Green coffee export markets and its stability for increasing Ethiopia exports: Markov-chain analysis
University of szeged, Gabriel temesgen woldu, Hungary
Ethiopia is endowed with a good production environment for growing coffee possessing a diverse genetic base for this Arabica coffee with considerable heterogeneity. Ethiopia is the 5th largest coffee producer, Africa’s leading exporter and the largest coffee consumer in Africa. The transition probability matrices have been formed using the first-order Markov chain model to analyse the dynamics of the export of coffee variation to different importing nations using time series data spanning from 2004 to 2018. The study reveals that the growth in the area, production, and price were growing at a compound growth rate of 0.09%, 0.03% and 0.057% per annum, respectively. The direction of trade shows that countries such as Germany, Japan and the USA are more stable importers of Ethiopian coffee while countries such as France, Italy, Belgium and Saudi Arabia were less stable and had low retention rates for Ethiopian coffee. The study, therefore, recommends that Ethiopia should reinvigourate its market to Italy, Belgium and France, as these countries are the largest coffee-consuming countries in the world and design appropriate export promotion strategies. Furthermore, the country has to open its eyes to new emerging markets apart from the currently focused countries to increase its market share in the global coffee market. Moreover, as there is a transition in taste and global demand for coffee, the country needs to shift its focus to specialty and Estate brand coffee, which could enable high-value realisation. Lastly, efforts should be made to reduce the cost of production of coffee so as make it more competitive on the global platform and shorten the value addition in the supply chain.
Keywords: Direction of trade, Ethiopia, green-coffee, Markov-Chain analysis, matrices, transition probability
Contact Address: Gabriel Woldu, University of szeged, Gabriel temesgen woldu, Dugonics square 13, H-6720 Szeged, Hungary, e-mail: gabriel.temesgengmail.com