International Food Policy Research Institute/ Ethiopia Strategy Support Program (IFPRI/ ESSP)and Ethiopian Development Research Institute (EDRI) Coordinated a conference with Agriculutral Transformation Agency (ATA) and Ministry of Agriculutrue (MoA) on Teff Value Chain at Hilton Hotel Addis Ababa on October 10, 2013.

1. ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
The impact of increased teff production on
Ethiopia’s economy
Ermias Engeda, IFPRI ESSP-II / EDRI
Todd Benson, IFPRI, Washington, DC
Conference on “Improved evidence towards
better policies for the teff value chain”
10 October 2013
Addis Ababa
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2. 2
1. The study
• Government of Ethiopia has ambitious goals for
increasing overall production of teff
 Broader objectives are increased growth of Ethiopian economy,
higher incomes for producers, & lower prices for consumers
• Teff sub-sector investments have wider economic effects:
 On economic growth in linked sectors & sub-sectors (both
agricultural & non-agricultural)
 On consumer & producer incomes and household welfare
 On prices
 Investigated these effects using an economy-wide model
 Computable General Equilibrium (CGE) model of the Ethiopian
economy

3. 3
Study components
• Two elements:
1. Investigate impact of a 13.3 percent increase in national
production of teff on economic growth, incomes, and prices
• Corresponds to a 25 percent increase in teff production in the 209
target woredas of the Teff Initiative of the Ethiopian Agricultural
Transformation Agency (ATA)
• Physical increase in production of 460,000 mt
2. Examine how such a production increase in teff will lead to
different economic impacts from similar production increases
in wheat and maize
• Does teff have unique economic properties, at least in comparison to
wheat and maize?
• Or are all cereals in Ethiopia the same in these respects?

4. 4
2. CGE model of Ethiopian economy
• Economy-wide model
 Built from Social Accounting Matrix of economy of Ethiopia
• A balanced accounting of all economic transactions that take place
within the economy
• Relies on household & agricultural surveys, national accounts, and a
broad range of other data on production and consumption in Ethiopia
• SAM refers to sectors, factors and households in the economy
• Permits examination of disaggregated effects of sub-
sectoral changes along several dimensions
 Highly disaggregated – 24 sub-sectors in agriculture sector
 Spatially disaggregates the agricultural economy into 5 agro-
ecologically defined zones that are economically interlinked
 Defines model households to capture household-level effects

5. 5
Spatial disaggregation of CGE model
1. Humid lowlands
2. Moisture sufficient
highlands – Cereal-
based
3. Moisture sufficient
highlands – Enset-
based
4. Drought‐prone
highlands
5. Pastoralist – Arid
lowland plains

6. • 14 household types are defined in model
 Poor and non-poor in 7 areas
 Poor are defined as households in lowest 40 percent of population
ranked by per capita expenditure
 7 areas:
 Large urban centers, including Addis Ababa
 Smaller urban centers
 Rural households in each of the 5 agro-ecological zones for the model
 Here report economic effects of the increase in teff
production on 6 aggregations of these household types
 rural & urban; rural poor & non-poor; urban poor & non-poor
Model households in Ethiopia CGE model
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7. 7
3. Method
• First, establish baseline conditions of the economy
• Apply production acceleration “shock” to teff sub-sector and run
model
 Here used CGE model in static manner - one-off scenario of sharp increase
in production
 Model assumes production increases achieved through improved
efficiency in use of factors of production – not through increases in use of
land or labor
• Run different national production shocks for wheat and maize to
come up with similar 460,000 mt of additional production for
each
• Examine effect of these production increases on outcomes of
interest – economic growth, incomes, & prices

8. • Teff production shock defined by ATA Teff Initiative aims a
25 percent increase in 209 target woredas
• Similar physical increase applied to wheat & maize to assess
differences in economic impact of similar increase in
production of other cereals
Teff, wheat, and maize production shocks
Teff Wheat Maize
Current production , ‘000s mt
(2011 production figure)
3,457 2,798 4,960
Increase in production, ‘000s mt
(production shock)
460 460 460
Total increased production, ‘000s mt 3,917 3,258 5,420
National production increase, % 13.3 16.4 9.3
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9. 4a. Results – Teff, economic growth
9
• Agriculture sector makes up 45%
of GDP; teff makes up 7.6% of
agriculture sector
• Here show economic growth due
to teff production increase over
baseline conditions
• See strong economic growth in
cereal highlands
 Also in drought-prone highlands,
where teff grown
 Positive growth, if more limited, in
enset zones where teff is not
common
Base-
line Teff, %
Overall 122.2 0.6
Agriculture
sector
58.8 1.2
Cereal
highlands
25.4 1.7
Enset
highlands
8.0 0.5
Drought-prone
highlands
15.2 1.4
GDP baseline unit: billions of ET Birr

