Diao, Xinshen; Thurlow, James; Ellis, Mia and Pauw, Karl. 2023.

1. Ethiopia’s Agrifood System
Structure and Drivers of Transformation
Xinshen Diao, Mia Ellis, Karl Pauw, and James Thurlow
International Food Policy Research Institute
This diagnostic analysis was conducted by IFPRI with financial support from USAID and funders of the CGIAR Research Initiative on Foresight and on National Policies and Strategies.
July 2023

2. Four Parts to the Diagnostics
• Current structure
What does Ethiopia’s food system look like today?
• Decomposing value chains
How are different products contributing to the broader agrifood system?
• Growth and market structure
How is Ethiopia’s agrifood system growing and transforming?
• Future drivers of inclusive agricultural transformation
Which value chains could be most effective?
2019
2009-2019
2019+

3. Summary
Ethiopia’s agrifood system (AFS) diagnostic results
Ethiopia’s AFS has been transformation with rapid growth
• Off-farm AFS GDP grew more rapidly than primary agriculture, and the share of off-farm components in AgGDP+ increased by 10 percentage points
between 2009 and 2019
• Agriculture is no longer the largest sector in Ethiopia’s economy, and its share of total GDP fell by 14 percentage points in 2009–2019
• The agrifood system, however, is still dominated by primary agriculture in value added, and agriculture is still the largest sector for employment in
total economy
AFS growth has been driven by domestic-market-oriented value chains
• Less-traded value chains dominated AFS growth with their large size and near average growth
• Importable value chains made an important contribution to AFS growth with their rapid growth
• Domestic consumption patterns (and changing diets) are therefore important drivers of agricultural transformation
Looking forward, the structure of AFS growth will be crucial in driving development outcomes…
(e.g., poverty, dietary improvements, employment creation, and growth)
… but no single value chain is the most effective at driving all these development outcomes
• Horticulture and wheat & barley are most effective at reducing poverty; horticulture and cattle & dairy are best for improving diet quality; the two
livestock value chains have strong employment effects; and wheat & barley and maize have large growth multipliers
 Jointly promoting horticulture, wheat & barley, maize, and livestock would offer an effective way to achieve multiple
development outcomes

4. Framework | Agrifood Systems (AFS)
Primary agriculture
Agroprocessing
Trade and transport
Food services
Trade and transport
Input supply Demand
Consumption of own-
produced goods
Purchase of primary
agricultural goods
Purchase of processed
agrifood goods
Purchase of ready-made
foods outside of home
Imports
A
C
B
D
E
Includes agriculture, plus all upstream/downstream sectors
• Five major components (A to E)
• Same format as standard economywide datasets (e.g., national accounts)
• Allows us to measure AFS structure and performance using actual data
Agrifood System GDP (AgGDP+)
Total value added generated by all agricultural
value chains (in constant dollars)
Agrifood System Employment (AgEMP+)
Total number of workers who are primarily
employed in an agricultural value chain

5. Structure2019 | Ethiopia’s Agrifood System Today
GDP and employment in Ethiopia’s agrifood system (2019)
• Part 1 focuses on the current size and
structure of the national agrifood system
• Latest AgGDP+ and AgEMP+ estimates
• Decomposed into five AFS components
• Situates AFS within the broader economy
• Uses official data sources
• GDP from national accounts
• Employment from various sources (i.e., population
census, labor force surveys, ILO, etc.)
• Ethiopia AFS estimates indicate that
• AFS makes up near half of GDP
($47.2 billion AgGDP+) …
• … and more than three-quarters of total
employment (40.3 million AgEMP+)
• Primary agriculture (A) is large, but off-farm
components (B–E) are also important
(26% of AgGDP+, 12% of AgEMP+)
GDP
($ billions)
Employment
(millions of workers)
Total economy 98.5 100% 52.2 100%
Agrifood system 47.2 47.9% 40.3 77.2%
Primary agric. (A) 34.7 35.2% 35.4 67.9%
Off-farm AFS 12.5 12.7% 4.9 9.3%
Processing (B) 2.7 2.7% 1.1 2.1%
Trade & transport (C) 6.6 6.7% 2.9 5.5%
Food services (D) 2.4 2.5% 0.6 1.2%
Input supply (E) 0.9 0.9% 0.3 0.6%
Rest of economy 51.3 52.1% 11.9 22.8%

