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Africa's Largest Coffee Producer Revamps Trading System


Ethiopia, Africa's biggest coffee producer, is abandoning its traditional auction system and transferring all coffee-bean trading to a recently-opened national commodity exchange. VOA's Peter Heinlein in Addis Ababa reports the changeover marks a revolution in marketing procedures designed to bring Ethiopia into the world coffee-trading system.

It is the opening bell on the opening day of coffee trading on Ethiopia's fledgling commodity exchange. And it is busy.

Since all coffee trading must go through this bourse, the exchange already has a projected annual volume of 225,000 tons of coffee. Half of that will be exported, earning the impoverished African nation $525 million, or nearly two-thirds of its export income.

Traders newly outfitted in jackets, brown for sellers, green for buyers, immediately go to work keeping an eye on the New York benchmark price, posted on signboards above the trading floor.

Ethiopia's Commodity Exchange Director Eleni Gabre-Madhinn watches the chaotic opening with a smile. The bourse is her creation, but it has struggled to stay alive in the six months since it opened. The price of its main traded commodity, maize, fell nearly 44 percent. Trading was almost non-existent.

She says the enthusiasm for coffee trading signals a new era for a country that proudly calls itself the birthplace of coffee.

"The entire system is underlaid by a highly automated system. In 11 seconds we can reconcile the orders, check if warehouse commodity exists, if the buyer has enough funds in their account. We are displaying the New York prices. It is 113 cents a pound today. It is updating every five minutes."

The New York price is at once an incentive and a constant reminder that while coffee is the lynchpin of Ethiopia's economy, this is not one of the 19 nations whose beans are used in setting world prices. Gabre-Madhin is determined to remake Ethiopia's reputation for inconsistent quality.

"Ethiopia is not one of these 19 countries," she said. "Ethiopia does not have deliverable growth status on the New York market. The reason for that is Ethiopia has not been able to maintain consistent quality and reliable delivery, precisely the things that ... are the advantage of selling on the exchange system."

Ethiopia's more than one million coffee growers are hoping this new exchange will prevent the inconsistencies that have hurt the country's reputation, even though its Sidama, Harar and Yergacheffe brands are considered among the world's finest.

They are being helped by a new law that sets jail terms and stiff fines for anyone caught mixing or misrepresenting Ethiopia's premium brands.

For exporters such as Abdullah Bagersh, the changes mean the buyer can be sure what he buys is what he pays for.

"It is a new way of doing business," he said. "The intention is it will be more transparent and more regulated. And I think these will bring good things to the industry."

Exchange director Gabre-Madhin says studies have shown that under the old system Ethiopian farmers received a lower share percentage of the final export price than in almost any other producing country. She calls that a contributing factor to Ethiopia's persistent poverty, and predicts the new system will provide incentives to reverse the country's low production levels.

Ethiopia's production is about six bags of raw coffee beans per hectare. Agronomists say the potential is five times more.

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