Growing talk of delivery defaults by Ethiopian exports caused concern in Europe's cash coffee market this week, traders said on Friday. "Ethiopian exporters appear to have been simply wrong-footed by the recent rises in New York prices and just do not want to sell at a loss," one coffee trader said.
"I was told by Ethiopian suppliers that if I did not accept price rises I would get no delivery. The market is extremely nervous because of talk trading houses are facing large numbers of defaults." Ethiopia's Prime Minister Meles Zenawi said on Wednesday he would look into claims Ethiopian coffee exporters have been defaulting on contracts.
New York arabica futures hit a 12-1/2-year high on July 30 partly because of fund buying and this week continued to hover at these levels. Ethiopian exporters were believed to have made heavy advance sales when New York was lower in May and early June, expecting prices to fall further as a good crop was expected in Brazil and a better harvest in Colombia, traders said.
"They did not secure cover supplies in their home market and now face enormous losses if they buy locally at current New York prices," a trader said. "But this was their risk and their own decision. If Ethiopia does not want to play by the global market rules it will find it will lose business." "Defaults will damage Ethiopia's trading image in the long term." Ethiopia would be the second country this year which has made widespread defaults. In January, major defaults by Vietnamese robusta exporters hit European buyers.