6. Structure2019 | Comparing to Other Countries
• Importance and structure of the AFS varies at different stages of development
Ethiopia is a low-income country (LIC)
• A: Ethiopia’s AgGDP+ share of total GDP is larger than the LIC average
• B: Ethiopia’s primary agriculture component is also larger than in most LICs
• C: Ethiopia’s agro-processing is smaller than expected, while trade & transport is larger
Share of total GDP (%) Share of AFS GDP (%) Share of off-farm AFS GDP (%)
LIC = low-income countries | LMIC = lower-middle income | UMIC = upper-middle-income | HIC = high-income Source: IFPRI Agri-Food System Database
A B C
4.2
26.4
16.9
7.1
1.2
35.2
8.2
13.4
11.9
10.6
6.6
12.8
All LIC LMIC UMIC HIC Ethiopia
Primary agriculture Off-farm AFS
34.0
66.2
58.6
40.2
15.6
73.3
66.0
33.8
41.4
59.8
84.4
26.7
All LIC LMIC UMIC HIC Ethiopia
Primary agriculture Off-farm AFS
33.7 37.8 38.4
46.9
26.1 21.3
31.7
42.8 38.6 21.4
35.9
52.2
23.1
13.7
11.2
18.2 27.8
19.4
11.4 5.8 11.8 13.5 10.3 7.1
All LIC LMIC UMIC HIC Ethiopia
Processing Trade and transport
Food services Input supply

7. Structure2019 | Supply vs. Demand Sides of the Agrifood System
Agrifood GDP vs. consumption
Primary, processed, and other product shares (%)
• AgGDP+ defines the AFS on the supply side
• Household demand and trade (imports) capture AFS structure on the demand side
• Agrifood processing is more important on the demand side than the supply side in the AFS
AgGDP+ Household demand
Agrifood exports vs. imports
Primary and processed product shares (%)
Exports ($2.74 bil.) Imports ($1.14 bil.)
73.3%
5.7%
21.0%
$2.54 bil.
92.6%
$0.20 bil.
7.4%
Primary agriculture
Agrifood processing
$1.05 bil.
92.1%
$0.09 bil.
7.9%
72.9%
17.8%
9.3%
Primary agriculture
Agroprocessing
Other off-farm

8. Value Chains2019 | Contributions & Trade Orientation
• Part 2 decomposes the AFS across broad value chain
groupings
• Classify value chains based on trade orientation
• Exportable value chains have above-average export-output
ratios ( > 4.0%)
• Importable value chains have above-average import-demand
ratios (> 1.7%)
• Less-traded value chains make up the rest
• Domestic market dominates AgGDP+ (78.8%) – 11 less-
traded value chains; relatively smaller off-farm share
(60%) and larger on-farm (primary) share (85.7% of total),
with cattle a significant exception
• Only two exportable value chain groups (export crops
include coffee and cut flowers); relatively larger off-farm
share (10.3%) and smaller on-farm (primary) share (5.8%)
• Three importable value chains account for a
disproportionate share of off-farm AFS (17.5%); these
value chains compete with processed agrifood imports
Promoting exportable value chains, some importable
value chains, and cattle (less traded) could be effective in
driving agricultural transformation by boosting value
added and employment in off-farm AFS
Share of total GDP (%) Exports /
output
(%)
Imports /
demand
(%)
Total
AFS
Primary
agric.
Off-farm
AFS
Total 100 100 100 4.0 1.7
Exportable 7.0 5.8 10.3 47.5 11.6
Oilseeds 3.0 2.7 3.7 42.3 22.5
Export crops 4.0 4.1 6.6 51.4 0.3
Importable 11.0 8.6 17.5 0.7 7.3
Other cereals 0.4 0.4 0.2 33.8
Horticulture 5.8 5.6 6.3 1.7 2.5
Other crops 4.8 2.6 11.0 0.0 8.9
Less traded 78.8 85.7 60.0 0.3 0.2
Maize 7.3 8.2 5.0
Teff 6.9 8.3 3.1 0.6
Sorghum 7.0 8.2 3.8
Wheat & barley 10.7 11.6 8.1 0.0 0.4
Pulses 7.3 8.9 3.1 1.6
Roots 4.0 4.6 2.2
Cattle 8.5 7.9 10.1 1.3 0.0
Dairy 12.1 13.4 8.5 0.0 0.1
Other livestock 4.9 6.0 1.7 3.2 1.2
Fish 0.5 0.3 0.8 0.0 1.2
Forestry 9.6 8.2 13.6 0.0 1.1
Breakdown of Ethiopia’s agrifood system (2019)

