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Ethiopian Coffee Exporters Awaiting Devaluation, Exchange Says
By Jason McLure
March 30 (Bloomberg) -- Coffee exporters in Ethiopia, Africa’s biggest producer, are stockpiling beans in anticipation of a further devaluation of the national currency, the Ethiopian Commodity Exchange said.
The stockpiling has contributed to a decline in export revenue that has been exacerbated by a poor harvest, falling world prices and a ban on Ethiopian beans in Japan, Eleni Gabre- Madhin, chief executive officer of the exchange, said in an interview on March 27 from the capital, Addis Ababa.
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what was your role in seizure of coffee stocks of private exporters?
I thought you are there to promote and encourage the private sector but the news we heared here started to portray your aligiance with Meles Zenaw’s communist approach.
What’s going on ?
Has anyone paid attention as to how deep the Birr has been sinking in relation to the US dollar and other currencies in the parallel market(black market)?
Let’s the blame game continue…
he Bragging of Free Economy, I thought included the keeping of commdities by merchants to sell when viable.
Great Dr. Eleni.
You are indeed the renaisance lady of Ethiopia.
Her empty vision is falling apart along with Woyane
Commodity is one of those terms open to many interpretations. The Marxist have their own definition of what a commodity is. To the Marxist using the labor theory of value ‘a commodity is any good or service produced by human labor and offered as a product for general sale on the market.’ In today’ economy a ‘commodity exchange is where farm products (coffee, wheat, cocoa) or raw materials (oil, metals) are traded.
Commodities exchange trading is where they trade on future products on commodities. A Sidamo coffee farmer can sell a future contract on his coffee beans that will not be ripe for a few months more or an Ada teff farmer can sell a future on his harvest next season. This sort of contract protects the farmer from price drops and the merchant from price rise.
A few of the World famous exchanges are Chicago Mercantile Exchange (agriculture, metals, energy) Kansas City Board of Trade (agriculture) Dalian (China) Commodity Exchange (agriculture) and Brazilian Mercantile and futures Exchange (agriculture, biofuels)
A stock exchange is where a ‘corporation or mutual organization provides a trading facility for stockbrokers and traders to trade stocks and securities. A stock exchange is used by corporations and companies to raise capital by selling shares, grow by acquiring other companies and generally make money circulate instead of sitting in a saving account or under a mattress.
The Chicago Board of Trade was established in 1848. Up until then most future contracts were not always honored both by the buyer or seller. The new Board was designed to minimize credit risk. The members of the Board set up the rules and run their organization independent of the long arm of the State.
Please not that the common theme in the above story is the founding of the exchange was purely a voluntary act by the traders. It was created to facilitate trade and protect both the farmer and the merchant from unscrupulous individuals.
Now we come to our infamous ‘commodity exchange’ that appeared out of the blue with much fanfare in 2008. Major wire services wrote gushing reports about it, Bloomberg quoted the new director, Reuters sent out alerts and even VOA commented about it. They all agreed it was a giant step for Ethiopian farmers. They dutifully reported what was handed to them.
As usual ‘Donor’ countries poured in money (ten million in two weeks were pledged) to help set it up. Building was erected to mimic the Chicago exchange. Electronic system was put in place and warehouses were built. Thus for all practical purpose the physical structure was in place.
I am glad you can see what I am leading to. We Ethiopians are most familiar with this scenario unfolding in front of our eyes. We know it is not going to work. We have seen this ‘theatre’ before.
The question is did those that set up the system really thought that it would work? When you consider that there are no free farmers in the country, that there is absolutely no trust in the government or its institutions, that there is no law other than the word of the Prime Minister and no free media to exchange information how in the world could you have such a purely capitalist enterprise function in a closed society.
If it does not work why set it up? Simply put the intention was never to help farmers or merchants. It was just another TPLF mechanism for more control of what is left of the independent business. They said it themselves. The Newsweek reporter Jason McClure quotes the director ‘Traders other than large growers and co-operatives that sell directly to international buyers will be forced to use the bourse, exchange director Eleni Gabre-Madhin said today.
So the Ethiopian Commodity Exchange (ECX) was inaugurated with lots of fanfare. Peter Heinlein of VOA wrote again quoting the director “The opening of the new exchange has unleashed a torrent of entrepreneurial spirit. Gabre-Madhin says”. So what happened? Let us just say they gave a party and no one showed up!
They passed a law in August to regulate the coffee industry. In other words to nudge the independent merchants to submit to the authority ECX. The Prime Minister went to parliament and threatened to ‘cut the hands’ of the merchants that refused to deal with ECX. Again The PM threatened to confiscate all coffee that is not under the control of ECX. Hording was the reason given for this draconian action.
Coffee is Ethiopia. Coffee was our number one export during the Emperor’s reign. Coffee sustained the brutal Derg. Coffee is Woyane government’s lifeline. Control of the trade of coffee is a must for the minority regime. ECX was a vehicle to take control of the independent merchants and drive them out of the coffee business.
Our merchants and farmers were too smart for that. They refused to be led to the slaughterhouse willingly. No amount of threat and coercion was effective against those that have survived numerous trials and tribulations the last thirty years. TPLF was forced to show its ugly face in broad daylight. The Ethiopian people are not new to government confiscation of property, wealth and their children. It is just another criminal action by a government against its own citizens.
So as usual we heard the news and we sighed. We are so used to TPLF abuse and disrespect it did not raise an eyebrow let alone indignation. When they killed Assefa Maru we were quiet. When they murdered Professor Asrat we shrugged it off. When they arrested Bekele Jirata we were silent. The arrest of Judge Birtukan did not bother most of us. Thus confiscation of tons of coffee from private warehouses is just another chapter in our saga of humiliation by the illegal regime.
Starting an exchange without the good will and participation of the people affected is not rational. Imposing from above is a recipe for failure. Merchants are in business to make money. They buy low and sell high. Selling for less than the cost is suicide. Now the government has the coffee what comes next. International coffee price is depressed due to the market melt down. What is TPLF’s next move? Of course they can sell it for any price since they did not pay for it. How about next season? The smart merchant is pushed out of the business what is left is cadre merchants. Good luck Ethiopia.
Thanks for your comments I hope Woyane boys understan it.
The report as well as the interview of Eleni is full of contradictions. The arguments contradict each other.
Here are main points.
1) Japan refused to take Ethiopian coffee. In this case the coffee traders have nothing to do with it. It implies there was more coffee to export if Japan was willing to take. But we hear that stores were empty. This would have resulted Ethiopia to have more coffee to be exported other than Japan.
2) Poor harvest. What can the traders do to show more in stock if there was close to 15% decline in harvest? Is it not true that a 15% decline in production could also result in 15% decline in export?
3) World price of coffee was dawn. Welcome to elementary principles of economics. When price goes dawn no body will sale more of that product.
4) Birr will soon be devalued. Hey, once you hear value of birr will go dawn soon, then how can you sell your stuff with cheaper money at lower price today than tomorrow?
The above points contradict one another and their effects go to different directions not to one point. Recent reports indicate traders are doing things as usual. So what is cooking there is anybodies guess. The clear thing is the government is starved for foreign currency. Government seems to blame others for its own failures.
asmamaw your comment is very interesting, you said
“Merchants are in business to make money. They buy low and sell high. Selling for less than the cost is suicide.” …
that is very true but what about hoarding? isnt hoarding of items wrong and illegal. the details are not clear but what happened could be that the traders were selling the coffee to different buyers like controband making more money than they would through ECX which sells the coffee at the market price. it seems to me the traders are at fault too for trying to dictate the rule and hurting the country and themselves at the end, instead of buying and selling legally.
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