According to a recent report by the US Department of Agriculture (USDA), total grain production in Ethiopia increased in marketing year (MY) 2012/13, following good rainfall. The report highlights some key points:
- the country’s grain production is central to agricultural production, national food security and GDP;
- the underdeveloped commercial feed industry is seen as holding back livestock sector development;
- production is mainly smallholder-based and rain-fed, with low levels of productivity, while newly established commercial farms are focusing on export crops.
The most important grain crops in Ethiopia (in descending order) are maize, wheat, teff, sorghum, barley and millet. The government’s 5-year Growth and Transformation Plan began in 2010 and “aims to double grain production by 2015”, although USDA believes “there is little chance of reaching this target”.
Maize accounts for 30% of total Ethiopian grain production, with some 8 million smallholder farmers producing 95% of the maize crop. Four-fifths of maize production is for household consumption, while 10% is sold commercially (with the remainder used for seed, wages in kind, and animal feed). Wheat and maize flour are often mixed in rural areas, when rising wheat prices lead to increased use of maize.
After South Africa, Ethiopia is the largest producer of wheat in Africa. Wheat production is increasing slightly, following partial distribution of improved seed varieties. Seed replication facilities, however, are insufficient to meet demand. A government agency controls the distribution of fertiliser, supplying a generic blend regardless of soil type. Ninety-two per cent (92%) of wheat production comes from smallholders, and government-run wheat farms are in the process of privatisation. Sixty per cent (60%) of wheat production is for household consumption, with only 20% sold commercially. According to USDA, milling subsidies on imported wheat have served to lower domestic wheat prices.
Sorghum and millet are favoured in drought-prone areas, with sorghum and sometimes millet being mixed with teff to produce the traditional bread injera. An informal trade exporting sorghum into neighbouring areas of Sudan and Somalia occurs. Barley commonly substitutes for wheat when wheat prices are high, and barley production is expanding to meet the needs of a growing brewing industry. Currently local production only meets 35% of the annual usage of 72,000 tonnes. In terms of trade policy, USDA notes that “imports of grain are not officially banned, but traders and millers don’t have access to foreign exchange… and cannot compete with the government-subsidized wheat distribution system.” Wheat imports thus take place exclusively through the government-owned Ethiopia Grain Trade Enterprise (EGTE), while informal imports of sorghum occur. However, “exports of grain are officially prohibited”, with the exception of occasional exports to neighbouring countries “when there is sufficient local production” (mainly sorghum).
Ethiopia has some 3.7 million tonnes of annual flour milling capacity installed, with a quarter of wheat consumption being imported. Locally produced wheat reportedly enjoys quality advantages and a 30% price premium over imported wheat. With urbanisation and changing consumption trends, Ethiopian consumption of wheat is increasing at 2.6% per annum.
Given the high levels of households’ own consumption (80%), and the limited engagement of the Ethiopian cereals sector in international trade, Ethiopia would appear to be little affected by global cereals price volatility, which is mainly felt through the level of government subsidies deployed in the wheat sector. The Ethiopian government’s focus on national food security indeed needs to be seen in the context of regularity and severity of droughts in the Horn of Africa.
The Ethiopian government is now in the process of privatising state-run wheat farms and encouraging commercial investment in agriculture (see Agritrade article ‘ Agricultural trade policy changes pending in Ethiopia’, 9 December 2012). However, elsewhere in Africa the use of export bans and tight regulation of trade has not generally been conducive to attracting foreign investment.
If foreign investment in commercial production of cereals is to be encouraged, controls on trade in basic cereals may need to be reviewed. Such a review, in turn, may also require an examination of systems that are more market-based to ensure that underlying food security objectives are met.
In addition, it may be necessary to pay increased policy attention to how to strengthen the position of established cereals producers within more market-based supply chains, including through initiatives to strengthen the capacity of producer organisations to efficiently manage input procurement and mobilise investment in improved post-harvest food storage. Efforts are already under way in this regard, through the work of the Ethiopian Agriculture Transformation Agency.