Review on Coffee Production and Marketing in Ethiopia

Coffee, Ethiopia’s largest export crop is the backbone of the Ethiopian economy. However, Ethiopia has not yet fully exploited its position as the producer of some of the best coffees in the world. Hence, a little information has been gathered on different aspects of the coffee with the objectives of reviewing coffee production and marketing in Ethiopia, and marketing actors and margin distribution of coffee in Ethiopia. Data from FAOSTAT, CSA and different published materials on coffee were used. According to the review, lack of competitiveness, lack of infrastructure, in adequate access to services, low value addition, in adequate technology transfer and research, competition of khat and rainfall variability are among major constraints of coffee production in Ethiopia. Price volatility, Poor accesses to market, little market promotion and incentive mechanism, and low price were reported to be the major problem of coffee marketing in Ethiopia. Licensing of more traders and inspecting their activities, enhancing infrastructural and institutional facilities and improving of coffee production technologies through development, and extension of improved coffee varieties and other related agronomic practices were among the major recommendations forwarded from the review.

clearing to allow movement in the forest during harvesting time (Tadesse, 2015). According to Labouisse et al. (2008) it includes simple coffee gathering and forest production where coffee trees are simply protected and tended for convenient picking. This system is found in southeastern and southwestern parts of the country (mainly in areas like Bale, Bench-Maji, Illubabor, Kafa, Jimma, Shaka, and West Wollega) (Boansi and Crentsil, 2013). These areas are the centers of origin of Coffea Arabica. This system accounts for about 10% of the total coffee production of the country (Melkamu, 2015). Semi-Forest Coffee: Semi-forest coffee is more intensive, with increased farming interventions (e.g. thinning of trees, understory clearance and weed cutting, and planting of coffee seedlings) (Moat et al., 2017). Farmers acquires forest land for coffee farms, and then thin and select the forest trees to ensure both adequate sunlight and proper shade for the coffee trees (Melkamu, 2015). It is a type of coffee production system where instantly the forest coffee system is converted to semi-managed forest coffee system through reduction of plant composition, diversity and density. This is the dominant production system in southwester Ethiopia (mainly Bench-Maji, Illubabor, Jimma, Kafa, Shaka, and Wollega) and in the Bale Mountains of southeastern Ethiopia (Tadesse, 2015). This system accounts for about 35% of the total coffee production of the country (Tesfu, 2012). Garden Coffee: is a further step in the cultivation process. Seedlings are taken from forest coffee plantations and transplanted closer to farmers' dwellings. In this system, coffee is grown in smallholdings under a few shade trees usually combined with other crops and fruit trees (Tesfu, 2012). It accounts for approximately 50% of national production and is located near residences of growers. It is planted at low densities and is mostly fertilized with organic materials (Boansi and Crentsil, 2013). Geographically, this coffee production system is mainly found in the southern and eastern and some in southwestern parts of the country; and specifically in Gedeo, Guji, Hararghe, Jimma, Sidama, Wollega and some other places (Tadesse, 2015). Plantation Coffee: Plantation coffee is grown on plantations owned by the state and on some well managed smallholders coffee farms. In this system, recommended agronomic practices like improved seedlings, spacing, proper mulching, manuring, weeding, shade regulation and pruning are practiced (Melkamu, 2015). This sector includes a few large private and state farms mainly located in the south-west, as well as many smallholder plantations spread all over the coffee growing areas. It accounts for about 10% of national production (Labouisse et al., 2008).

Coffee production in Ethiopia
Coffee is grown by over 4 million small holder farmers. Farmers engaged in growing and producing stimulant crops such as coffee are greater in number than those growing fruits (CSA, 2018). It employs 15 million people, or roughly 15 percent of the country's population at different points along the value chain. Nearly 95 percent is cultivated on small plots, generally less than half a hectare. Ethiopia is the world's sixth largest coffee producer, accounting for 4 percent of production. It is also the largest producer in Africa, accounting for about 40 percent of continental production (Francom, 2018).
Number of coffee producers has increased from 2012/13 to 2016/17 and then declined. Regarding total area of land allocated for the production of coffee, it has increased over the considered years though at different rates. Table (1) also indicated that there was a fluctuation in yield of coffee over the last six years in the country.  From figure 2, one can easily understand that the trend of coffee yield has declined. Negative value of trend line of yield implied that yield has declined over the considered 25 years. The maximum and minimum of 8.65 and 5.2 quintals per hectares was obtained in 1999 and 2012 respectively. The low value of R-square in yield trend line implies that the trend line of yield did not fit the data or there was high variation of yield over the past 25 years in Ethiopia.

