Livestock Goes Hungry
As PM Promises Chicken for Every Meal
Ethiopia boasts the largest livestock population in Africa, and its cattle, goats, sheep, and camels are integral parts of the agricultural sector, national GDP, and export earnings. Although agriculture accounts for more than a quarter of GDP and an even higher proportion of income from exports, livestock’s share remains low as productivity and commercialization lag behind. This is despite decades of intervention by the government and international donor agencies to improve the sub-sector. As a new round of efforts led by the Prime Minister takes off, EBR’s Bamlak Fekadu takes a look at the challenges facing the livestock business.
Hana Fikru, is among 163,018 Ethiopian nationals repatriated from the Kingdom of Saudi Arabia between the end of 2013 and 2014. She is among the hundreds of thousands who travel to the Gulf nation, often illegally, in search of opportunity and a means to take care of loved ones back home. The harrowing tales surrounding these migrants are familiar to many, and too often they end in tragedy with returnees coming home to little more than nothing and a broken spirit to boot.
Hana was determined to forge a new path for herself at home. A few years after her return, she opened a small poultry farm in Addis Ababa’s Kolfe-Keraniyo District.
Things went well – for a while.
The skyrocketing prices of feed and veterinary care forced her to close down her farm a few months ago. Chickens, it seems, are not so easy to breed.
“I shuttered the farm after the Ethiopian New Year,” she says. “I found the line of business riskier than I originally thought.”
The feed products, which comprise high-quality imported premix, vary in price and composition based on the age of the broilers and chickens. Chicks younger than four weeks are fed a layer mash, while those older than seven weeks receive an alternate formula composed carefully to ensure balanced nutrition. The price of a quintal of poultry feed hovered around ETB 1,100 barely a year ago. It has since risen nearly fivefold, pushing Hana and other small-time poultry farms out of business.
In the past five years alone, the prices of feed ingredients and compound feeds have shown an average increment of 52 and 82 Pct, respectively. A newsletter published by Precise Consult last year revealed that poultry feed prices in Ethiopia spiked by 350 Pct in a year, spelling the end for many poultry farms.
“My farm recently lost over 450 chickens due to a shortage of medications,” Hana told EBR.
Animal feed and nutrition are the essential links in the livestock production chain, tying crop cultivation and animal protein production and processing. High feed costs, space limitations, low feed quality and availability, along with price hikes on vet medicines and vaccines, are also challenging the sub-sector.
Smallholders in the livestock business are doing what they can to hang on in the face of these challenges, but it is difficult to see an end to the troubles.
According to the Ethiopian Poultry Producers & Processors Association (EPPPA), the ballooning price of poultry feed is driving poultry farmers away from the industry, with between 15 and 20 farms ceasing operations by July 2022.
Alemayehu Feyisa, marketing team leader of the National Veterinary Institute, observes the demand for livestock and poultry medications is growing rapidly. The proliferation of farms is behind a mismatch between demand and supply, while the ever-present forex crunch aggravates the already untenable prices as commercial importers struggle to lay their hands on foreign currency. Established nearly six decades ago, the Veterinary Institute has been involved in the production and distribution of medicines for local markets as well as markets in over 26 African countries. Its headquarters rests on 40 hectares of land in Bishoftu of the State of Oromia and has the capacity to produce over 350 million doses of vaccines each year for everything from cattle to birds.
“[Prices for] imported vet medications might be inflated for obvious reasons; but, our Institute doesn’t change prices as it is subsidized by the government,” Alemayehu told EBR.
The Institute is currently working in collaboration with the Ministry of Agriculture to expand sales channels and reach smallholder farmers in remote rural areas through mobile refrigerated vehicles.
As of late February, about 170,000 livestock deaths, predominantly sheep and goats, have been reported in the Shabelle, Korahe, and Nogob zones due to severe water and pasture shortages resulting from consecutive poor rainy seasons. It has led to emaciated livestock, increased livestock distress sales, and atypical livestock deaths. These losses were made even worse as pastoralists barely had time to recover from the large-scale damage caused by a similar drought in 2016/17.
Livestock holdings and herd sizes among poor households in the livelihood zone declined moderately across livestock types in late 2021 and early 2022.
The productivity and financial success of small livestock farmers and businesses engaged in the commercialization of livestock products are also negatively impacted by the shortages and rising costs of feed, which make up, on average, 70 Pct of costs in the livestock trade.
Dairy industry players have long complained about the inadequate feed supply and rising prices, which they say are among the main bottlenecks facing the livestock sector. In recent years, drought-induced feed shortages in pastoral areas have exacerbated the cost of cattle feed.
Under the Federal Cooperative Agency, Hibret Cooperative Union, with over 280 members engaged in the collection and retailing of milk and dairy products, is one example of those burdened by the situation.
“The Union oversees more than 840 dairy cattle and is suffering from ballooning prices for fodder, which have more than doubled,” said Wondemeneh Ashebir, chairperson of the Cooperative Union.
