The Missing Half of Ethiopia's Coffee Plan

Jul 18 , 2026
By Wondwossen Mezlekia

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A record 3.1 billion dollars at the port finances the coffee tree, not the household that grows it. Ethiopia needs a rules-based income fund for smallholders during replanting years and price collapses, argued Wondwossen Mezlekia (wondwossen.mezlekia@gmail.com), who writes the Poor Farmer blog and has reported on Ethiopia's coffee trade since 2006.

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The 3.1 billion dollars in coffee export earnings Prime Minister Abiy Ahmed (PhD) announced to Parliament two weeks ago is a real achievement, and it deserves the credit it is receiving. So does the new five-year plan to lift average productivity from about nine quintals a hectare to 21Qtls by 2031.

I have argued for that direction since 2007. Too many trees are old, too many growers work with too little capital, and the supply side has waited long enough. Build a better tree. Build the research.

But a coffee strategy cannot stop at the tree. A record at the port is not a farm-gate account, and a higher yield becomes a higher income only when the price holds, and costs do not take the gain back. The plan improves the tree and says almost nothing about the household that owns it when the market turns. And it is turning.

The International Coffee Organisation’s (ICO) composite indicator, around 256 cents a pound in May 2026 and 248 in June, is well off its early-2025 peak. It is the missing half of the plan.

Who carries a smallholder through the years after a tree is stumped or replanted, before it yields the larger harvest promised? And who protects that household when the larger harvest arrives in a year the world price has fallen?

Today, the answer to both is the same. The farmer carries it alone.

Consider what the state is financing. Rehabilitation and replanting. The FOLUR land and forest restoration project. A UNIDO concessional credit line through the Commercial Bank of Ethiopia (CBE) for coffee companies and cooperatives. A Climate Investment Fund plan for land restoration and adaptation. All real, all needed, and everyone finances a tree, a forest or a company. A loan to a cooperative, a new seedling, a stumped tree. However, none of these is income protection.

The first risk is the transition. A study of coffee production costs in four districts of Jimma zone, published in the Ethiopian Journal of Agricultural Sciences, found gross margins negative in the establishment and early growth years, turning positive only as the trees mature. One zone, not a national cost schedule, but the lesson is plain.

Rehabilitation is a household-income decision, not just an agronomic one. A farmer who cuts back old trees accepts lower income now for a larger harvest later, a bargain fair only if the household survives the interval.

The second risk comes after the harvest. Ethiopia does not set the world price. When it falls, the exporter can delay buying, the trader can wait, and the processor can adjust its margin. The farmer with ripe cherries and a household to feed can do none of those things.

The year just celebrated made the point. In parts of the harvest, cherry reportedly reached 220 Br to 250 Br a kilogram, yet sector reports described washing stations closing as harvest finance fell behind, while more farmers dried cherry at home to sell later. A high price is income only when someone can pay it.

This is where Ethiopia should build a Coffee Income Stabilisation Fund. Not a fund that promises a politically fixed price, not a discretionary account that opens under pressure and vanishes when attention moves on, not a subsidy for exporters, estates or the best-connected traders. It should be a narrow and rules-based mechanism for the people who carry the greatest production risk, the smallholder growers.

Colombia offers a lesson, though not a model to copy. Its growers' federation operates a purchase guarantee; a producer has a buyer at a published internal price. In 2019, Colombia also created a separate Coffee Price Stabilisation Fund to steady producer income through severe price declines.

One system ensures there is a buyer. The other protects income when the price no longer covers the cost. Ethiopia has neither. It has a weekly reference price, which is not a guaranteed buyer or a stabilisation payment. It will need both harvest finance so coffee can be bought when ripe and a floor when the farm-gate price falls below the cost of production.

The Fund should have two windows, because the risks differ.

The first is a rehabilitation-income window. A registered smallholder who stumps or replants under an approved extension programme receives a temporary transition payment tied to verified land, trees and past production. It is not a loan in disguise. A farmer should not have to borrow at commercial rates to comply with the state's own strategy.

The second is a price-stabilisation window, activated only when a published regional farm-gate price falls below an independently calculated cost benchmark. Payments should be limited, temporary, tied to recorded legal sales, and capped by the farmer's production history, so estates, traders and invented suppliers cannot turn it into a machine for rent.

They go directly into verified growers’ bank or mobile money accounts. Cooperatives, washing stations, and licensed buyers may verify the sale but cannot control the payment.

This is not only a funding proposal but also a transparency proposal. A stabilisation fund cannot pay below a never-calculated cost benchmark and cannot trigger on a farm-gate price no one records. To run it, the Coffee & Tea Authority would finally have to publish regional production costs and farm-gate prices, season after season, with the rules, triggers and payments public by region and beneficiary.

Ethiopia should be able to show not only what a tonne earned at the port, but whether a household in Jimma, Sidama, Guji or Yirgacheffe was better off after costs.

Govern it honestly or do not build it. Put it under a Board rather than one ministry's discretion, drawing in smallholder cooperatives, the producing regions, the Coffee & Tea Authority, independent agricultural economists and public finance professionals, audited and published yearly. Finance it honestly, too.

Development partners can pay for the registry, the cost studies, the payment system, and the audit, but the benefits should rest on domestic sources, stated openly; a reserve built in high-price years; an export-sector contribution activated only above a pre-announced price; and a budget line approved in Parliament.

The contribution should not be passed back to farmers through lower farm-gate prices. Start with a two-season pilot in the major producing regions, tested against real cost data and independently reviewed before expanding.

The obvious objection is fiscal. Ethiopia defaulted on its Eurobond in December 2023 and remains in restructuring. But that is the argument for this design, not against it.

A countercyclical reserve accumulates in strong years and draws down under published rules in weak ones. It is not a permanent budget line but a bound on fiscal risk, not a source of it. And Ethiopia already spends on the coffee production side. The choice was never between spending and not spending, but between financing only the assets that make more coffee and paying the households expected to grow it.

The record proves the world will pay for Ethiopian coffee. It does not yet show the grower keeping more of it. A six-billion-dollar export ambition should carry a farmer-income ambition of equal seriousness.

The government should now finance the part of the system that has carried the sector through every record and every collapse. Build the tree. Then build the floor beneath the farmer who carries it.

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PUBLISHED ON Jul 18,2026 [ VOL 27 , NO 1368]

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