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Potential economic profitability and competitiveness of wheat production in SS Africa

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Presentation by Dr. Bekele Shiferaw (CIMMYT) at Wheat for Food Security in Africa conference, Oct 8, 2012, Addis Ababa, Ethiopia.

Presentation by Dr. Bekele Shiferaw (CIMMYT) at Wheat for Food Security in Africa conference, Oct 8, 2012, Addis Ababa, Ethiopia.

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  • 1. Potential economic profitability andcompetitiveness of wheat production in SS Africa Bekele Shiferaw, Asfaw Negassa, Jawoo Koo, Kai Sonder, Melinda Smale, Stanley Wood, Hans Braun, Thomas Payne, Zhe Guo, Sika,Gbegbelegbe Wheat for Food Security in Africa Conference 8-10 October 2012, Africa Hall, UNECA, Addis Ababa, Ethiopia
  • 2. Outline• Introduction – – Widening gap and challenges to food security – Can SS Africa produce some of its requirements to reduce dependence on imports? – How large is this potential?• Methodology for analysis of SS Africa’s potential• Main findings of the study• Production potential• Conclusions• Policy implications
  • 3. Widening gap – per capita consumption and production60 Wheat self-sufficiency (%), 2007-2009 6050 53.3 50 46.1 45.8 40.740 40 3030 20 10 2.6 1.620 0 Eastern Middle Western Northern Southern Africa Africa Africa Africa Africa Africa 1960 1970 1980 1990 2000 2010 Per capita consumption Per capita production Source: Based on FAOSTAT database.
  • 4. Average area and production of wheat in Africa (2008 - 2010)Country Area (1000 ha) Production (1000 Self-sufficiency (%) tons)Algeria 1,585.1 2,388.1 29.33Ethiopia 1,520.7 2,725.4 64.33Egypt 1,283.2 7,889.7 45.78South Africa 649.5 1,839.3 59.50Tunisia 585.2 1,131.6 40.93Sudan 308.8 543.9 25.38Kenya 140.6 356.0 40.12Libya 133.3 105.0 6.71Tanzania 49.0 92.9 11.00Rwanda 48.1 72.5 73.01Nigeria 34.7 51.3 1.40Others 141.8 340.9 5.24Africa 9,376.0 22,542.3 38.8
  • 5. Widening gap between wheat production and consumption in Africa All Africa Sub-Saharan Africa 25 Million tons 20 15 10 Gap 5 0 1977 1961 1965 1969 1973 1981 1985 1989 1993 1997 2001 2005 2009 Demand Production
  • 6. Trends in wheat self-sufficiency ratio for selected regions in Africa (1961-2010) East Africa Middle Africa North Africa 90 60 80 80 40 70 70 60 60 20 0 50 50 40 40 -20 1960 1970 1980 1990 2000 2010 1960 1970 1980 1990 2000 2010 1960 1970 1980 1990 2000 2010 Southern Africa West Africa Africa 250 20 80 200 15 70 150 10 60 100 5 50 40 50 0 1960 1970 1980 1990 2000 2010 1960 1970 1980 1990 2000 2010 1960 1970 1980 1990 2000 2010Source: Prepared by authors based on FAOSTAT database.
  • 7. Challenges of reliance on import markets• Weather induced supply disruptions• Price spikes and price volatility in food markets• Diversion of maize for biofuels production and pressure on food prices• Speculative selling and buying behaviors• Wheat export restrictions by exporting countries• Foreign exchange shortages by SSA countries Are African policy makers willing to take this risks for national food security? Can this import dependence be reduced through domestic production in SS Africa?
  • 8. Objectives of the study• Assess to what extent domestic wheat production in selected countries of SS Africa would be agro- ecologically feasible and economically profitable and competitive to imports under rainfed systems using existing varieties.• Jointly conducted with IFPRI (HarvestChoice) and CIMMYT
  • 9. Modeling approach• GIS analysis. A number of biophysical suitability mapping approaches were evaluated and utilized to delineate suitable agro-ecologies as a basis for running the crop growth model.• Crop growth simulation. CERES-Wheat model in the DSSAT was used to estimate rainfed wheat yield responses at the pixel level: • No fertilizer • 50% of recommended fertilizers • 100% of recommended fertilizers• Fertilizer and grain transport cost modeling. Spatial analysis using road network and land cover data to estimate pixel-specific unit transport cost (for fertilizer and wheat produce).• Net economic returns – computed using pixel level import parity prices for wheat and imported inputs
  • 10. GIS analysis – suitability mapping Ecocrop map IIASA FAO GAEZ map
  • 11. Economic profitability analysis
  • 12. Aggregation and sensitivity analysis• If pixel level production is profitable using imported fertilizer and import parity prices, wheat production is considered profitable and competitive to imports.• National potential is then estimated at different levels of profitability and competitiveness by aggregating returns from pixel level simulations.• Sensitivity analysis. The robustness of the estimated potential was then evaluated against plausible changes in: – wheat prices, – fertilizer prices, – grain yields, – marketing costs, and – climate change.
  • 13. Map of study countries
  • 14. Results and discussion
