Record earnings showed the power of Ethiopia’s Arabica. The price reversal is now exposing a trading system still poorly protected against global commodity shocks.
In Ethiopia’s coffee trade, the mood has turned almost as quickly as the market. Only months ago, exporters and suppliers were racing to secure beans, convinced that the rally in global prices still had room to run. Warehouses filled, local prices climbed, and a record export year seemed to confirm what many in the sector had long believed: Ethiopia’s coffee, prized by buyers across the world, had finally found a market willing to pay more for its origin, quality and scarcity.
Then the market turned.
Arabica prices, which had surged through 2024 and into early 2025 on tight supplies, weather shocks and shrinking inventories, began to cool as the supply outlook improved. The rally had been extraordinary. In January 2025, the New York Arabica futures had hit an all-time high of 3.7685 US dollars per pound, driven by fears over Brazil’s crop, tight certified stocks and strong buying from roasters. The USDA later noted that Arabica “C” futures rose from 216.00 cents per pound in May 2024 to 425.10 cents in mid-February 2025, a rise of 85.6 percent.
The timing could hardly have been better for Ethiopian exporters.
The global coffee rally arrived just after the country shifted to a more market-determined foreign exchange regime in July 2024, allowing the birr to weaken sharply against the US dollar. The adjustment made every dollar earned from coffee exports worth far more in local-currency terms, giving exporters and the government an additional boost just as international prices were climbing. By 2026, the dollar had become more than twice as expensive in birr terms as it was before the reform, even as the gap between the official and parallel markets narrowed significantly from pre-reform levels.
For the coffee exporters, the weaker birr amplified the gains from record global prices, although it also raised the cost of imported inputs, financing and logistics.
The numbers that followed were historic. Ethiopia’s coffee export earnings reached 2.653 billion US dollars in the 2024/25 fiscal year, from shipments of about 468,967 metric tonnes, according to official figures cited in the original reporting. The government reported that the year’s performance was well above target both in value and volume, turning coffee into one of the clearest winners of the country’s export push.
But commodity booms rarely end gently. By early 2026, the same global forces that had inflated the market began to work in reverse. The International Coffee Organization said its Composite Indicator Price averaged 267.57 US cents per pound in February 2026, down 9.9 percent from January, as improved supply expectations and forecasts of a global surplus weighed on prices. The New York ICE market fell 13.8 percent that month to 288.76 US cents per pound.
For traders who had bought coffee at the top of the market, the correction was painful.
“But many exporters, encouraged by the earlier surge, built up stocks at elevated prices, only to face a market that later dropped by nearly one US dollar per pound,” said Daniel Zerayacob, a seasoned coffee export professional. According to him, prices had risen to about 3.90 US dollars per pound before falling to around 2.90 US dollars.
“The downturn has had a severe impact on both suppliers and exporters,” he told Birrmetrics.
That sentence captures the heart of the problem. Ethiopia’s coffee sector is not only exposed to global price volatility because coffee is a traded commodity. It is exposed because much of the domestic trading system still runs on spot transactions, thin market intelligence, weak risk-sharing tools and limited access to instruments that help exporters and producers manage price swings.
Gizat Worku, manager at the Ethiopian Coffee Exporters Association, said export volumes had declined in recent months as market conditions weakened. He said speculative positions taken by suppliers and exporters had proven inaccurate, partly because many actors lacked timely market information.
The warning signs were visible. In March 2026, the Ethiopian Coffee and Tea Authority urged suppliers and exporters to move stocks quickly, citing the downward trend in global prices. Adugna Debela, the Authority’s director-general, said international prices had already fallen by 30 percent in recent months and warned that further declines were possible. The government had set a target of exporting 600,000 tonnes of coffee in the current budget year to earn three billion US dollars.
The Ethiopian Coffee Association also issued an urgent alert to farmers, suppliers and exporters, warning that falling global prices and rising stockpiles were exposing the sector to severe financial pressure. It cautioned that holding large inventories could deepen losses, while delayed sales could worsen the situation.
