The Role of ECX in the Ethiopian Coffee Industry

By Anteneh Assefa

TOPICS• WHAT ECX BRINGS TO THE MARKET;• ECX’S VALUE ADDITION TO THE MARKET;

• THE GTP;• EXISTING INITIATIVES;• NEW INITIATIVES;• CONCLUSIONS.

I. What does ECX bring to the Market? Core Value Propositions

•Order

• Integrity

•Transparency

•Efficiency

How does ECX Bring Order?

• Through an organized trading platform;• Through standardized contracts and standardized products;

• Through a system of Membership based participation;

• Through formal rules and procedures;• Through monitoring and enforcement of compliance to rules;

• Through managing risks to the market;

Integrity

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Integrity of Product

Integrity of Transaction

Integrity of Actors

How does ECX bring integrity?

•Through industry accepted grading and certification of the quality and quantity of products traded;

•Through warehousing of commodities traded(global std. inv. mgt.);

•Through enforcing fair competition and ethical business conduct;

•Through clearing all payments between buyers to sellers;

How does ECX bring transparency?

•Through rapid and reliable dissemination of market information to all actors- producers, processors…local, international;

•Through a system of industry-accepted product grades and standards;

•Through enforcing disclosure and audit reporting requirements for its Members;

How does ECX bring efficiency?

•Through the use of IT to promote an End-to-End system- from warehousing to trading to clearing and settlement of payments to delivery of commodity;

•Through a centralized trading platform offering low-cost service to all users;

II. ECX’s value addition to the Ethiopian coffee sector

• Secure inventory management in production area;

• Guaranteed warehouse receipts system; • Reduced mixing of coffee origins during the marketing process;

• Quality certification that preserves the origin of the coffee and establishes a finer distinction between coffee qualities;

• Trading system that ensures competition and transparency;

ECX’s value addition to the Ethiopian coffee sector (Cont’d)• Guaranteed/quick clearing and settlement;

• Aggressive market data dissemination- market actors benefiting from of both national and international prices;

• Through improved consistency of qualities enhanced competitiveness of Ethiopia in the world coffee market.

• Motivation for improved production;

• Increased producers’ share in the value of the beans-35% to 65%;

• Motivation of market players to come to the formal channel;

ECX’s value addition to the Ethiopian coffee sector (Cont’d)

Looking Ahead

- Strengthening Existing Initiatives

- Creating New Initiatives

III. The GTP

•The G.T.P. lays emphasis on the development of sustainable agriculture in Ethiopia, with ambitious targets

• Expansion of production• Conserving natural resources• Moving farmers into market-oriented production

GTP Forecasts For Coffee Production and Exports

Base year Year 1 Year 2 Year 3 Year 4 Year 5 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

Coffee production 341,000 405,790 482,890 579,468 695,362 831,000 ( in tons) Coffee exports( in tons) 172,210 221,115 283,907 364,531 468,052 600,970

Coffee export earnings ( mil in USD)

528,000 692,000 906,000 1,187,000 1,555,000 2,037,000

Growth Rate (%)Coffee production - 19 19 20 20 20

Coffee exports - 28 28 28 28 28

Coffee export earnings ( in USD)

- 31 31 31 31 31

Source: GTP main document and Policy matrix

IV. Existing Initiatives

• Rewarding Quality• ECX has created a Q contract which rewards quality

and incentivizes farmers and processors to produce quality coffee.

To close the gap b/n increasing dd for specialty coffee

• Direct Specialty Trade(DST)• Linking producers with international buyers;• ECX provides warehousing, quality certification and trading

venue;• International buyers have the option to purchase certified

and traceable coffee directly from producers;• Win, win, win solution to the producers, buyers, and the

market;

V. New Initiatives

•The Sustainable Coffee Working Group;

•Starbucks/ECX Traceability Program

New Initiatives

• ECX is working with Sustainable Coffee Working Group in collaboration with IDH

• Purpose of SCWG-Identifying ways that sustainable coffee could be brought to market through ECX, and the existing marketing chain, given the volumes needed;

• The SCWG has been working during the last six months and will shortly be producing a strategy paper;

Starbucks and ECX Traceability Program

Date Program

Description

2010 Starbucks and ECX Traceability

Initiative

Signed an MOU to begin a traceability initiative;

2011-2012

ECX Pilot

Integration of GeoCertify traceability services into the ECX

GeoCertify scaled up to track all grades of coffee from the entire Sidama A and Yirgacheffe

Over 3 million kgs were tagged through this program

The program was proven scalable2012-

2013Market

Adaptation Next phase Starbucks and ECX to extend

traceability to the market-to the consumer globally

Starbucks and ECX to scale the program to capture more classifications.

VI. Conclusions

• ECX aims to strengthen and add value to the Ethiopian Coffee Sector;

• ECX as a dynamic and forward looking institution, is ready and willing to adopt to current global practices and initiatives-traceability, specialty issues;

• ECX recognizes that sustainability provides an opportunity to Ethiopia in providing the platform to major roasters and coffee traders in sustainable sourcing and corporate responsibility.

THANK YOU