26% premium over the official rate of 27.25 birr per USD.
This reflects on the cost of everything in the country, from luxury cars to medicines, food, and the industrial inputs the country needs to keep its economy going.
Why Coffee Is at the Center of It
This dysfunctional exchange rate has a lot to do with coffee, the commodity we can’t live without, but that apparently we don’t want to pay too much for.
“Coffee generates a big chunk of those US Dollars the country needs.”
But the international market is paying around 78 cts/lb for Ethiopian natural coffees, the bulk of the country’s production, when the production cost for this coffee is 105 cts/lb.
Who Absorbs the Loss?
Of course, the situation is complex, and it is this “black market premium” that is helping protect farmers from the brunt of the price disaster.
- Farmers and middlemen still get paid around 93 cts/lb when they deliver this coffee to the Exchange.
- Exporters take the losses. They process this coffee, move it to Djibouti, and sell it at 78 cts/lb.
Sustainable?
Source Ethiopian Coffee With Us
From our own washing stations in Sidama, Yirgacheffe, and Guji, we follow every lot from ripe cherry to export.
Explore our coffees, or tell us what you are looking for and we will keep you close to the season.