1. The study tests three common perceptions about food value chains using data on the teff supply chain in Ethiopia. 2. The study finds that the teff supply chain is relatively short, with on average three intermediaries between farmers and consumers. Farmers obtain around 80% of the final retail price. 3. Distress sales, where farmers would accept a lower price, make up 19% of transactions, and extreme distress sales 10% of transactions. Farmers store teff and release it smoothly over the year. These findings contradict the common perceptions of inefficient, exploitative supply chains driven mostly by distress sales.

1. ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
The Teff Supply Chain
Bart Minten, Seneshaw Tamru, Ermias Engida, and Tadesse Kuma
IFPRI ESSP
Ethiopian Economics Association
16th International Conference on the Ethiopian Economy
July 19-21, 2018
Addis Ababa
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2. 2
1. Three conventional wisdoms on food value
chains
Perception 1: “Value chains are long and there are many layers, causing
inefficiency”
Perception 2: “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 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

3. 3
2. Data and methodology
• Purpose of the study is to understand major value chains from rural
producers in major production zones to Addis, the major city in the
country.
• Organization of surveys: 1/ Interviews with key informants
September – October 2012; 2/ Fielding of surveys in November –
December 2012.
• Surveys with producers and communities upstream; rural and urban
wholesalers and truckers midstream; cereal shops, mills, and
cooperative retail downstream

4. 4
2. Data and methodology
• Stratified random samples at each level:
• 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)

5. 5
3. Structure of the value chain – testing ‘perception 1’
• Most common value chain is with two nodes: 52.8%
• 2 trade nodes or less between retailers and farmers: 85%
- Sometimes shorter, e.g. 32% of teff sold by urban retailers directly
obtained in rural areas

6. 6
4. Price formation- testing ‘Perception 2’
0
200
400
600
800
1000
1200
1400
1600
1800
Birr/quintal
Milling and
cleaning
Urban retail
Urban
wholesale
Rural
market/tow
n
Farmgate
• Farmers obtain between 78%
(red) to 86% (magna) of the
final urban retail 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%

7. 7
4. Price Formation-Variation over space
• Strong price – transportation cost relationship
• In case of white teff (most traded), producer share drops from 90%
close by to 80% for most remote
100011001200130014001500
0 50 100 150
Transport costs to Addis (Birr/quintal)
Magna White
Mix Red

8. 8
5. Temporal variation in sales- testing ‘Perception 3’
• 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

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5. Temporal variation
• Storage: release smooth over the year
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
-200
-150
-100
-50
0
50
100
150
200
250
300
N-D D-J J-F F-M M-A A-M M-J J-J J-A A-S S-O O-N
kgs
consumption sales

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6. 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

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6. 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 underestimated

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7. 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. 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

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THANK YOU!