ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE

Sinafikeh Asrat, Gerawork Getachew and Alemayehu Seyoum Taffesse Ethiopia Strategy Support Program II

International Food Policy Research Institute

A Presentation at the 8th International Conference on the Ethiopian EconomyEthiopian Economic Association and Ethiopia Strategy Support Program II

June 24-26, 2010

Trends and Determinants of Cereal Productivity: Econometric Analysis of Nationally Representative Plot-level Data

The views expressed in this paper are those of the authors and do not represent the official positions of their respective institutions.

Motivation and objective – Slides 3 and 4

Data and Approaches – Slide 5 -6

Cereal Production –Trends and current (around 2007/08) state – (Slide 7-11)

Trends in input use - Sides 12-16

Determinants of yield (econometric analysis) – Slides 17-27

Returns to fertilizer use ( V/C and O/I ratios) – Slides 28-31

Conclusion & Caveats – Slide 32-34

Outline

2

Objective - study the structure and growth of cereal production

What happens in cereal production is criticalo Direct – the welfare of the bulk of rural producers (most Ethiopians);o Food security, incomes – all Ethiopianso Economic growth – linkages

Data show large increases in production in the last decade – acreage expansion main source overall

Source: Authors’ calculation from CSA data.

Motivation and Objectives

CropGrowth (1997/98-2007/08) - (%)

Production Acreage Yield Sorghum 149 61 55 Teff 129 47 56 Wheat 109 81 16 Maize 94 61 21 Barley 72 44 19All Cereals 111 57

Motivation and Objectives

Crop Average Annual growth rate - 2004/05-2008/09 (1997-2001 E.C.) (%)

Production Area Cultivated Yield

Cereals 8.9 3.7 5.1

Teff 9.9 4 5.7

Barley 2.9 -2.7 5.6

Wheat 3.3 1 2.4

Maize 12.9 6.7 5.9

Sorghum 12.7 7.2 5.4

Note: Cereal yield is calculated as acreage-share weighted average of the yields of the five major cereals listed in the table – they account for more than 95 percent of cereal acreage and cereal output.

The central questions are – what are the sources of this growth? And is it sustainable?

4

Primary data source

Ethiopian Agricultural Sample Survey (AgSS) - 1996/97-2007/08 (1989-2000 E.C.) ;Central Statistics Agency (CSA)Annual, large, nationally representative;

(We like to acknowledge the support of Wro. Samia, the head of CSA, and her colleagues in providing us with these data and answering our many queries)

Secondary data source

other researches

Econometric analysis

Data and Approaches

5

Setting the Scene – Recent Trends in Cereal Production in Ethiopia

Source: Authors’ computation using CSA data (CSA (July 2006), CSA (July 2007), CSA (June 2008), and CSA (May 2009)).

Table 1: Cereal Production by crop – 2004/05-2008/09 (1997-2001 E.C.)

Cereal Production – International Comparison

11

comparable with consumption elsewhere when measured in quantity applied per area under fertilizers; 94kg/ ha (teff) , 131kg/ha (wheat) and 162 kg /ha (maize).

Other important observations significant decline in fertilizer use between 1998/99 and

1999/2000.

Application levels largely recovered by 2000/01 but remained within a relatively narrow band since 2004/05.

Determinants of Yield

But lots of markets in Ethiopia are either thin or absent ; impossible to separate the production and consumption decisions hence the following production function.

Yic = yic (Xic , Kic , Di, Ei)

Where; Yic = Level of output of crop c produced by household i

Xic = Variable input levels

Kic = Fixed input levels

Di = Household preferences

Ei = Household endowments

(Strauss (1986), De Janvry, Fafchamps and Sadoulet (2003) and Tafesse (2003) )

Variables Yield - output in quintals per hectare of cultivated area .

Fertilizer application - the sum of quantity applied ( in kg) of Dap, Urea and Dap + Urea per hectare of cultivated area.

Other inputs – the use of improved seeds, irrigation, organic fertilizer,

extension services and credit services; each a “yes” or “no” question type

Holder level variables – gender, age and years of schooling of the holder , household size .

Location Dummies - dummies for each administrative zones ;to capture important variations such as agro ecology and access to markets and public services. Dummies for wereda and enumeration area were also tried but with unsatisfactory results.

22

Results

Heckman - OutcomeStatistics for Heckman Selection

VARIABLES Teff Wheat Maize Teff Wheat Maize

Quantity of Chemical Fertilizer Used per hectare 0.975 0.996 2.295 Number of

Observations579431 579431 579431

(Quantity of Chemical Fertilizer Used per hectare)2 -0.116 0.311 -0.903 Censored

Observations486713 524635 437623

Quantity of Chemical Fertilizer Used per hectare) X (Type of Seed Used)

0.089 -0.142 -0.769 Uncensored Observations 92718 54796 141808

Type of Seed Used (Improved variety = 1) -0.168 0.406 1.36 Wald chi2 57279 (df

=71)39308 (df =

69) 92531 (df =

77)

Organic Fertilizer Use (Use = 1) 0.089 0.343 -0.209 Prob > chi2 0 0 0

23

Results (contd.)

Two-part (LSDV)Statistics for LSDV

VARIABLES Teff Wheat Maize Teff Wheat Maize

Quantity of Chemical Fertilizer Used per hectare 1.124 1.689 3.758

Number of observations 35993 24873 51064

(Quantity of Chemical Fertilizer Used per hectare)2 -0.234 -0.146 -1.727

F( K, N-K-1)

4607.9 (d.f=71, 35921)

1347.1 (d.f.=69,24

803)

2516.3 (d.f=77,509

86)

Quantity of Chemical Fertilizer Used per hectare) X (Type of Seed Used)

-0.187 -0.091 -0.722

Prob > F 0 0 0

Type of Seed Used (Improved variety = 1) -0.255 0.277 1.797

R-squared 0.333 0.3982 0.339

Organic Fertilizer Use (Use = 1) 0.124 0.199 -0.116

Root MSE 2.8421 4.8856 6.5179

Trends in Input-Output Prices Ratios (2000-2009)

Output Input Ratio Teff Wheat Maize

Differences in simple average yields (fertilizer users vs. non users) 0.87 2.51 3.27

Yield gains at average application by users vs. no application (using fitted values) 1.06 1.9 1.02

Yield gains due to 1 quintal increase in fertilizer application by users (using fitted values) 0.64 2.15 -1.56

Value to Cost Ratio      

Differences in simple average yields (fertilizer users vs. non users) 1.06 1.8 1.71

yield gains at average application by users vs. no application (using fitted values) 0.96 0.9 0.39

yield gains due to 1 quintal increase in fertilizer application by users (using fitted values) 0.78 1.55 -0.82

Selected Indicators of Returns to Fertilizer Use

30

Chemical fertilizer use remains relatively law in Ethiopia’s small holder crop farming sector

Regression results confirm chemical fertilizer use has positive but not large impact on cereal yields .

Input-output and value to cost ratios estimated using regression results do not indicate high returns to fertilizer use in cereal production under current conditions.

Therefore evaluated at national averages , chemical fertilizer use does not appear to generate highly profitable returns in teff, wheat and maize.

Conclusion

35

Thank you so much!