| Abstract: | Coffee has greater importance in the Ethiopian economy. It is the single foreign exchange earner of the
country accounting for about 46 percent of its total export revenue for the last two decades.
Approximately 1.3 million households are involved in coffee production, and it is estimated that around
15 million of the country’s population are dependent on coffee production and market based income for
their livelihoods. This research aims to examine the performance and major determinants of Ethiopian
coffee export in the major importing countries in the last decade. The effects of importing countries’
GDP, population situation, real effective exchange rate etc. on the demand for Ethiopian coffee export is
analyzed in detail. Challenges and prospects for the country’s coffee export identified and appropriate
recommendation has been given. Descriptive statistics, growth function, and log-linear regression were
employed for data analysis.
With a share of less than 3 per cent of the global market for coffee, Ethiopia relies on a high proportion of
its coffee export earnings. Indeed, coffee is the backbone of the Ethiopian economy, contributing about 28
per cent of the total foreign exchange earnings in 2011. In 2010/11, the total volume and value of coffee
export was 196,117 ton and 841.65 million American dollars, respectively; and more than 120 Ethiopian
Coffee exporters were participated in processing and exporting coffee to 53 destination countries of the
world.
Over the 1991-2011period (EPRDF governance), the value of coffee export earning of Ethiopia showed a
positive growth of 7.5 percent annually 60 percent of this growth was explained by the increase in the
volume of coffee exported that grew by 4.5 percent; and 40 percent by increase in coffee prices that rose
by 3 percent annually.
The growth of Ethiopian coffee exports has a different pattern when we examine it on market basis. For
the period 1991-2011, Ethiopian coffee export volume showed a positive growth rate to Japan (6.96%),
Saudi Arabia (6.19%) and Belgium (4.34%).The growth rates for Germany, France, and Italy were not
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significant at 10 percent probability. The volume of coffee exported to USA, and Finland showed
negative growth rate of 6 percent 10 percent respectively during the analysis period; nevertheless, the
total imports of the countries showed no significance changes.
With the purpose of identifying factors influencing the export demand for Ethiopian coffee log-linear
equation was estimated. The explanatory variable assumed the expected relationships. The coefficients of
Ethiopian coffee export prices assumed negative sign for all countries and significant for Saudi Arabia,
Japan, and the USA. The coefficients of Brazilian mild prices were significant in case of Japan, Germany,
and the USA and assumed a positive sign expected. These suggest that the Brazilian mild Arabica coffee
is a direct substitute for the Ethiopia coffee. Coefficients of the income variable were positive as
expected, but found to be significant for Saudi Arabia alone. The estimated coefficients of population
were significant for Saudi Arabia, Japan and Germany and assumed a positive sign as per expectation.
The taste and preference of the USA market showed a negative trend for Ethiopia coffee. |