10. Teff, income growth
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• All household groups benefit
from increased teff production
• Urban consumers see greater
relative benefit than do rural
producers
 Urban non-poor likely are greatest
beneficiaries of increased teff
production
 Reflects the effect of lower price
of teff on real income, since it is
one of the major items in urban
consumption bundle.
 Both rural and urban non-poor
are better endowed with
productive resources. Thus, they
enjoy higher income gain.
Base-
line Teff, %
Overall 133.0 0.37
Rural 98.0 0.32
Rural poor 24.8 0.22
Rural non-poor 73.1 0.35
Urban 35.0 0.52
Urban poor 5.0 0.51
Urban non-poor 30.0 0.52
Income baseline unit: billions of ET Birr

11. Teff, price changes
11
• Strong reduction in teff price with
increased production
• Prices for other commodities
increase slightly with increased teff
production
 Increased efficiency of teff production
releases factors to other crops
 Increased production of all crops
increases incomes
 But increase in production of other
crops is insufficient to meet new level
of demand from higher incomes, so
prices rise, except for teff
Teff, %
Teff -11.86
Wheat 0.27
Maize 0.17
Barley 0.17
Sorghum 0.20
Pulses 0.19
Oilseeds 0.05
Milk 0.23
Meat 0.09
Analysis based on prices relative to 2005
base year, so actual prices not reported.

12. 4b. Results – Cereals comparison,
economic growth
12
• Increases in national
production of teff leads to
greater overall economic
growth than similar
increases for maize & wheat
 Reflects the higher price of
teff relative to wheat and,
especially, maize
 But geographic differences
 Reflect differing comparative
advantage for production and
different patterns of
consumption of these cereals
in different zones
Teff, % Wheat, % Maize, %
Overall 0.6 0.4 0.4
Agriculture
sector
1.2 0.8 0.8
Cereal
highlands
1.7 1.2 1.7
Enset
highlands
0.5 0.9 1.1
Drought-
prone
1.4 0.7 -0.1
GDP baseline unit: billions of ET Birr

13. Cereals comparison, income growth
13
• Increased teff production
provides superior increases
in incomes relative to the
other cereals, expect for the
rural poor
 Reflects value of increased teff
production relative to that of
wheat & maize – teff has a
higher price
• Teff & maize show sharp
rural/urban income growth
distinctions. Wheat does not.
Teff, %
Wheat,
%
Maize,
%
Overall 0.37 0.29 0.26
Rural 0.32 0.29 0.23
Rural poor 0.22 0.28 0.16
Rural non-poor 0.35 0.29 0.25
Urban 0.52 0.30 0.33
Urban poor 0.51 0.29 0.32
Urban non-poor 0.52 0.30 0.33
Income baseline unit: billions of ET Birr

14. Cereals comparison, price changes
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• Increased production leads to
expected price declines for the
three cereals
 Somewhat larger first-round price
decline for teff
• Price increases seen for the
other commodities
 Increased wheat production leads
to highest price increases in other
commodities.
Teff, %
Wheat,
%
Maize,
%
Teff -11.86 0.24 0.17
Wheat 0.27 -7.11 0.22
Maize 0.17 0.24 -8.23
Barley 0.17 0.24 0.16
Sorghum 0.20 0.25 0.14
Pulses 0.19 0.25 0.17
Oilseeds 0.05 0.83 0.12
Milk 0.23 0.32 0.16
Meat 0.09 0.13 0.11
Analysis based on prices relative to 2005 base
year, so actual prices not reported

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5. Discussion
• Analysis shows that investments to intensify and increase teff
production will result in:
 Strong economic growth that is superior to maize and wheat at similar
levels of production increase. This is particularly the case in areas of
Ethiopia where teff is agro-ecologically suited. Teff is highest value cereal.
 Important income gains, in particular for urban households
 Lower teff prices with higher production, enabling increased consumption
• Given these benefits, should investments in teff supplant those
for increasing wheat and maize production? No.
 Given higher yields and yield potential of wheat and maize, less costly to
attain target production increase with those crops than with teff
 The three optimally exploit different agro-ecological conditions
 Diversity in cereal and other staple food production contributes to national
food security

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6. Implications
• Increased teff production offers important economic
benefits. These benefits are captured through continued
investments:
 In developing technologies to improve teff production
 In improving better and on-time input access for farmers
 In improving post-harvest practices to minimize losses
• However, it is better to balance investments across staple
food crops
 A teff specific strategy alone is not in Ethiopia’s interest
 Adopt a zonal approach to planning investments to increase crop
production. Will ensure exploitation of different agro-ecologies
across Ethiopia with optimal crops for each.