Ethiopian coffee structure and supply chain
Ethiopian coffee structure and supply chain
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We have been buying coffee through Nordic Approach (a green bean wholesaler based in Oslo) from cooperatives, private farmers, and washing stations selling coffee through ECX, with whom they have built trusting relationships over the years.
In 2017, the system and rules changed, and it is now possible to buy coffee beans directly from private washing stations.
All the washing stations we are associated with buy coffee cherries directly from hundreds of small farmers in the surrounding area.
This system means that a single lot of coffee contains coffee cherries from hundreds of growers.
Small farmers in the surrounding area grow mainly the original variety (Ethiopian Heirloom).
The coffee beans harvested by each farmer are delivered to the washing station on the same day and tagged with the date and grade.
Coffee beans are processed by traditional full-washed, eco-pulping (using machines that can remove even the mucilage) or natural refining.
The cooperative's coffee is traded directly with the governing body cooperative and by marketers and exporters involved in all coffee sold by the Ethiopian cooperative.
For the last few years, coffee from privately owned washing stations has been traded through ECX (Ethiopian commodity exchange).
These coffees have been selected purely based on flavor profile and personality after several cupping iterations in the field by Nordic Approach.
In 2017, private washing stations that are not part of a cooperative can now sell directly to importers.
This full disclosure makes it possible to trace 100% of the production to where the coffee is produced.
How this will affect the market in the future is impossible to predict at the moment, but it is undoubtedly a good thing for roasters, producers, and exporters.
Ethiopian producer
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Producers in Ethiopia are mainly family-owned businesses with small farms.
The average farmer's plantation is less than one hectare in size.
Most coffee is grown organically; organic fertilizers are common, and they do not do much pruning.
Farmers usually grow no more than 1,500 coffee trees per hectare, and each tree produces cherries equivalent to approximately 100-200 grams of green coffee.
Cooperative (agricultural cooperative) system
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Cooperatives can sell coffee as a traceable commodity.
Even coffee beans that do not go through ECX will be sold through cooperatives.
Coffee is sold and exported by cooperatives in each area.
For example, coffee from Limu is sold and exported by the Limu cooperative, and similarly from Oromia by the Oromia cooperative.
Agricultural Cooperative Coffee and Supply Chain
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Small family farmers can sell small quantities of harvested coffee cherries to collection sites (markets) or washing stations.
Farmers can choose from a range of agricultural cooperatives or privately owned wastelands to trade with a wasteland willing to pay a higher price.
Producers receive payment based on the price determined by the day's market rate.
In many cases, the cooperative buys coffee at a higher price, and the cooperative receives a second payment (dividend).
The cooperative's washing stations are thoroughly sorted, including flotation and screening to produce premium beans such as Grade 1 & 2 and manually remove defective beans.
They refine either Washed or Natural depending on the time of year and water source conditions.
Farmers' cooperative washing stations deliver the dry parchment to the regional ECX exchange, where they grade beans.
They divide the coffee into grades 1-5 according to physical quality differences and flavor profile.
The coffee is labeled for origin and quality before being sold to buyers through cooperatives.
After grading, they store the coffee in Addis Ababa or a separate warehouse.
After the lot has been delivered to the warehouse, the cooperative provides samples for cupping.
Usually, they offer one lot in units of 100 bags.
We can sort coffee from different agricultural cooperative washing stations within the cooperative.
The most critical factor in selecting the cooperative and production partners is the state of control of lot sorting, with particular emphasis on the system's content and transparency.
The coffees are Grade 1 coffees, selected after cupping and careful selection of hundreds of samples received from privately owned washing stations sold through ECX.
At present, ECX limits the traceability of coffee from private washing stations.
Only cooperatives and farmers (landowners) with a production/export permit can sell and export coffee as a traceable commodity.
However, Grade 1 coffees are graded by ECX by region and area, ensuring that low-quality, flavor-poor coffees are rarely found in ECX coffees.
We also know how much smallholders are paid in terms of commodity, processing, and sorting, how much they are paid (based on the cherry price of the day) and how much effort producers put into producing good quality beans.
ECX coffee and supply chain
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Small family farmers can sell small quantities of harvested coffee cherries to collection sites (markets) or washing stations.
Farmers can choose which washing station they wish to trade with, with the farmers' cooperative or private refiner paying a higher price.
Producers receive payment based on the price determined by the day's market rate.
In the case of high competition, private refiners (washing stations) always pay a premium over the market price to attract farmers.
Washing stations thoroughly sort by flotation and screening to produce premium beans, such as Grade 1 & 2, and by hand to remove any defects.
The beans are processed as either washed or natural refining, depending on the time of year and water source conditions.
Wet mills deliver dry parchment to the regional ECX exchange, where they grade beans. They divided the coffee into grades 1-5 according to physical quality differences and flavor profile.
Before being sold through ECX, the beans are labeled with the region of origin and quality.
Exporters schedule what they buy depending on the grade and the region where they are produced.
Generally, Yirgacheffe Kochere Grade 1 is the most commonly traded.
Usually, a limited number of producers offer Grade 1 coffee beans at certain times of the year.
Exporters also have information on which producers' coffee is available at a given time of year.
Coffee is sold to exporters through ECX at a minimum price, which fluctuates according to various factors such as weather, supply, and demand.
Lots purchased by exporters are transferred from local warehouses to warehouses designated by the exporter.
After they conclude the deal, the exporter provides samples of the coffee to the buyer (from whom we are buying).
Based on the samples provided, we sort coffees from different exporters and regions to find the specific profile we are looking for.
Some exporters stick to Grade 1, while others specialize in top-quality or specialty markets.
The state of control of lot sorting, the system's content, and transparency are essential factors in choosing an exporter.