Ethiopia Halts Coffee Auctions, Moves to Exchange

November 28th, 2008 | by addis portal |

Nov. 28 (Bloomberg) — Ethiopia, Africa’s biggest coffee producer, has halted daily auctions and will begin trading the beans on the national commodity bourse from Dec. 2 to reduce fraud and help reassure buyers of quality.

The Ethiopia Commodity Exchange, which began trading corn and wheat this year, opened eight warehouses in growing areas and will take control of the country’s grading and quality control system. Traders other than large growers and co-operatives that sell directly to international buyers will be forced to use the bourse, exchange director Eleni Gabre-Madhin said today.

“This is an important signal to the world that Ethiopia’s domestic market is trying to clean up its act,” she told reporters in the capital Addis Ababa. “Ethiopia loses a significant premium on international markets because of its inability to meet certain standards.”

Under a coffee law passed in August, the country is seeking to regulate an industry that employs 1.2 million growers and accounts for 35 percent of export earnings. While Ethiopia, on the Horn of Africa, shipped $525 million of coffee abroad last year, its beans aren’t used in setting benchmark international prices because of inconsistent quality, Gabre-Madhin said.

Top-grade coffees from the regions of Sidamo, Yirgacheffe, and Harar sell for almost twice as much as some other areas, and samples of traded lots are often fraudulently switched, she said.

“Exporters faced the risk that what they bought wasn’t what they paid for,” Gabre-Madhin said. “There has been a lot of adulteration of coffee” and “leakages from one region to another. All of this is designed to address that.”

The new law includes jail terms of three to five years and fines of almost $5,000 for those rigging coffee quality.

The changes also seek to strengthen the position of farmers over middlemen who have more information about coffee prices, Gabre-Madhin said. “Ethiopia’s farmers get the lowest percentage share of the export price of almost any country,” she said.

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