Opportunities of Coffee Production in Ethiopia
Genetic diversity and favorable Environments, Agro-forestry based production system, already known brands in the world market, trademarked and licensed benefit to all, Modern Marketing System (ECX), Encouraging policy and coffee price are among major opportunities of coffee production in Ethiopia (Tesfu, 2012). The Ethiopian coffee sector has bright prospects. The country has suitable altitude, optimum temperature, low labor costs and fertile soil. It can sustainably produce and supply fine specialty coffee with potential of producing all coffee types of the various world coffee growing origins (Jose, 2012). Another opportunities of coffee production in Ethiopia are; high national and international demand for the product, increasing interest of private sector with high investment potential, high support by both regional and federal governments (Berhanu, 2017). The Ethiopian Coffee and Tea Development and Marketing Authority has been re-established as per the proclamation endorsed by the House of Peoples' Representatives on December 2015, with a view to boosting the country's benefit from the sector. The Authority has mandates and responsibilities; to strengthen modern extension services to attain higher level of production and increased productivity, to establish quality based effective and efficient marketing systems, and to support, supervise and regulating of coffee processing industries (Zelalem, 2016). Ethiopian coffee is top in both color and taste. To maintain these qualities, there is a well-established and linked structure that connects coffee farmers, processing-plant owners, governmental organization and coffee processing (Melkamu, 2015).

Production constraints of coffee in Ethiopia
Coffee production in Ethiopia is constrained by lack of competitiveness, lack of infrastructure, in adequate access to services, low value addition, and in adequate technology transfer and research (Jose, 2012). In recent days, khat, a plant chewed by humans for its stimulating effect, is competing for farm land with coffee. Some small holder coffee farmers resorted to producing khat instead of coffee as they are increasingly attracted by the high prices and greater yield they get from cultivation of khat. A significant number of farmers particularly in the eastern part of the country have switched from coffee production to khat production. Khat is drought, diseases and pest resistant plant which can be harvested three to four times a year and generates better income for farmers than other cash crops including coffee (Tolera and Gebremedin, 2015). Moat et al. (2017) reported that the other challenge of coffee production in Ethiopia is the variability of weather pattern such as rainfall variability on the onset of the wet season, extension of dry season and more extreme (drier and hotter).
According to Tadesse (2003) deforestation and change in land use are threatening coffee forest gene pools in Ethiopia. This has been aggravated with the recent coffee price crisis on the world market as a result of market liberalization. Farmers are shifting their coffee farm or forest to other monoculture crop production. Tesfu (2012) also added deforestation and land degradation, diseases, predominant traditional production, failure of using appropriate coffee technologies, inadequate services (credit, inputs, equipments), and lack of sustainability and competitiveness in the coffee sector are challenging coffee production and quality improvement in Ethiopia.

Coffee export
Ethiopia produces and exports one of the best highland coffees in the world (Samuel and Eva, 2008). Total earnings from goods export grew by 3% in 2018 over the same quarter of last year on account of the rise in export earnings from Coffee (19.1%), Oilseeds (4.9%), Leather and Leather products (27.7%), Fruits and Vegetables (16%), Meat and Meat products (10.1%), Flower (8.1%), Electricity (23.8%) and other exports (35.1%). Earnings from coffee picked up 19.1% in 2018 as compared to last year same quarter and reached USD 215.6 million on account of a 16.5% rise in export volume and 2.2% increase in international price. As a result, the share of coffee in total merchandise export earnings increased to 31.8% from 27.5% a year earlier (NBE, 2018). Countries such as Germany, France, Italy, Belgium, Sweden, Norway, Finland, Denmark, UK, Switzerland, USA, Japan, Saudi Arabia, Canada, Taiwan, South Korea, Australia and South Africa are traditional buyers of Ethiopian coffee (Melkamu, 2015). Agricultural exports share of total exports was declined from 86% in 2013/14 to 84% in 2016/17. However, coffee exports share of total exports was increased from 30% in 2013/14 to 33% in 2016/17.  Figure 2 showed that trend of coffee yield has declined. This implied, the increment in both quantity and value, was not because of increase in yield. Rather, it is because of increase in area allocation and output harvested. The highest and lowest value of export was 1,023,691,000 and 129,177,000 US$, respectively. The former was recorded in 2014 while the latter was obtained in 1993. Figure 4: Trends of coffee export quantity and value Source; Own computation from FAOSTAT data, 2019.

