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The supply chain of teff to addis ababa
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The supply chain of teff to addis ababa

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International Food Policy Research Institute/ Ethiopia Strategy Support Program (IFPRI/ ESSP)and Ethiopian Development Research Institute (EDRI) Coordinated a conference with Agriculutral ...

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.

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    The supply chain of teff to addis ababa The supply chain of teff to addis ababa Presentation Transcript

    • The supply chain of teff to Addis Ababa Bart Minten, Seneshaw Tamiru, Ermias Engeda, and Tadesse Kuma IFPRI ESSP-II EDRI Conference on “Improved evidence towards better policies for the teff value chain” 10 October 2013 Addis Ababa 1 ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE
    • 2 1. Introduction • Importance of cities rapidly growing world-wide: In 1950: 30% living in cities; In 2010: 50% • In Africa: projected to have 60% in cities in 2050; Rapidly growing rural-urban agricultural market flows, with important implications on urban and rural food security • Increasing dependence of African cities on imported food, blamed on uncompetitive local value chains • However, few scientific studies that look rural-urban food value chains; • This leads often to a badly informed debate
    • 3 Three conventional wisdoms on food value chains • Perception 1: “Farmers obtain small share of final retail price” (The Economist: “… too few subsistence farmers get a chance to sell their produce (and usually get less than 20% of the market price)” March 2nd-8th, 2013, p.9, in Leaders) • Perception 2: “Value chains are long and there are many layers, causing inefficiency” • Perception 3: “Sales are driven by distress immediately after harvest when prices are low” Our contribution: Test validity of these perceptions in the case of Ethiopia for teff
    • • Purpose of the study is to understand major value chains of teff (the most important crop in Ethiopia) from rural producers in major production zones to Addis, the major city in the country. • Surveys with producers and communities upstream; rural and urban wholesalers and truckers midstream; cereal shops, mills, and cooperative retail downstream 2. Data and methodology
    • • Stratified random samples at each level: 1. Upstream: 1,200 farmers in five major teff production zones. These five zones represent 38% of national teff area and 42% of the commercial surplus. 2. Midstream: 200 rural wholesalers (that ship teff to Addis); 75 urban wholesalers (2/3th on Ashwa Meda; 1/3rd on Ehil Beranda); 90 truck drivers 3. Downstream: 282 retail outlets (83% mills; 10% cereal shops; 7% consumer cooperatives) 2. Data and methodology
    • • Most common value chain is one with three intermediaries between producer and consumer: Producer Regional trader Urban broker/trader Urban retailer Consumer - Sometimes shorter, e.g. 32% of teff sold by urban retailers directly obtained in rural areas - Sometime longer, e.g. 13% of procurement of rural traders from rural assemblers or farmer-traders 3. Structure of the value chain
    • • Farmers asked teff price at the time of the survey (October- November 2012) for their most common place of sale • All value chain participants asked prices for the different teff qualities at the time of the survey (rural traders: October-November; urban traders and retailers: December) • Use all these prices to get at average price composition 4. Price formation
    • 4. Price formation in value chain (October 2012) 0.0 200.0 400.0 600.0 800.0 1000.0 1200.0 1400.0 1600.0 1800.0 Magna White Mix Red Birr/quintal Milling and cleaning Urban retail Urban wholesale Rural market/town Farmgate
    • • Farmers obtain between 78% (red) to 86% (magna) of the final urban retail grain price • Average composition of margin between producer and consumers: 1/ Farmgate – rural markets: 15% 2/ Rural market – urban wholesale: 54% 3/ Urban wholesale – urban retail: 19% 4/ Milling and cleaning: 13% • Gives us average picture at time of survey; in rest of presentation look at spatial and temporal variation 4. Price formation in the value chain
    • • Strong price – transportation cost relationship • In case of white teff (most traded), producer share drops from 90% close by to 80% for most remote 5. Variation over space100011001200130014001500 0 50 100 150 Transport costs to Addis (Birr/quintal) Magna White Mix Red
    • • Storage: release smooth over the year 6. Temporal variation 0 100 200 300 400 500 600 700 800 900 N-D D-J J-F F-M M-A A-M M-J J-J J-A A-S S-O O-N kg storage
    • • Two measures of distress sales: 1. “Would you have sold the teff at this time if the price would have been 10% lower?”: 19% of transactions (“distress”) 2. “Would you have sold the teff at this time if the price would have been 50% lower?”: 10% of transactions (“extreme distress”) • In 71% of the cases, farmers would not have accepted lower price 6. Temporal variation in sales
    • • Multinomal model (0=normal; 1=distress; 2=extreme distress): 1. Strong effect of the month of sales: More distress sales in months immediately after harvest 2. Extreme distress sales characterized by smaller quantities sold (seemingly only done to cover immediate needs) 3. Off-farm income leads to less distress and extreme distress sales 4. More remote households have more distress sales (poorer in general and play less the market) Associates of distress sales
    • • Milling margins dropped by half in last ten years 7. Changes in margins Ratio of milling margins over teff price 0 0.01 0.02 0.03 0.04 0.05 0.06 200107 200202 200209 200305 200312 200407 200502 200509 200604 200611 200706 200801 200808 200903 200910 201005 201012 201107 201202
    • • Trend line: share of producers has increased from 74%- 78% in 2001 to 76-86% in 2011 Share of producer in retail price 0.5 0.6 0.7 0.8 0.9 1 200201 200207 200301 200307 200401 200407 200501 200507 200601 200607 200701 200707 200801 200807 200901 200907 201001 201007 201101 201107 Shareinretailprice white producer mix producer red producer Linear (white producer) Linear (mix producer) Linear (red producer)
    • 16 7. Conclusions 1. We find most common value chain to be rather short, with on average 3 intermediaries between farmers and consumers 2. The share of the farmer in final retail price is about 80 %, using different methodologies (price at time of survey; price from transactions and taking seasonality of sales into consideration); share drops when farmers live further 3. Distress sales: 19% of transactions; Extreme distress: 10% of transactions; smooth storage release These are seemingly all signs of well-functioning markets
    • 17 7. Conclusions Why in contradiction with perceptions? 1. Few surveys; mostly case studies; problems of representativity; 2. Important changes (roads; communication) have happened that people are not aware of 3. Teff unsophisticated value chain (little value addition by value chain agents) 4. Results different for perishable crops; root crops; or thin markets 5. Teff high price; e.g. maize different 6. Traders easy to blame; their importance overstated
    • 18 8. Implications 1. As market assessment hard, careful at benefits and costs before interventions (such as cooperative marketing, modern commodity exchanges; warehouse receipt systems; price controls) 2. Lower transportation costs lead to higher prices for producers; Better qualities have higher producer share 3. If objective of policy makers is to reduce consumer prices, focus on costs at the farm level (i.e. improved technologies); there is seemingly very little potential at the market level