9. Growth2009-2019 | Agrifood System Performance
• Ethiopia’s AFS has been transforming with rapid growth
• Agricultural share of total GDP fell by 14 percentage points between 2009 and 2019
• Share of off-farm components in AgGDP+ rose by 10 percentage points
• … but agriculture still dominates AgGDP+
• Agriculture GDP is three times as large as GDP in the off-farm components and almost 10 times in employment
Agricultural GDP, agrifood system GDP, and employment shares (2009–2019)
• Part 3 analyzes structural change in the AFS and the contribution of different value chains to AFS growth
49.4
59.3
16.7
74.2
35.2
48.0
26.7
67.9
Agricultural GDP share AgGDP+ share Off-farm share of AgGDP+ Agricultural employment share
Share
(%)
2009 2019

10. Growth2009-2019 | Value Chain Performance
• AgGDP+ grew rapidly during 2009–2019 (6.9% p.a.)
• Less-traded value chains dominated AFS growth with
their large size and near average growth (6.7%),
contributing 75% of AFS growth in 2009–2019
• Importable value chains made an important
contribution to AFS growth with most rapid growth
(10.8%)
• Value chains with above-average AgGDP+ growth rates
(*) ( > 6.9%) are in importable and less-traded groups
• All three importable value chains have high growth
rates (9.4% – 12.8%)
• Four less-traded value chains have above-average
growth
• AgGDP+ growth driven by strong growth in off-farm
AFS (12%), including processing (14.3%)
• Most value chains, not only fast-growing ones,
experienced faster off-farm growth
Indicative of increased market orientation of the AFS;
associated with increased demand for trade,
transport, and processing
Value chain growth in Ethiopia (2009-2019)
Average annual GDP growth rate (%)
Total
AFS
Primary
agric.
Off-farm
AFS
Process-
ing
Total AFS 6.9 5.5 12.0 14.3
Exportable 5.7 3.6 10.0 11.9
Oilseeds 4.8 3.2 9.3 12.6
Export crops 6.4 4.1 10.4 11.4
Importable 10.8 8.8 14.2 15.5
Other cereals* 9.9 9.4 13.2 19.6
Horticulture* 9.4 8.4 12.5 14.6
Other crops* 12.8 9.7 15.3 15.7
Less traded 6.7 5.8 12.2 15.2
Maize 6.0 5.9 12.3 14.9
Teff* 12.1 11.9 13.8 14.9
Sorghum* 7.0 6.4 11.4 14.3
Wheat & barley 6.8 5.8 11.8 15.8
Pulses 6.7 6.3 10.4
Root crops* 7.5 7.2 10.0
Cattle 6.0 3.9 13.5 15.2
Dairy 5.0 3.9 12.1 15.4
Other livestock 4.3 3.7 12.6 11.4
Fish* 15.3 11.8 21.6 12.6
Forestry 4.3 3.3 8.3 13.3

11. Future Drivers2019+ | Modeling Faster Growth
• IFPRI’s RIAPA model is used to analyze different sources of agricultural growth
• Expand production in different value chains
• Increase on-farm productivity growth rates in targeted value chains
• Achieve same overall growth in agriculture GDP (e.g., 1.0%)
• Track linkage effects within value chains and spillover effects to other value chains
• Assess outcomes
• Poverty – Poverty-growth elasticity in percentage points based on $2.15-a-day
• Hunger – Hunger-growth elasticity in percentage points based on prevalence of undernourishment
• Diet – Diet quality to growth elasticity in % derived from Reference Diet Deprivation index (REDD)
• Jobs – Employment multiplier in thousand employed persons associated with US$1 million growth in targeted value chain
• GDP – GDP growth multiplier in US$ millions associated with US$1 million growth in targeted value chain
• Average across outcomes
• The value of outcome indicators (elasticity or multiplier) is expected to differ across value chain growth; not all value chains are
equally effective at achieving all outcomes
• Normalizing the individual outcome scores
• The values of each outcome indicator are scaled so that the most effective value chain is given a score of one and the leasteffective is given a
score of zero. A value chain with adverse impact is also given a score of zero.
• An average score with equal weights is used to measure the total impacts across all value chains

