African Coffee Production—Opportunities and Challenges

08 August 2018

When one thinks of coffee-producing countries, Brazil and Colombia are sure to come to mind. However, Ethiopia and Uganda are also among the top-ten coffee producing nations. These countries are positioned to boost their production rapidly over the next five years, but only if they can capitalize on domestic demand, successfully market to international buyers, and work towards greater efficiency in their operations. And with top producers like Brazil and Vietnam holding such a large share of global output, any upsets to production in these countries could have great implications for global supplies and trade. Gro Intelligence subscribers can easily monitor weather, trade, and production data to predict coffee market events.

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Background
Ethiopia and Uganda
Working Towards Sustainability
Conclusion

Background

As incomes rise around the world, people seem more interested in drinking coffee. And we can’t seem to get enough of it—Canada consumes an average of 6.7 kilograms per capita annually, Brazil 6.2 kilograms, Italy 5.8 kilograms, and the United States (US) 4.5 kilograms. A US consumer survey found that Americans are crazy for caffeine, and that “52% of coffee drinkers would rather go without a shower in the morning than give up coffee.”

Brazil ranks as the top producer of coffee by a wide margin, with output reaching 3.36 million tonnes last year. Vietnam comes in second at 1.6 million tonnes, and Colombia third with production reaching 876,000 tonnes in 2017. However, crop sensitivity to fluctuations in temperature and precipitation makes coffee subject to market volatility, so El Niño weather patterns in South America could mean trouble for two of the global powerhouses. Drought conditions are worsening, which decreases coffee production, reduces navigable waterways for cargo transportation, and contributes to wildfire spread.

Frosts in Brazil can also greatly affect supplies. The country produces over a quarter of all coffee worldwide, and this supply can be devastated by frost in just one day. Freezes greatly hurt production in the 1970s and 1990s, causing coffee prices to jump to record highs. Frosts tend to occur in the southern areas of the country, which caused producers to move north into warmer growing regions. By relocating and avoiding frost, global stockpiles started to grow and prices fell. However, coffee is still grown in the southern regions, which could put the global market at risk whenever Brazil experiences unfortunate weather events. And because the damage to production from a frost can take some time to become apparent, the market will continue to remain cautious during Brazil’s cold months.

Weather events like drought and frost can greatly affect global coffee markets and trade, but can lesser-known, smaller producers like those in Africa step up in the absence of top producers?

Ethiopia and Uganda

Ethiopia currently sits as the world’s sixth largest coffee producer. The industry employs approximately 15 million people and accounts for 28 percent of the country’s total annual exports. Arabica coffee originated in Ethiopia, and consumers know the country for its Yirgacheffe, Sidamo and Harar bean varieties. Production in 2017/18 reached 416,580 tonnes, with steady growth occurring nearly every year since 2002. The USDA anticipates that Ethiopia will produce 426,000 tonnes of coffee in 2018/19 and export 239,000 tonnes of it.

Uganda ranks eighth on the list of global coffee production. The country grows very little arabica coffee compared to Ethiopia, with robusta comprising 82 percent of total production. robusta coffee is indigenous to Uganda, and two main varieties—Nganda and Erecta—are grown specifically for their suitability for the growing instant coffee industry. Last year the country produced 216,000 and 45,000 tonnes of robusta and arabica coffee, respectively, and exported 270,000 tonnes in total. The USDA forecasts that Uganda’s 2018/19 total coffee production will reach just over 287,000 tonnes, a 10 percent increase from last year. Exports should jump back up to the record 2016/17 volume of about 276,000 tonnes this year.

The African Fine Coffees Association (AFCA) has a positive outlook for the continent’s future coffee production. The organization reports that farmers are working on optimizing their operations by planting more coffee trees and by penetrating new markets to boost sales. Uganda, for example, recently eradicated a wilt disease which had wiped out a significant number of robusta trees since it was first found back in 1990. Now, Uganda is in a prime position to rapidly bolster production. The AFCA believes Africa’s total coffee production could almost double over the next five years, giving the continent a more considerable presence on the global market.

To further increase production, Uganda seeks to target domestic consumers. Coffee retains its longtime cultural significance in Ethiopia, but consumption in Uganda has historically been low compared to that of cheaper tea. However, as Uganda’s urban middle class grows, so does its taste for coffee. As production expands, the beverage is becoming more affordable and widely distributed throughout the country. Higher demand in their domestic market will protect farmers from global market volatility, which can be fatal for producers who are unprepared for a brief demand shortfall.

Working Towards Sustainability

Like the rest of the world, African coffee producers face obstacles to future production. Climate change presents a hurdle to farmers, especially smallholders who may not have access to capital to help them adapt to changing conditions. Droughts are becoming more common, and many producers do not have the necessary irrigation equipment to combat the dry conditions. African coffee yields tend to be low, as growers may not have access to new coffee plant varieties or costly inputs such as fertilizers and agro-chemicals. Many producers also suffer from a lack of support services like training and advice from extension programs which could greatly increase productivity.

Despite these challenges, many are working towards solutions. Programs such as the Jimma Agricultural Research Centre (JARC) in Ethiopia and the National Crops Resources Research Institute (NaCRRI) in Uganda help conduct vital research and provide farmers with pertinent growing information. The programs perform research to breed new coffee varieties which are more resistant to pests, diseases, and a changing climate into the hands of farmers. Sustainability initiatives will also be important for the future of the African coffee business. Organizations like the FairTrade Foundation and Rainforest Alliance are actively working with farmers in East Africa to increase sustainable farming practices.

These programs could augment revenue and assist farmers by marketing their sustainable products to larger consumer markets in Europe and the US. Many consumers in these wealthier nations are increasingly willing to purchase specialty coffee at a higher price when they see FairTrade or Rainforest Alliance labels. These labels indicate that the product was sustainably produced, is more economically beneficial for the farmers, and is grown in a manner that lessens environmental impact. African coffee would undoubtedly benefit from practices that increase production and help integrate products into niche markets around the world.

Conclusion

Coffee consumption is increasing—and not just in the US—with no signs of slowing down. The international market is very susceptible to volatility caused by demand and production fluctuations, and increasing effects from weather phenomena such as El Niño on South American producers will further exacerbate price turmoil. African countries like Ethiopia and Uganda are significant coffee producers, but have faced constraints to increasing production like lack of capital and extension service support. However, domestic demand, farmer support programs, and farmer training are increasing. If those countries can boost their market profiles and shore up their finances by targeting niche consumers in wealthier countries, they could be better prepared to profit at times when other producers have occasional lapses in production.

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