Perspectives on the Future of Ethiopia’s Agriculture: Trends, Challenges and Prospects

1. ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
Perspectives on the Future of Ethiopia’s
Agriculture:
Trends, Challenges and Prospects
1
Ethiopian Economics Association
15th International Conference on the Ethiopian Economy
July 20-22, 2017
Addis Ababa

2. Introduction
• Ethiopia’s agricultural sector has grown rapidly in the last decade
• To achieve further rapid growth in agriculture and overall economy,
the country will need to continue to
- raise agricultural productivity
- invest in urban and rural infrastructure
- maintain a favorable macro-economic environment to encourage
private investment and overall economic growth
• Study will examine these issues; will provide quantitative
assessments of likely trajectories of the Ethiopian economy under
alternative scenarios of public investment, economic policies, and
external shocks.
2

3. Project Work Plan
• Agricultural productivity, technology adoption and natural
resources
• Evolving agricultural markets
• Household welfare, resilience and poverty
• Urbanization, population growth and labor migration
• Scenario analysis: Economy-wide modeling
4

4. Project Schedule
• Project started in December 2016 (in collaboration with RED&FS
and Planning Commission; funded by EU)
• July 2017: Presentations of mid-term results
• December 2017: Workshop with final results
• March 2018: Final reports
• After March 2018: Training in the tools developed
25

5. ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
Evolving agricultural markets in Ethiopia
5
Bart Minten and Mekdim Dereje
IFPRI ESSP
Ethiopian Economics Association
15th International Conference on the Ethiopian Economy
July 20-22, 2017
Addis Ababa

6. 0
10
20
30
40
50
60
70
2000 2005 2011
Shareinfoodexpenditures(%)
cereals
non-cereals
a. Increasing diversification
in the food basket
• However, quantities of
cereals consumed is
increasing:
- 1996: 127 kgs/capita
- 2000: 141 kgs/capita
- 2005: 150 kgs/capita
- 2011: 155 kgs/capita
• Share of cereals in
expenditures on the
decline
1. Diet transformation

7. b. Important difference
between urban and rural areas
• Urban residents have
different food basket:
- More consumption of teff
and meat
- Lower consumption of
maize, sorghum and
enset/kocho
0 5 10 15
teff
sorghum
maize
processed cereals
animal products
enset/kocho
F&V
% food expenditures
Rural
Urban
1. Diet transformation

8. c. Food markets becoming
more important
• Food in rural areas mostly
acquired through own
production (42%)
• However, food markets
(sales of food for food
purchase (34%)) already
important in rural areas
and very high in urban
areas
0 50
Auto-consumption
Sale ag. products
Sale non-ag.
products
Salary/wage
Remittances
Others
% food expenditures
Urban
Rural
1. Diet transformation

9. d. Examples of purchased
foods taking off (ES Survey),
especially so for the richest
quintile:
• Macaroni/pasta
• Bread/biscuits
• Enjera
1. Diet transformation
0
2
4
6
8
10
12
14
0
0.1
0.2
0.3
0.4
0.5
q1 q2 q3 q4 q5
Numberofenjera
Sharehouseholds
pasta/macaroni
bread/biscuits
Purchased enjera

10. 10
2. Agricultural output markets
a. Market growth
-
2
4
6
8
10
12
14
16
18
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
RealbillionBirr
Real value commercial surplus

11. 11
2. Agricultural output markets
b. Importance crops in commercial surplus
0
10
20
30
40
50
60
70
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%commercialsurplus
Teff Coffee Wheat Chat Sesame Maize

12. c. Food imports/aid
2. Agricultural output markets
0
500
1000
1500
2000
2500
3000
3500
4000
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
1000tons
rice wheat
0
100
200
300
400
500
600
700
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
MillionUSD
rice wheat

13. d. Agricultural exports
2. Agricultural output markets
-
500
1,000
1,500
2,000
2,500
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
MillionUSD

14. 14
3. Agricultural input markets
a. Modern inputs
0
100
200
300
400
500
600
700
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
MillionUSD
Chemical fertilizers - imports
0
20
40
60
80
100
120
140
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
MillionUSD
Agro-chemicals - imports

15. 15
3. Agricultural input markets
b. Intensification and cities

16. 16
4. Changes in prices
Output/fertilizer price ratio
-
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Teff Wheat
Barley Sorghum
Maize
a. Input versus output prices

17. 17
b. Margins between markets
-300
-200
-100
0
100
200
300
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
Birr/quintalin2011prices
Maize prices differences surplus - deficit markets
4. Changes in prices

18. 18
2. Contextual changes
Mostly driven by road infrastructure improvement

19. 19
4. Changes in prices
60 80 100 120 140 160 180
Grains, roots and tubers
Legumes and nuts
Dairy products
Eggs
Flesh foods
Vitamin A dark green leafy veg.
Other Vitamin A rich F&V
Other fruits and vegetables
Oils and fats
Sugar and honey
Prices in 2016 compared to 2007 (2007=100)
c. Changes of prices of different food groups

20. 20
5. Future marketing systems
Over the next decade and a half, three trends will likely drive major
changes in food marketing systems (will try to quantify in further
efforts):
1. Population growth and increasing urbanization - In 2030: 106 million
rural and 39 million urban people (80 and 19 million in 2016)
2. Further improvements in infrastructure (roads, communication
(mobile phones), electricity, etc.)
3. Higher incomes (middle-income target by 2025)

21. 21
5. Future marketing systems
A. Implications downstream:
1. Calories consumed will increase but relatively slowly (200 calories
per capita per day for doubling of income)
2. Changes in types of foods demanded, especially take-off of Animal
Source Foods (ASF) (high-income elasticity)

22. 22
5. Future marketing systems
A. Implications downstream:
3. Increasing demand for:
- Processed products/convenience/ready-to-eat products (e.g. enjera)
- Branded/certified products (to assure quality and safety)
4. Changes in food distribution
- Modern retail (“modern retail revolution”; already 50% of urban
consumption in China)
- Out-of-home food consumption (USA 1900- 2010: 10-49%; Egypt
1981-98: 20-46%; India (hh reporting) 1994-2010: 23-39%; Ethiopia
2011 – urban: 16%)

23. 23
5. Future marketing systems
B. Implications midstream:
The quantities of food that will be marketed by 2030 will increase
rapidly because of
- doubling urban population (almost exclusively dependent on food
markets)
- increasing size of rural markets (better connected farmers participate
more in markets, inputs and outputs)
Important implications for
1. Transport sector
2. Wholesale and trading sector
3. Food processing sector
4. Commercial storage sector
5. Food service sector (restaurants, hotels, schools, hospitals, etc.)

24. 24
5. Future marketing systems
C. Implications upstream:
Which farms will market increasing food demanded?
- In other African countries, fast emergence of a commercial farm
sector that supply cities (work Thom Jayne). Until now, relatively less
important in Ethiopia.
- In Ethiopia, smaller farms sell less, more into calorie-dense low-value
products (e.g. maize, roots) and livestock but also off-farm activities

25. 25
5. Future marketing systems
C. Implications upstream:
- Increasing prices for increasingly demanded non-cereals (and good
for nutrition!) likely sign of problems with supply of “high-value”
crops; More attention and investment needed towards lower-priced
a. ASF: Better breeds, AI, feed, and disease management
b. F&V: Plant protection and seed development