Weekly Coffee News: East Africa

General News

This week's news paints a stark picture of the dual climate crises confronting different parts of the world. Central Europe is reeling from its most severe floods in two decades, with nearly six months' worth of rain falling in just a matter of days. The torrential downpour has led to the evacuation of thousands in Poland, the Czech Republic, and Hungary, but not before rivers like the Oder and Danube burst through flood barriers, submerging homes and businesses. The economic toll, while yet to be fully calculated, is expected to be significant as local economies struggle to cope with the damage.

Meanwhile, halfway across the globe, Brazil is grappling with its worst drought since 1950. Water levels in the Amazon Basin have dropped to historic lows, with riverbeds drying up, rendering key navigation routes impassable. The drought's implications are rippling through global supply chains, particularly affecting Brazil's output of oranges, sugar, and coffee—commodities vital to the world economy.

On the financial front, September, typically a tumultuous month for equities, has surprised market-watchers by posting gains. The S&P 500 has risen by 1%, reversing the sharp losses of 5% and 9% seen in 2022 and 2021. The Federal Reserve's decision to cut interest rates by 0.5%—its most aggressive move in four years—has spurred optimism, with expectations of further cuts in Switzerland and Sweden.

This policy shift has, however, sent ripples through commodity markets, particularly in coffee. Prices soared to 13-year highs on Monday, surpassing 270 c/lb, driven by fears that Brazil's drought could reduce Arabica and Conilon production. But reports of rainfall in key producing regions tempered the rally, pulling prices back down. By Friday, Arabica had closed 3.5% lower at 250.75 c/lb, while Robusta also dropped by 3.9%, settling at 5,059 USD/MT. With tight supply-demand dynamics and ongoing logistical bottlenecks, volatility is expected to persist in the coffee market until (certified) inventories are replenished and a final decision is made on the EUDR handling.

For further pricing information, refer to the accompanying weekly tables.

Ethiopia

As Ethiopia completes the fourth and final filling of the Grand Ethiopian Renaissance Dam (GERD), tensions with Egypt have escalated once again. Egypt, which relies on the Nile for 97% of its freshwater, views the dam as an existential threat. The two nations have engaged in years of diplomatic wrangling, with Cairo expressing deep concerns over Ethiopia's unilateral actions. Meanwhile, Egypt has formalized a new military alliance with Somalia, a move that may further complicate the delicate power dynamics in the region. Ethiopia, for its part, continues to maintain strong ties with Somaliland. These shifting alliances could heighten the ongoing disputes in the Horn of Africa.

Weather conditions have been partly cloudy, with rain expected across Addis Ababa and the Jimma, Sidamo, and Yirgacheffe regions. In contrast, Harrar is expected to remain dry. The early arrival of rain in coffee-producing areas of Ethiopia has sped up the ripening of coffee cherries, potentially leading to an earlier start for the upcoming harvest season, typically around mid-October.?

Ethiopia's recent decision to float its currency has resulted in a sharp devaluation of the Birr (ETB) against major global currencies. Traders are holding on to coffees with hopes of higher prices.?

Logistics continues to be a true challenge in Ethiopia. The main reasons for the delay are a general lack of equipment and shipping lines permanently rolling bookings.?

Kenya

Kenya has inked an agreement with Germany to enable the controlled migration of skilled Kenyan workers to Europe. The International Labour Organisation (ILO) hailed the deal as a significant opportunity for Kenyan professionals to access quality employment abroad while also addressing Germany’s labor shortages.

As for the weather — the rainy days have ceased, and drier, sunnier conditions are expected around Nyeri, Kirinyaga, Embu, Kiambu, and Murang'a. The combination of sunshine and scattered rains has been beneficial for the development of the new crop. Overall, the trees appear healthy as the main crop ripens across the scenic slopes of Mt. Kenya and Mt. Elgon.

Meanwhile, coffee continues to be auctioned at the Nairobi Coffee Exchange. Lower-quality AA/AB grades are gaining prominence. Currently, the demand is slow and prices remain stable. Sale 43 of the 2023/2024 season is set to take place tomorrow, September 24th.

The availability of food-grade containers is gradually improving at the port of Mombasa.

Tanzania

Tanzania has been rocked by the shocking murder of Ali Mohamed Kibao, a prominent opposition figure from the Chadema party, who was abducted and killed in Dar es Salaam. The incident has raised concerns over the country’s shrinking democratic space. President Samia Suluhu Hassan has promised a thorough investigation.

The northern regions have mostly experienced dry weather conditions with abundant sunshine. Similarly, areas in the south, including Mbeya, Mbinga, and Mbozi, see comparable weather patterns.

In the south, harvest activities are coming to an end soon. In the northern areas around Mt. Kilimanjaro, harvest is in full swing. The quality of the crop looks promising.?

Arabica parchment is reaching the dry mills operating at maximum capacity across the country. Coffees are being cleaned, hulled, graded, and prepared for export at a good pace. Robusta is traded in good volumes, increasing deliveries to Dar es Salaam and Tanga.

Physical auctions are ongoing, with the most recent one held in Mbinga (south of Tanzania) and the next scheduled for Moshi (near Mt. Kilimanjaro).

Congestions persist at the port of Dar es Salaam, primarily due to schedule changes implemented by port operators and a lack of adequate containers.

Rwanda

In an ongoing crackdown, Rwandan authorities have closed thousands of churches and prayer houses for failing to meet health and safety regulations. Officials claim the effort is aimed at protecting citizens from potential exploitation and ensuring that religious institutions comply with safety standards.

Weather conditions have been rainy, which has caused some flowering across coffee-producing regions.?

In terms of coffee, there is little going on. Washing stations are closed, and dry mills are focused on processing the remaining coffee from the 2024 crop. In addition, the National Agricultural Export Development Board (NAEB) organized the "Best of Rwanda" 2024 auction to promote the country's high-quality coffees. The winning lot was an anaerobic natural Red Bourbon, which achieved a score of 91.86 points.

Uganda

Uganda’s coffee sector is bustling as the Arabica harvest gains pace in Eastern and Western regions, with washing stations fully operational. Robusta harvesting is expected to begin in November.?

August saw a notable increase in coffee exports, with over 830,000 bags shipped—a 13% rise year-on-year. While Robusta exports surged, Arabica volumes have declined, largely due to poor flowering in the Mount Elgon region and the biennial off-year cycle, which has reduced output compared to last year.