  • 15. Yield under lowintensification (all pixels)Country Average (kg/ha)Angola 1055Burundi 2886Ethiopia 2348Kenya 3087Madagascar 2175Mozambique 1052Rwanda 3681Tanzania 1986DRC 1655Uganda 2861Zambia 1462Zimbabwe 911
  • 16. Yield under medium intensification (all pixels)Country Average (kg/ha)Angola 1542Burundi 3208Ethiopia 2972Kenya 3410Madagascar 2605Mozambique 1287Rwanda 3986Tanzania 2219DRC 2059Uganda 3383Zambia 1933Zimbabwe 1394
  • 17. Yield under High intensification (all pixels)Country Average (kg/ha)Angola 1886Burundi 3395Ethiopia 3395Kenya 3617Madagascar 2874Mozambique 1444Rwanda 4151Tanzania 2372DRC 2325Uganda 3728Zambia 2252Zimbabwe 1744
  • 18. NER under Low intensification (for pixels NER>0)Country Average NER Pixels with (US$/ha) positive NERs (%)Angola 195 22Burundi 905 100Ethiopia 618 71Kenya 802 91Madagascar 524 73Mozambique 111 15Rwanda 1314 96Tanzania 347 68DRC 270 53Uganda 742 99Zambia 301 63Zimbabwe 250 35
  • 19. NER under Medium intensification (for pixels NER>0)Country Average Pixels with NER positive (US$/ha) NERs (%)Angola 250 28Burundi 1010 100Ethiopia 670 88Kenya 885 92Madagascar 651 76Mozambique 128 19Rwanda 1416 96Tanzania 371 70DRC 275 71Uganda 898 100Zambia 385 80Zimbabwe 271 58
  • 20. NER under High intensification (for pixels NER>0)Country Average Pixels with NER positive (US$/ha) NERs (%)Angola 275 32Burundi 1061 100Ethiopia 771 90Kenya 931 92Madagascar 731 76Mozambique 145 21Rwanda 1461 96Tanzania 384 71DRC 302 76Uganda 994 100Zambia 444 86Zimbabwe 309 76
  • 21. Potential area (>$200/ha) and production (medium level of intensification) Area (million ha) Production (million tons) 10% 25% 10% 25%Mozambique 0.1 0.26 0.27 0.67Burundi 0.14 0.34 0.45 1.11Rwanda 0.14 0.36 0.61 1.51Uganda 0.2 0.51 0.69 1.72DRC 0.25 0.62 0.76 1.89Kenya 0.67 1.67 2.65 6.63Zimbabwe 0.81 2.03 1.72 4.3Angola 0.92 2.31 2.67 6.67Tanzania 1.21 3.02 3.62 9.05Madagascar 1.27 3.17 4.74 11.85Zambia 1.73 4.32 4.26 10.64Ethiopia 2.6 6.5 9.42 23.55All 10.04 25.11 31.86 79.59
  • 22. Sensitivity analysis: 25% wheat price decrease Change in percentage of pixels with positive net economic returns from baseline DRC-44 Zambia -29 Tanzania -23 Zimbabwe -23Madagascar -21Mozambique -15 Angola -13 Ethiopia -13 Kenya -8 Burundi -3 Rwanda -1 Uganda -1 -40 -30 -20 -10 0 Change
  • 23. Sensitivity analysis: 25% wheat yield decrease Change in percentage of pixels with positive net economic returns from baseline DRC -28 Zambia -23 Zimbabwe -21Madagascar -15Mozambique -14 Tanzania -14 Angola -8 Ethiopia -8 Kenya -7 Burundi -3 Rwanda -1 Uganda -1 -30 -20 -10 0 Change
  • 24. Conclusions• Strong evidence that there is large potential for economically profitable wheat production in SSA to meet the growing consumption demand• Results are generally robust to plausible shocks. – Low world prices of wheat and high fertilizer costs will reduce the relative competitiveness of domestic production – Fall in domestic yield will reduce competitiveness – investment in R&D to increase yields and to reduce production and marketing costs will increase it• The limiting factors are not agro-ecological, they are rather socio-cultural, institutional and policy impediments.
  • 25. Policy implications• How can Africa exploit this potential? – Paradigm shift – policy dialogue with an open mind to explore opportunities – Action plan will vary by country/region and need to analyze farming system constraints and other crops – Adaptive research and extension to enhance farmer awareness, access to seeds, inputs and knowledge of improved practices – Development of value chain opportunities – Better food aid and import policies to reduce negative effects on domestic producers
  • 26. • Thank you!• Asante sana!• Merci beaucoup!• Shukran!• Ameseginalehu!Bekele Shiferaw:b.shiferaw@cgiar.org
  • 27. Per capita consumption of main cereals in Africa (kg/year)80.070.060.050.040.030.020.010.0 0.0 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 Maize Wheat Rice
  • 28. 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 1961 80.0 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980Maize 1981 1982 1983 1984 1985 1986 1987Wheat 1988 1989 1990 1991 1992 (kg/capita/year), 1961 - 2010Rice 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Trends in annual per capita consumption of main cereals in Sub Saharan Africa 2007 2008 2009 2010
  • 29. Import of main cereals into Africa (million tons)
  • 30. Trends in Sub Saharan Africas net export of main cereals (million tons), 1961 - 2010
  • 31. Sensitivity analysis: 25% fertilizer cost increase Change in percentage of pixels with positive net economic returns from baseline DRC -2 Zambia -2 Ethiopia -1Madagascar -1Mozambique -1 Tanzania -1 Zimbabwe -1 Angola 0 Burundi 0 Kenya 0 Rwanda 0 Uganda 0 -2 -1.5 -1 -.5 0 Change
  • 32. Sensitivity analysis: 25% marketing cost increase Change in percentage of pixels with positive net economic retur from baseline DRC-21 Zambia -14Madagascar -11Mozambique -9 Angola -8 Zimbabwe -7 Ethiopia -2 Burundi -1 Kenya 0 Rwanda 0 Tanzania 0 Uganda 0 -20 -15 -10 -5 0 Change