Truck Load Lots
Rugged trucks able to negotiate difficult rural roads can also help insure traceability of certified coffee.
Transparency is an issue for specialty coffee buyers ― less than 10% of the coffee produced in Ethiopia is certified, although much more could qualify if it was not commingled at washing stations and warehouses.
Story and photos by Dan Bolton
Ethiopia is blessed with the world’s greatest coffee.
In April Bekele Bulado Bukana, Ph.D, Ethiopia’s minister of trade, hosted a dinner to present a novel way to bring certified coffee to market. The system means that coffee traded in the Ethiopia Commodity Exchange (ECX) would never leave the delivery truck. Tests of the truck load lots (TLL) system is underway following a pilot study that concluded with promising results.
“The specialty coffee sector has been neglected, the cost is very high compared to other competitive Asian and South American coffee producing and marketing countries and we are now working on it,” Bukana told the dinner crowd of roasters, traders, and growers.
“We hope to become competitive in the world market,” said Burkana, who added that Ethiopian Prime Minister Hailemariam Desalegn has given him “full power to improve the sector.”
The mandate is significant because Ethiopia under PM Desalegn has undertaken a massive development programs to improve infrastructure which currently ranks among the poorest in the world. The construction of roads is an example. The world average is 10 kilometers per 1,000 people. In Ethiopia, the average is 0.43 kilometer per 1,000 people. Paved roads cover only 0.01 kilometer per square kilometer. The transport sector faces the challenges of low levels of rural accessibility and inadequate road maintenance but that is changing. There are 2,000 kilometers of roads under construction throughout the country, a move expected to remarkably increase foreign trade, according to the Ethiopian Road Authority.
In line with infrastructure development, more effort has to be exerted to bring change in coffee market. In Ethiopia, less productivity, lengthy value chain, inadequate research to enhance production and productivity and others are the major hindrances which seriously affect the coffee development marketing.
Here is how the truck load lot program will work:
A TLL truck arrives at the coffee washing station which can either be certified (certified organic, for example) or uncertified. The truck is inspected and loaded with green coffee (bulk or in sacks).
Samples taken from the truck are graded to determine coffee quality at a certified lab. A certificate attesting to the contents is issued. The truck is then sealed, the lot is weighed and the weight formally declared before the truck departs for the warehouse.
Once a truck arrives a the washing station, a storage receipt (verifying weight) is issued and the loaded truck is transferred to a secure bonded warehouse for the trading period.
At the ECX, buyers must purchase the entire truck load lot. Information provided in the trading note describes characteristics that include type, contract, grade). Certifications are noted, transparency maintained.
Once the lot is sold, a pickup notice is brought to the regional branch and the truck delivers the coffee to the buyer (or the buyer’s designate).
“Our hypothesis is that keeping coffee on the delivery truck during trading is the simplest and most scalable solution,” said Ermias Eshetu, c.e.o. of the ECX. In the current ECX system the combination of coffee into warehouse stacks means differentiating factors are not identified until after purchase, he explained. This compromises traceability.
In Seattle at the Global Specialty Coffee Expo STiR spoke with traders who said that buying lots by truck and storing a fleet of thousands of trucks would be expensive and unnecessary in countries with modern transport and warehousing — but in Ethiopia it may prove workable.
In the current system coffee arrives at the warehouse in lots determined by type, origin and grade. Bags from different washing stations with different certifications are combined in stacks in the warehouse. Quality grading is regulated and there are storage and transfer protocols in place but there is limited product information available to buyers. It is only after the coffee is purchased that the buyer is given detailed information about the coffee.
“This leads to exporter inefficiency as they must overbuy to meet contracts for sustainably certified coffees and then manually separate the lot after the sale,” said Eshetu.
Different farms maintain different standards. Standards for handling coffee certified by the Rainforest Alliance, the 4C program, and USDA’s National Organic Programs are not interchangeable. Organic regulations for example, require the coffee to be stored separately from non-certified coffees.
The TLL model will enable identification of these certified lots and prevent contamination while insuring traceability, an important requirement if Ethiopia’s coffee is to remain competitive, said Eshetu. In his slide presentation, Eshetu cited for key objectives:
Improving quality of life - Farming communities benefit from implementation of sustainable practices that forbid child labor, provide better working conditions and mandate clean water both for sanitation and in the coffee waste stream.
Strategic relevance - Major customers, representing 25% of current exports, have made a public commitment to source sustainable coffee going forward. Adopting sustainable practices is necessary to keep their business and to prevent other customers from moving to other markets that meet their sustainability requirements.
Motivation to improve - The identification of individual lots creates incentives for farmers to differentiate themselves through improvements. Adopting advanced agronomy practices will boost quality and yields.
Ermias pointed out that “The opportunity is significant. Adjusting our platform to further differentiate coffee would drive growth across the value chain.”
He said that lot of work had been done in the background at ECX to change the information available to buyers.
“We expect to be up and running in a few weeks at a few sites,” he added.