agricultural transformation in ethiopia: evidence from … · agricultural transformation in...

ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE

Agricultural transformation in Ethiopia: Evidence from the teff sector

Bart Minten

Addis Ababa December 12th

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Major changes in agriculture

1. More improved technologies: e.g. 4 fold increase inuse of fertilizer over 15 years

2. Av. Annual increased in agricultural productivity:7.4% over the period 2005-2011

3. Improved market performance; e.g. significantlysmaller margins between markets

4. Growth of agricultural exports; e.g. 50% increase involume of coffee export, take-off flower exports,ten-fold increase in sesame exports in ten years.

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Major challenges

1. Yields still low; adoption of improved practices hasincreased but overall rates are still low (e.g. half ofthe farms use fertilizer)

2. Not self-sufficient in staples; e.g. still majorimports of wheat

3. Increasing land pressure leads to smaller farms,making livelihoods from agriculture problematic

4. little diversification, sector largely focused oncereal crops, with major implications on nutrition

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Teff as an illustration of the dynamics

• 20% of all cultivated area, covering 2.7 million hectaresand grown by 6.3 million farmers (maize is second with15% of cultivated area)

• Value of production in 2011/12 was 1.6 billion USD, themost important crop in the country.

• Value of commercial surplus (CS) 2011/12: 464 millionUSD, as important as sorghum, maize, and wheatcombined; one-quarter less than coffee (600 million USD)

• Purpose of the study: to understand major valuechains from rural producers in major productionzones to Addis, the major city in the country.

• Organization of surveys: 1/ Interviews with keyinformants September – October 2012; 2/ Fieldingof surveys in November – December 2012.

• Surveys with producers and communitiesupstream; rural and urban wholesalers andtruckers midstream; cereal shops, mills, andcooperative retail downstream

Data and methodology

Increasing adoption of modern inputs in ten years

Teff upstream in the value chain

Technology Unit Ten years ago

Now

Improved seed share (%) 7 36

Use of DAP kgs/ha 50 91

Use of urea kgs/ha 34 64

Herbicides share (%) 32 65

Pesticides share (%) 4 13

Type of teff: rapid decline of red; increase of white/magna

Teff upstream in the value chain

Technology Unit Ten years ago

Now

Red teff share (%) 36 20

Mixed teff share (%) 18 12

White teff share (%) 41 54

Magna teff share (%) 5 14

Reasons for the decline of red teff:

1. Lower prices of red teff. Higher prices of whiteteff driven by:a. lower conversion ratios of red teff to enjeras;b. longer shelf life for white enjeras;c. preference of consumers

1. Higher productivity of white teff now because ofavailability of improved varieties; traditionally redteff would do better compared to white teff

Teff upstream in the value chain

• 93% of teff farmers use chemical fertilizer; 34%uses improved seeds

• Stated reasons for not using or for not usingenough modern inputs:

1. Chemical fertilizer: Lack of money at the timeof need

2. Improved teff seeds: Unable to find them orunable to find more

Teff upstream in the value chain

Heterogeneity in adoption: Fertilizer 0

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1.5

quin

tals

/ha

0 50 100 150Transport costs to Addis (Birr/quintal)

DAP now DAP 10 years ago

urea now urea 10 years ago

Heterogeneity in adoption: Herbicides 0

2040

6080

100

% o

f far

mer

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0 50 100 150Transport costs to Addis (Birr/quintal)

herbicides now herbicides 10 years ago

Heterogeneity in adoption: Improved seeds 0

2040

6080

% o

f far

mer

s

0 50 100 150Transport costs to Addis (Birr/quintal)

Improved seeds now Improved seed 10 years ago

• Trend line: share of producers has increased from 74%-78% in 2001 to 76-86% in 2011

Midstream - Changes in margins: Share of producer in retail price

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Shar

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white producer mix producerred producer Linear (white producer)Linear (mix producer) Linear (red producer)

- Declining milling costs (ratio milling/teff price); othermarketing costs stayed stable

Midstream – Changes in margins: Milling costs

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• Teff retailing in Addis: 61% mills; 29% cereal shops; and8% consumer cooperatives

• Traditionally (as seen in other towns or rural areas), millsonly did milling and household typically would:

a. buy teff on market/cereal shop;b. clean teff at home;c. take teff to mill;d. prepare enjera at home

Teff downstream in the value chain

• Mills are increasingly becoming “one-stop shops”

Teff downstream in the value chain

10 years ago Now

Unit No. of Value No. of Value

obs. obs. Share of customers that get home delivery % 102 59 271 61Share of customers that clean at home % 96 30 254 21Share of customers that only come for milling % 93 30 250 24

- More competition and better service delivery

- Food service industry sizable (20% of teff sold as preparedenjera)

Teff downstream in the value chain

10 years ago Now

Unit # Value # ValueNumber of mills in the kebele number 92 6.1 250 9.3Number of cereal shops in the kebele number 75 2.9 202 4.1Often queuing of consumers % 102 30 276 12

Drivers for change 1. Public sector: Large investments in agricultural extension system

Unit Mean/

Percent

Contact extension agents:

Received a visit of an agricultural extension agent in the last 2 years share 74

In last 12 months:

Farmer visited a demonstration plot of teff share 37

Farmer visited a government office of agriculture and discussed teff issues share 27

Farmer awareness of technologies:

Farmer knows the recommended fertilizer use on teff plots share 51

2. Important improvements in road and communicationinfrastructure

Drivers for change

Unit Farmers Rural Urban Urban

traders traders retailers

Owners of a phoneshare (%) 28 100 100 98

Year since they own a phone year - 2006 2007 2008Used mobile phone in the last marketing transaction

share (%) 12 - 97 56

If yes, agreed on a price with the trader by phone in the last transaction

share (%) 74 - 52 32

3. Urbanization (1.2 million more people in Addis),income growth and economic superior characteristicsof teff (doubling of income, 110% increase in teffconsumption expenditure); these factors combinedmight have led to doubling of commercial surplus intoAddis in last 10 years

4. Higher opportunity costs of time, especially ofwomen; further impetus for foodservice industry aswell as for development of a different retail sector

Drivers for change

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ConclusionsImportant changes in the teff value chain:

1. Modern inputs increasingly adopted, especially by those farmers living close to urban areas

2. Quality demands are rising, important shifts from cheap red varieties to more expensive white ones

3. Increasing willingness to pay for convenience in urban areas, as illustrated by the emergence of one-stop shops as well as by a sizable foodservice sector

4. The share of rural-urban marketing, urban distribution, and milling margins is declining, indicating improved marketing efficiency

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Conclusions

Despite changes, still in early stage of agricultural transformation:

1. Upstream: a/ Adoption of improved varieties still low; b/ Fertilizer used is below recommended level; c/ Mechanization absent; d/ Vertical integration and coordination absent

2. Downstream: a/ Little evidence of up-scaling; b/ Small share of modern retail; c/ Almost no branding

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Implications

1.Major room for improved seed development; better knowledge on other technologies to improve productivity needed, i.e. row planting, transplanting, response to fertilizers that contain zinc and copper, minimal tillage

2. Further investments in roads and communication (still one of the lowest in Africa)

3. Urbanization motor for rural transformation (urbanization also one of lowest in Africa)