Ethiopia holds a significant position as the third largest #Arabica #coffee producer, considerably impacting the physical pricing of dry processed coffees. However, there is significant variability in the production and availability of the coffee in this country, so it is essential to understand its production geography and distinct harvest cycles.
In this article, we are going to present a detailed examination of Ethiopia's vital coffee-growing regions, offering insights into production trends and their relationship with weather variations on this origin.
Ethiopia Producing Regions & Harvests
Ethiopia’s coffee production is divided into 5 main regions that share similar climates, elevation and harvesting cycles, given their proximity to one another.
These factors make Ethiopia especially suitable for Arabica growth. The topography includes elevated lands, averaging 1675 meters. This high altitude, coupled with temperatures near 77°F (22°C), are ideal conditions for the cultivation of Arabica, the more expensive and flavorful coffee bean.
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The climate and smallholder nature of Ethiopian coffee farms also favor Natural processing (dry processed, 70-80%), although Washed coffees (20-30%) are also a component of Ethiopia’s output and increasingly more common.
This origin has consistent, moderately warm weather during the harvest. This lack of rain facilitates the drying process of the beans under the sun during that period. However, washed coffees are also heavily present in Ethiopia, especially in key regions such as Sidama and Yirgachefe.
Like other origins north of the Equator, harvest in Ethiopia takes place inside the Oct-Jan timeframe, with subtle variations. Yet, a smaller volume (~5-10% of the crop) is collected during Feb-Apr. The main coffee producing regions classified by the Ethiopia Commodity Exchange (ECX), in descending order of crop size, are Sidamo, Yirgacheffe, Limu, Djimma, and Lekempti.
For our purposes and given that sometimes one region encompasses the other, we can analyze a few of them together.
Sidamo & Yargacheffe
Harvest: October to January
Based in the central highlands of the country, these are Ethiopia’s most famous growing regions, not only because they produce the majority of the Ethiopia’s coffee (~48% of total output) but also due to its reputation of offering high-quality coffees, beyond lower grades. These are the key regions one wants to focus when analyzing weather impact on Ethiopia’s coffee production.
Together, they produce a mixture of washed (~60%) and naturally processed (~40%) coffees. For context, Yargacheffe is a part of Sidamo, which is also known for providing high altitude specialty lots, but a problem is faced in the specialty industry there, as the small holder producing nature makes traceability and quality control difficult.
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Limu & Djimma
Harvest: November to January
Produces the second largest portion of Ethiopia’s coffee, at an estimated 2.5m bags/year (~33% of total). Located in the southwest of the country, these regions are heavy on commercial coffees, being Ethiopia’s pinnacle of standard beans. Like the other regions (such as Sidamo), Limu and Djimma count with high lands averaging from 1,400–2,200m (4,600–7,200ft).
Both regions produce Natural coffees. While Limu is slightly larger in proportion, producing a mix of Washed and Natural coffees, Djimma has its focus on the typical sundry processed beans.
Lekempti
Harvest: February to April
Going more to the north, we have Lekempti, which produces an estimated 7-10% of Ethiopia’s production, averaging 700k bags/year. Lekempti grows high altitude Arabica Naturals, and it's known for the fruity and caramel smell. Another point worth noting is its delayed harvesting calendar, when compared to the other main regions: Lekempti starts its harvesting works in Feb rather than in Oct, and so rainfall season there normally starts a few months after its counterparts.
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Harrar & Others
Harvest: October to January
This is one of the oldest producing regions, surrounding the small town of Harrar. Considered to be one of Ethiopia’s original grades, coffees from this region are often high-quality and grown in environments requiring extra irrigation. When summed with other smaller provinces, it makes up for an estimated 600k bags per year (~8% of total), mostly of Natural coffees.
Weather Impact & Production in Ethiopia
Climate change is a hazard to Ethiopia coffee crops, as it has been impacting rainfall cycles, while incrementing a small increase of 0.3°C (~0.54°F) in temperatures each decade. Unbalanced rain and temperature increases add to plant stress, which in turn, can affect the crops.
Ethiopia’s typical light rainfall ultimately favors the Arabica Naturals (dry-processed) industry, but there were cases in which this caused the coffee crops to fail. This was evident in 2009, after consecutive poor rains reduced production by 18.6%, pushing it from 6.8m bags down to 5.5m in a year. It was only several years later (in 2016) that Ethiopia would recover back towards 7m bags.
Many aspects of drought in Ethiopia remain poorly understood, but some studies show a correlation to the cooling phase of El Niño, which was in fact present during the 2008-2009 period. At present, we have entered an El Niño period, and although impacts to East Africa aren’t highly correlated (from a historical perspective), potential reduced rain in Ethiopia is a point to monitor.
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From a coffee farmer’s perspective, as temps increase, the tendency is to move to higher altitudes to compensate. Since Ethiopia’s regions are highlands, there’s ostensibly the option to move the farm.
However, the predominance of coffee farmers in Ethiopia are small-scale and they often lack the resources to easily move. This is why some of them opt to switch from coffee to khat, as this plant is more drought tolerant. This makes competition for land (coffee vs other plants) another factor to monitor.
Relation to the Futures Market & Global Trade
Ethiopia is especially important for physical coffee traders of Arabica Naturals, roasters, as well as KC futures market traders and members of the specialty industry in the European countries. The reason is simple: this origin is a major source of Arabicas.
Ethiopia is the 3rd largest producer of Arabica coffee, at an impressive 7.4m bags per year, and the second largest source of Naturals. As such, this makes Ethiopia particularly important as a compensating source of Naturals when the crops are down in Brazil. This was the case in 21/22 and 22/23, when Brazil experienced large weather issues from frost and drought.
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By that time, coffee exports from Ethiopia increased by 11%. This was far from offsetting the losses in Brazil, but surely an important option to consumers and those dealing physical Naturals and watching their differentials. Moreover, demand for Ethiopian specialty coffee is growing, placing regions such as Sidamo and Harrar in an increasingly important position.
Ethiopian coffees are also a major source of hedging pressure. Even though these coffees are naturals, they are still Arabicas which means that they are hedged vs NY. However, the hedging only occurs once these coffees have been purchased by multinational trade houses, as the closed Ethiopian economy makes it impractical to hedge.
Ultimately, Ethiopia’s large Arabica production is an essential piece in the global coffee balance sheet, as it can easily add or remove a 1m bags. Its weather vulnerabilities and land competition are crucial factors to watch, especially now that El Niño is present. The last few years has seen the Arabica market in deficit and now hovering near balanced, which makes monitoring Ethiopia’s key producing regions, all the more essential to understand the global price of coffee beans.
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