ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
The impact of increased teff production on
Ethiopia’s economy
Ermias Engeda, IFPR...
2
1. The study
• Government of Ethiopia has ambitious goals for
increasing overall production of teff
 Broader objectives...
3
Study components
• Two elements:
1. Investigate impact of a 13.3 percent increase in national
production of teff on econ...
4
2. CGE model of Ethiopian economy
• Economy-wide model
 Built from Social Accounting Matrix of economy of Ethiopia
• A ...
5
Spatial disaggregation of CGE model
1. Humid lowlands
2. Moisture sufficient
highlands – Cereal-
based
3. Moisture suffi...
• 14 household types are defined in model
 Poor and non-poor in 7 areas
 Poor are defined as households in lowest 40 per...
7
3. Method
• First, establish baseline conditions of the economy
• Apply production acceleration “shock” to teff sub-sect...
• Teff production shock defined by ATA Teff Initiative aims a
25 percent increase in 209 target woredas
• Similar physical...
4a. Results – Teff, economic growth
9
• Agriculture sector makes up 45%
of GDP; teff makes up 7.6% of
agriculture sector
•...
Teff, income growth
10
• All household groups benefit
from increased teff production
• Urban consumers see greater
relativ...
Teff, price changes
11
• Strong reduction in teff price with
increased production
• Prices for other commodities
increase ...
4b. Results – Cereals comparison,
economic growth
12
• Increases in national
production of teff leads to
greater overall e...
Cereals comparison, income growth
13
• Increased teff production
provides superior increases
in incomes relative to the
ot...
Cereals comparison, price changes
14
• Increased production leads to
expected price declines for the
three cereals
 Somew...
15
5. Discussion
• Analysis shows that investments to intensify and increase teff
production will result in:
 Strong econ...
16
6. Implications
• Increased teff production offers important economic
benefits. These benefits are captured through con...
Upcoming SlideShare
Loading in …5
×

The impact of increased teff production on ethiopia's economy

1,130 views

Published on

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.

Published in: Technology, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,130
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
37
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

The impact of increased teff production on ethiopia's economy

  1. 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 1
  2. 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. 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. 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. 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. 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 6
  7. 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. 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 8
  9. 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. 10. Teff, income growth 10 • 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. 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. 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. 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. 14. Cereals comparison, price changes 14 • 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
  15. 15. 15 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
  16. 16. 16 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.

×