12. Future Drivers2019+ | Prioritizing Agricultural Growth
Poverty
(change in %-point)
Hunger
(change in %-point)
Jobs
(change in 1,000)
Diet quality
(change in %)
Average across outcomes
(averaged normalized scores, reordered)
GDP
(change in bil. $)
Individual outcomes
(per unit change in agriculture GDP, ordered by poverty outcome)
1.12
2.90
2.36
1.16
1.10
1.37
0.95
1.08
1.40
1.41
0.88
0.00
-0.05
-0.05
0.30
0.23
-0.03
0.18
0.04
0.83
0.80
0.08
Horticulture
Wheat & barley
Maize
Export crops
Oilseeds
Teff
Other crops
Pulses
Other livestock
Cattle and milk
Root crops
2.04
0.36
0.28
0.08
0.12
0.08
0.13
0.21
0.17
0.41
-0.02
-0.29
-1.17
-1.14
-0.24
-0.25
-0.82
-0.18
-0.27
0.13
0.14
-0.12
-1.29
-0.85
-0.74
-0.70
-0.57
-0.39
-0.27
-0.26
-0.23
-0.19
-0.07
Horticulture
Wheat & barley
Maize
Export crops
Oilseeds
Teff
Pulses
Other crops
Other livestock
Cattle & dairy
Root crops
0.53
0.46
0.38
0.37
0.36
0.28
0.23
0.14
0.12
0.12
0.04
Horticulture
Wheat & barley
Cattle & dairy
Other livestock
Maize
Export crops
Oilseeds
Teff
Other crops
Pulses
Root crops
Total
Horticulture
Wheat & barley
Cattle & dairy
Other livestock
Maize
Export crops
Oilseeds
Teff
Other crops
Pulses
Root crops
Poverty Growth Jobs Diets

13. Future Drivers2019+ | Key Messages
AFS growth is pro-poor
• Growth led by all value chains reduces poverty, but horticulture and wheat & barley are most effective
AFS growth is effective in improving food security (hunger) and diet quality
• Most value chains reduce hunger; the three cereal value chains – maize, teff, and wheat & barley – are most effective
• Most value chains improve diet quality; horticulture is most effective
Agricultural growth creates jobs but not necessarily on-farm
• Most value chains are associated with an increase in total employment, but AFS jobs are mainly created off-farm
• The two livestock value chains are most effective in creating jobs in the overall economy and within the AFS
Agricultural growth has strong growth multiplier effects that generate income beyond agriculture
• Wheat & barley and maize value chains have the strongest multiplier effects both for AFS income and total GDP because of their
linkages with food industries
In conclusion, promoting multiple value chains can achieve broad-based impact
• No single value chain group is the most effective in achieving all the development outcomes we consider
• Horticulture, wheat & barley, the two livestock value chains, and maize rank highly in the combined outcome scores for poverty, diet,
jobs, and national GDP growth
• Promoting these value chains would offer an effective way to achieve broad-based outcomes

14. Note: Value Chain Groups and Agricultural Sectors in Individual
VC Groups
Value chain group and their share
of AgGDP+
Individual products and their share of group's Agriculture GDP
Maize (7.3%) Maize 100%
Teff (6.9%) Teff 100%
Sorghum (7.0%) Sorghum 100%
Wheat & barley (10.7%) Wheat 64.5% | Barley 35.5%
Other cereals (0.4%) Rice 73.8% | Other cereals 26.2%
Pulses (7.3%) Pulses 100%
Oilseeds (3.0%) Groundnuts 11.5% | Other oilseeds 88.5%
Roots (4.0%) Enset 65.1% | Irish potatoes 18.7% | Sweet potatoes 8.8% | Other roots 7.4%
Horticulture (5.8%)
Leafy vegetables 23.3% | Other vegetables 59.5% | Nuts 1.5% | Bananas 4.8% | Other
fruits 10.9%
Export crops (4.0%) Coffee 76.6% | Cut flower 23.4%
Other crops (4.8%) Sugarcane 11.7% | Tobacco 0.2% | Cotton & fibers 4.6% |Tea 0.7% | Other crops 82.8%
Cattle (5.8%) Cattle meat 100%
Dairy (12.1%) Raw milk 100%
Other livestock (4.9%) Poultry meat 28.3% | Eggs 9.3% | Small ruminants 50.5%| Other livestock 11.8%
Fish (0.5%) Fish 100%
Forestry (9.6%) Forestry 100%