Ethiopian farmers are considering dropping out of the coffee production business as the global price of the commodity drops to its lowest point in 13 years.
Ethiopian coffee growers are worried about a global slump in prices, which fell to the lowest point in September, and are beginning to question the future of one of the country’s top commodity exports.
The trade of coffee, tea, and spices represented 200 million dollars in earnings for Ethiopia last year.
The main cause driving the slump in the price in the arabica species, meaning“mountain coffee,” is Brazil’s unusual coffee crop yield—also known as a bumper crop in business jargon.
The Brazilian crop supply rocked the price of arabica in the New York stock exchange and the ICE Futures U.S. Exchange.
Brazil is the world’s biggest producer followed by Vietnam and Colombia.
In 2018, the amount earned by farmers for their beans fell by a third impacting the already low wages generated by the crop which represent about 1 cent for every cappuccino cup sold in western countries, according to Weekly Times.
“We are losing hope. We are not reaping as much as we should and I am worried this will have a huge impact,” Gerardo Cafeto, a coffee farmer in Ethiopia’s central highlands, told Reuters.
Gafeto’s earnings for a cappuccino cup sold in western countries ranges from 1 to 4 cents. This marks a stark decrease from previous years where he would earn approximately 29 cents for each cup.
A key factor to consider for farmers who operate in the coffee export activity is the lack of added value to their product. “There hasn't been a really significant change in how coffee has been transported, purchased or produced in many decades. It has just always been extracted from the country,” said Rob Terenzi, co-founder of Vega Coffee in the United States.
Ethiopians export mostly raw unroasted beans to industrialized countries who then process the crops—adding value to the raw product—prior to consumption.
“It is labor intensive and costly. They were struggling as things were before, let alone now prices have gone down. We fear they could abandon the crop en mass,” said Desalegn Demissie, director of the Shebedino cooperative development office.
The global slump is also likely to produce similar reactions in other traditional coffee producing regions such as Central and South America.