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INTERVIEW-Ethiopia coffee exports falling, pins hope on sesame

Published 05/22/2009, 12:16 PM
Updated 05/22/2009, 12:24 PM
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* Coffee earnings seen falling by 30-40 percent

* Falling exports fuelling currency crisis

* Ethiopia could become world's top sesame exporter

By Barry Malone

ADDIS ABABA, May 22 (Reuters) - Ethiopian coffee exports will fall by 30-40 percent in 2009/2010, but the country hopes to become the world's biggest sesame seed exporter this year, the Ethiopian Commodity Exchange (ECX) boss said on Friday.

Ethiopian officials have blamed bad weather for near total crop failure in some southern growing zones this season, and ECX chief executive Eleni Gabre-Madhin said the global economic slowdown was also hurting overseas sales.

"This year we're likely to see a 30 to 40 percent shortfall in coffee export earnings relative to last year," she told Reuters in an interview at her office in Addis Ababa.

"But we are projecting to export 225,000 tonnes of sesame, earning about $250 million, which is likely to make us the world's largest exporter."

The ECX began trading sesame for the first time last month and potential investors in the sector from China and India have already visited the Horn of Africa nation, Eleni said.

Africa's biggest coffee exporter is also the world's fourth-largest sesame exporter after China, India and Myanmar, exporting 124,291 tonnes of sesame last year.

Eleni said Ethiopia could set the benchmark price for sesame in the future. "It's a big ambition for a little country, but we have that potential," she said.

Coffee accounted for some 60 percent of Ethiopia's foreign exchange revenue in the 2007/2008 (June/July) season, when it earned more than $525 million from exports of 170,888 tonnes of mostly high quality arabica beans.

But Eleni said the cash-strapped nation would only make about $300 million from its biggest hard currency earner this year, partly due to the global economic slowdown.

"It's not insignificant that some of the higher-end premium coffee outlets are scaling back," she said. "Starbucks closing 600 stores around the world has implications for demand for the type of premium coffee that Ethiopia exports."

Ethiopia has been suffering from a shortage of foreign currency as commodity prices have fallen worldwide and demand for its mostly agricultural exports has slipped.

DIRECT IMPACT ON EARNINGS

Prime Minister Meles Zenawi warned last month reserves stood at just $850 million versus a target of at least $1.2 billion.

The government has said it expects economic growth of 11.2 percent in 2009. The International Monetary Fund has predicted growth of 6.5 percent for Ethiopia this year.

"The global coffee market has had a direct impact on our foreign exchange earnings and our economy is having to face that at the moment," Eleni said.

The ECX was set up to replace a murky auction system. But some Ethiopian exporters have been reluctant to sell their beans through the new exchange, which began trading coffee in December.

The government seized 17,000 tonnes of the crop in March and revoked the licences of six exporters it accused of hoarding their stocks and waiting for prices to rise.

When a state-owned body then exported the seized stock, some in the industry accused the government of nationalising its most valuable export business. The government denied that.

"It was a one-time corrective action," Eleni said. "An attempt to send the signal that we have to keep export earnings going because the country is in a crisis."

Exports have also been shaken by Japan's insistence on testing Ethiopian coffee beans on arrival after it found some last year that were contaminated with pesticides. That effectively halted exports to a country that once bought about 20 percent of Ethiopia's beans.

Ethiopia prides itself as the birthplace of coffee. Some 15 million smallholder farmers grow the crop, mostly in the forested highlands in the huge country's west and southwest.

(Editing by Daniel Wallis)

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