Coffee market performance and producer welfare upon the introduction of the Ethiopian Commodity Exchange

Coffee has been and remains the cornerstone for the Ethiopian economy for a long time. Over the years, numerous policies were implemented with the aim to extract benefits out of the sector. The most recent policy reform was the introduction of Ethiopian Commodity Exchange (ECX) that is serving as trading platform for coffee in 2008. This thesis attempts to examine the impact of the introduction of ECX on the performance of the coffee sector and welfare of the coffee producers. The thesis is structured in four separate sections. First it examines the extent to which the prices of Ethiopian coffees integrate with the coffee prices on the international market. Second, it tests the spatial integration of the prices of coffees between the different coffee producer markets in Ethiopia. Third, it tries to understand the price transmission between the world and the domestic Ethiopian coffee market. Finally, it seeks to unveil the impact of de-commoditization which is introduced by ECX, on the welfare of the coffee producers. Generally, ECX is a great milestone for a developing country economy such as that of Ethiopia which encountered numerous socio-economic problems. However, ECX faces challenges in achieving the institutionalization of the Ethiopian coffee market. Failure to understand the coffee market and the lack of institutional trust at all levels, especially at higher-level of Ethiopian coffee market need due consideration.

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