As global coffee production surges to record levels, Ethiopian exporters are facing collapsing margins and rising uncertainty.

A confluence of record harvests from top producers, softening international demand, and policy missteps at home is exerting pressure on what remains one of Ethiopia’s most vital export sectors.

Extraordinary supply forecasts from Brazil, Vietnam, Colombia, and Indonesia are driving the fear of a price crash.

Brazil, by far the world’s largest exporter, is expected to produce up to 49 million bags of Arabica coffee in the 2026/27 season, 30pc higher than the previous year. The rebound is largely attributed to favourable weather in the country’s central coffee-producing states.

Vietnam, Indonesia, and Colombia are also set to post sizeable gains. The United States Department of Agriculture projects global output to rise to a record 178.8 million bags in 2025/26. Although consumption is rising in tandem, currently estimated at 173.9 million bags, the widening surplus is feared to drag down prices across major exchanges.

The removal of a 40pc U.S. tariff on Brazilian coffee has heightened the bearish trend, while Europe’s one-year delay in enforcing the EUDR has caused a whiplash in demand dynamics. Buyers overstocked ahead of the regulation, then pulled back, reducing immediate demand and further weakening prices.

The International Coffee Organisation’s (ICO) composite index reflects this volatility. In mid-December, the price for Brazilian natural coffee plunged 10pc in two weeks, falling to 3.45 dollars a pound. Compared to the historic peak in December last year, the market has given up much of its gains.

For Ethiopia, where coffee remains a top foreign exchange earner, the timing could hardly be worse. Ethiopian Grade Five coffee, representing nearly 70pc of the country’s coffee exports, is now fetching between 2.59 and 2.80 dollars a pound. After factoring in freight, logistics, and finance costs, returns are barely covering expenses.

Exporters, the main ones being Daye Bensa, Kerchanshe and Tracon, could be under acute stress.

Gizat Worku, general manager of the Ethiopian Coffee Association, has warned of deepening losses, as exporters buy coffee domestically at inflated prices only to face slumping international returns. According to him, the pricing mismatch is driven by speculation and a failure of local markets to internalise global price signals.

“The recent price decline signals that further pressure on export prices may be unavoidable,” he said. “Exporters are buying coffee at exaggerated domestic prices and may face losses once shipments reach the market.”

Gizat depicted the current market as “unpredictable” and said exporters are under mounting pressure.

Historically, such losses were offset by profits from import operations, but Gizat noted this strategy is unsustainable. He is urging a recalibration of lower procurement costs, reduced speculation, and realignment with market fundamentals.

Officials at the Ethiopian Coffee & Tea Authority maintain a cautiously optimistic position. Deputy Director General Shafi Oumer sees no evidence of a dramatic crash. He cites Ethiopia’s growing market reach, now at 84 countries, with 20 new destinations added last year, and robust demand for high-quality Arabica as buffers.

He pointed to premium prices achieved for top grades (Grade One to Grade Three) and efforts to boost quality and mechanisation.

“We’re focusing on quality and market promotion,” Shafi insisted, downplaying negative projections as speculative.