The pressure is not limited to exporters. It runs through the chain, from farmers and suppliers to processors and shippers. Dawit, a coffee exporter and local supplier, said prices paid to farmers had continued rising even as international prices weakened. That divergence left exporters caught between higher domestic procurement costs and a softer global market.
“Most farmers had already sold from their stocks, except for a few large producers with cash reserves who held back, waiting for better prices,” Dawit said.
This is where Ethiopia’s coffee story becomes more complicated than a simple tale of boom and bust. Higher farmgate prices can be positive for producers, especially in a country where millions of households depend on coffee income. But when domestic prices become detached from international prices, the risk often shifts to suppliers and exporters who buy locally before securing profitable external sales.
The result is a margin squeeze: coffee bought at yesterday’s domestic price must be sold into today’s weaker global market.
Ethiopia is not alone in facing this kind of volatility. Coffee is one of the world’s most climate-sensitive and speculation-prone agricultural commodities. In 2025, the rally was driven by a mix of drought in Brazil, supply concerns in Vietnam, depleted inventories and strong roaster demand. By 2026, the tone had changed. The World Bank said global coffee production was projected to reach about 179 million bags in 2025/26, up nearly two percent from the previous season and the third consecutive annual increase. It forecast Arabica prices to fall by more than 14 percent in 2026 and Robusta prices by 18 percent, as production continued to recover.
The World Bank’s April 2026 Commodity Markets Outlook projects Arabica coffee to average 7.25 US dollars per kilogram in 2026, down from 8.47 US dollars in 2025, before easing further to 7.00 US dollars in 2027. Robusta is forecast to decline from 4.86 US dollars per kilogram in 2025 to 4.00 US dollars in 2026 and 3.90 US dollars in 2027.
Brazil remains central to that outlook. As the world’s largest coffee producer and exporter, its harvest expectations can move global prices. In April 2026, Brazil’s 2026/27 coffee crop was expected to grow 11.5 percent to a record 71.4 million 60-kilogram bags, helped by better climate conditions and crop management. Arabica output alone was projected to rise 13.5 percent.
For Ethiopia, this creates a difficult paradox. The country produces some of the world’s most distinctive Arabica coffee, with origins such as Yirgacheffe, Sidama, Guji, Limu and Harrar carrying global recognition among specialty buyers. Yet Ethiopia remains a price-taker in the broader global market. Its reputation gives it premiums, but not immunity.
The sector is central to the economy. The USDA says coffee accounts for roughly one-third of Ethiopia’s total export earnings and supports about 15 million people, including smallholder farmers and other actors across the value chain.
That scale makes the current correction more than a trading problem. Coffee is a rural livelihood, a foreign-exchange earner, a national brand and a political economy in itself. A sharp price fall can affect exporters’ balance sheets, suppliers’ working capital, farmers’ expectations, banks’ lending appetite and the government’s export revenue plans.
The deeper concern is structural. Ethiopia remains a high-value but low-efficiency origin market. Production is fragmented among smallholders, yields remain low compared with major competitors, and logistics, financing and quality-control systems add costs along the chain. While reforms have opened parts of the sector, including direct export channels and more market-linked minimum pricing, the country’s trading culture remains heavily exposed to spot-market behaviour.
“Our market is a spot market,” Daniel said. “You will not see differentiated pricing, long-term planning, or forward contracts.”
That is perhaps the most important line in the story. A spot market can work well when prices are rising. It allows quick transactions, rapid gains and flexible buying. But when prices fall, the same system leaves traders exposed. Without forward contracts, hedging arrangements, price insurance, warehouse finance or back-to-back sales, exporters who buy aggressively during a rally can be left holding expensive stock in a falling market.
In more developed commodity systems, traders can use futures markets, long-term contracts and financial instruments to manage such exposure. These tools do not eliminate risk, but they spread it. Ethiopia’s coffee sector has far fewer buffers. The result is a market that celebrates price rallies but absorbs downturns painfully.