Domestic consumption
Ethiopian is not only a major producer and exporter of coffee, but the highest consumer as well in Africa. Share of consumption in total production in the immediate years following initiation of the reform were relatively lower, decreasing from as high as 65% in 1987 to 25% in 2003. The relatively smaller share of domestic consumption in production in the early years of the reform could be attributed to increases in exports observed in the country during that period as a result of increases in the number of exporters following the liberalization of internal marketing. It however has taken on an increasing trend since the year 2004 (Boansi and Crentsil, 2013). Similarly, Francom (2018) reported that Coffee consumption in Ethiopia is growing, albeit slowly as the population expands. In 2015/16 total production was 6.4 million 60 kg bags, of which 3.7 million were consumed within Ethiopia (Moat et al., 2017). An interesting new development in Ethiopian major cities regarding coffee consumption is the emergence of small roadside stalls selling coffee to passer by customers. The small roadside stalls serve coffee in a traditional manner. They have emerged and flourished in Ethiopia's major towns, growing very popular among coffee consumers who are frustrated by the escalating price of coffee and the deteriorating quality of coffee served in cafes and coffee shops. Unlike regular coffee shops, the small roadside stalls pay neither VAT nor house rents making their cost of serving coffee much lower and more competitive than the regular coffee shops (Alemayehu, 2014).
Coffee in the local market is mainly coffee destined for export through the Ethiopian Commodity Exchange (ECX) but rejected for failing to meet ECX's quality standards. But, local coffee price is usually higher than international Coffee arabica prices (Alemayehu, 2014). According to Getachew (2011), mixing coffee with other grain crops such as barely is becoming a usual in the country.
Coffee plays a vital role in both cultural and social life of Ethiopian community. Among coffee producing countries in the world, Ethiopia is the first country in consumption of coffee. From the 200,000-250,000 tons of average annual production, about 50% is consumed in the country. Preparation and drinking of coffee is a unique culture in Ethiopia; coffee ceremony. Coffee is not drunk alone. It is a social activity to be shared with others. Sharing coffee with others means you are at peace with them and cultivates community and friendship (Melkamu, 2015).

Empirical Review on Marketing Margin Analysis of coffee along its value chain in Ethiopia
According to Getachew (2011) the total marketing margin for coffee marketing in the eastern Ethiopia was Birr 20 per a kilogram of dried cherries produced and sold by farmers. Among the actors in coffee marketing channel, Journal of Marketing andConsumer Research www.iiste.org ISSN 2422-8451 An International Peer-reviewed Journal Vol.67, 2020 13 retailers receive the highest marketing margin, which is more than 79% of the total marketing margin. They have also the highest margin as percent of the cost prices (average buying price and marketing costs), which is 31.75%. For instance, retailers earn a profit of Birr 2891.76 from selling 1 quintal of hulled and prepared coffee, while wholesalers only obtain a profit of Birr 394.4, which is 7 fold smaller than the amount earned by retailers. Even farmers, who are engaged in coffee production the whole year, obtained only 45% of the margin grained by retailers. It can also been seen that 67% of the retail value (final price paid by consumer) goes to farmers, while the remaining 33% is taken by traders (7% by wholesalers and 26% by retailers).
Similarly, Zekarias et al. (2012) studied market chains of forest coffee in southwest Ethiopia and reported that the producers obtained less net benefit than other intermediaries. Net benefit analysis was used for the actors in the chain to examine/evaluate the performance of the market. Larger average net profit was obtained by the intermediaries than the producers and producers ware less beneficiaries in the chain than the other actors.

Marketing Constraints of Coffee in Ethiopia
Despite positive image of the country as birthplace of coffee, a strong local coffee culture, genetic diversity and easy branding opportunities, diverse agro-ecology and climatic conditions, unique distinct characters of coffee quality, a favorable national agriculture ecosystem for coffee development, the country, however, so far failed to fully capitalize its potential. The effect of price volatility has been a direct factor in increasing rural poverty in rural communities; up to 85% of coffee farmers have cited coffee price volatility as a leading risk factor for their farms. Episodic pricing pressures on smallholders lead some to shift away from traditional forest coffee production systems towards more immediately profitable zero-shade systems that can yield higher returns in the short term. However, this is having a profound impact on the degradation of coffee landscapes on longer time