Daniel suggested that one possible response would be the creation of a National Coffee Fund covering the supply chain from farmers to exporters and logistics operators. Such a mechanism, he said, could allocate support based on exposure to price and market risks, giving the sector a buffer against sharp swings.
“We cannot continue to benefit when prices are high and be exposed when they fall,” he said.
The idea is attractive but complex. A fund could help stabilise parts of the value chain, support farmers during downturns or provide emergency liquidity to exporters. But it would also raise hard questions: who would finance it, how losses would be verified, whether support would reach farmers or mainly rescue traders, and how to avoid encouraging risky stockholding during future rallies.
There is another route: reduce vulnerability by increasing productivity, improving market intelligence, expanding forward-sales capacity, strengthening traceability and helping exporters move beyond bulk green-bean exports. Ethiopia has already taken steps in this direction. The USDA says policy reforms have shortened parts of the value chain and helped farmers capture a larger share of export value. It also notes that Ethiopia’s minimum export prices are now updated weekly based on the New York Arabica Coffee Price, the exchange rate and other market factors.
But value addition remains limited. Ethiopia is still overwhelmingly a green-bean exporter. USDA data show roasted coffee exports remain a tiny fraction of total coffee exports, even though they have grown from a very small base.
That matters because much of the global value in coffee is captured after the bean leaves the origin country — through roasting, packaging, branding, retailing and consumer experience. Ethiopian coffee may appear on the menus of specialty cafés across the world, but the margins from that identity are often captured elsewhere.
The government says it is trying to push the sector up the quality ladder. The Ministry of Agriculture revised its export plan as global price signals shifted, targeting 600,000 metric tonnes of coffee exports and three billion US dollars in revenue for the current fiscal year. It has also tilted its focus towards Grade 1 and Grade 2 coffees, betting that quality premiums can soften the impact of weaker commodity prices.
In the first nine months of the fiscal year, Ethiopia exported 304,000 metric tonnes of coffee and generated 2.13 billion US dollars in revenue, according to figures cited by the ministry in the original reporting.
“This performance clearly shows that we are on track to achieve our three billion US dollar export earnings target,” Addisu Arega told Birrmetrics when asked about the impact of falling prices on the export outlook. He said the strategy had helped raise earnings from lower volumes and strengthened Ethiopia’s position as a supplier of premium coffee, while reducing reliance on lower-grade exports.
That strategy makes sense, but it is not without risk. Premium coffee can command higher prices, but it also requires consistency, traceability, careful post-harvest handling and reliable logistics. Buyers paying premiums are less tolerant of quality slippage and delivery uncertainty. If fuel shortages, container constraints or inland transport delays worsen, the premium strategy can become harder to sustain.
Those pressures are already visible. Renewed volatility in global energy markets has added another layer of uncertainty for coffee exporters. The World Bank expects energy prices to rise by 24 percent in 2026, driven by supply disruptions linked to conflict in the Middle East. Higher energy costs can feed into processing, inland transport, shipping and packaging, putting further pressure on margins across commodity supply chains.
The ministry says fuel constraints have begun to affect coffee processing and domestic transport. It says it is issuing regular market updates and price forecasts to help firms navigate volatility, prioritising fuel allocation for coffee processing plants and export logistics, improving container access, and expanding rail transport services at competitive rates to ease inland bottlenecks.
These measures may help, but they do not remove the central lesson of the current downturn. Ethiopia’s coffee boom revealed the country’s earning potential. The price chill is revealing the weakness of a system still too dependent on favourable global prices, fragmented domestic buying and limited risk management.
The country’s coffee future cannot be built only on the hope that global prices will stay high. It will depend on whether Ethiopia can convert its unmatched coffee heritage into a more resilient industry: one with better information, stronger contracts, higher productivity, more value addition, and a fairer distribution of risk from farm to export gate.
The bonanza showed what Ethiopia can earn when the world is short of coffee. The chill is showing what must change before the next rally comes — and before the next fall follows.