Fodder like furushka (a type of feed typically composed of bran), mixed feed, and the like have seen prices rise too close to ETB 3,500 in the last year. Wondemeneh disclosed that the cooperative’s members are being forced to sell their cattle and drop out of the dairy business as a result. He fears the situation could get worse if prices continue to rise.
Animal feed is classified into conventional and unconventional varieties. Animals consume conventional feed, while unconventional feed is prepared from wheat, maize, and soybeans—crops used primarily for human consumption. Agro-industrial byproducts such as grain and grain screening are the main sources of feed. Oil-processing plants, breweries, and sugar factories produce these byproducts, and wheat bran from flour mills is the primary type of animal feed in Ethiopia. Feed producers required more than 115,000 tons of wheat in the 2020/21 fiscal year, followed by maize (142,000 tons) and soybeans (74,500 tons).
According to the Ethiopian Meat and Dairy Industry Development Institute, dairy farms regularly experience the largest shortfall in feed supply, followed by beef and poultry farms. The animal feed inflation rate registered between 45 and 55 Pct in 2020/21 – much higher than the average food inflation rate of 24.1 Pct recorded over the same period. Inflation rates for eggs, milk, beef, and chicken meat sat at 46 Pct, 37 Pct, 35.5 Pct and 55.8 Pct, respectively.
The conditions have been no less difficult for feed producers. Biruck Negede is the production manager for Amen Feed Factory, which was founded five years ago with approximately ETB 20 million in initial capital. The factory has a production capacity of 100 tons annually.
Biruck argues that the ongoing conflicts, the rapid expansion of exports of oilseeds like soybean and fagulo (a type of fodder made mostly of oats), and the lack of foreign exchange to acquire feed concentrates are all contributing factors to the rise in feed and fodder prices.
“Furushka, an input from flour manufacturer byproducts, is a basic type of feed but the scarcity of wheat has exacerbated the price spike,” said Biruck.
A year ago, authorities from the Agriculture Ministry suggested a tax break to the Finance Ministry in a bid to ease the problems. Its experts studied data over five years to estimate the potential effects of eliminating import duties for feed producers. The analysis revealed that tax cuts could help bring down prices for dairy products by an average of 17 Pct, and the cost of animal feed by a third. The experts also found that some feed components were being sold for over three times their normal cost.
Authorities at the Finance Ministry, in turn, approved the proposal for customs duty and tax exemptions on dairy products. However, the rising cost of feed meant that retail prices for dairy products continued to rise.
Manufacturers who depended on imported raw materials experienced a 50 Pct decline in sales as a result of the VAT policy, while businesses that bought their inputs experienced a 20 Pct drop.
The shortages and escalating prices of feed have adverse effects on the productivity and profitability of companies involved in the commercialization of livestock products. The heavy taxation has been a burden for pastoralists, translating into rising costs for dairy and meat products, according to Biruk.
“Although value added tax has been waived for inputs for feed and fodder producers, revenue offices are not complying with the directive,” Biruck told EBR.
Industry insiders assert that regional administrations’ bulk purchases account for a sizable portion of the turmoil in the livestock industry. This is due to the fact that, beginning in November 2021, the regional governments of Oromia and Somali began supplying livestock feed and water for breeding animals in drought-stricken areas. As a result of the drought, there is an abrupt and strong demand for feed, which has exacerbated the supply-demand imbalance and pushed prices even higher.
Still, the development of the feedlot sector in the highlands can play a central role in both pushing supply by catalyzing greater feed productivity and converting weaker animals’ output to quality products.
Federal and regional authorities have recently begun to make efforts to entice domestic and foreign investors to build industrial farms that will largely grow crops for export and industrial use, like wheat, soybeans, rice, and cotton. The government has also offered low land leasing rates and other incentives to investors in an effort to encourage the development of commercial farms; but, due to security, infrastructure, and financial issues, the majority of these farms have not produced as expected.
It is an unwelcome development as the federal administration names the livestock sub-sector as a pillar of economic growth in the second Growth and Transformation Plan (GTP). The authorities want to see unexploited potential drive trade and create a wide range of agro-industries along the path of a market-led economy and wider commercialization.
Ethiopia’s agricultural economy, as almost all farmers own some livestock assets, was valued at USD 720 per farm on average in 2018. The sector was growing rapidly over the last decade, estimated at almost 6 Pct a year, but about 80 Pct of that growth came from increases in the number of livestock, according to the Ethiopian Development Research Institute (EDRI). Smallholder farmers represent about 85 Pct of the population and are responsible for 98 Pct of milk production. Productivity, however, is relatively low, quality feeds are difficult to obtain, and support services are inadequate.
During the 2021/22 fiscal year, the country garnered over USD 120 million from the export of 22,689 tons of meat and meat byproducts, such as liver and kidney. However, the export revenue from live animals depicted a 55.0 Pct decline owing to lower export volume of 39.1 Pct and international prices (26.1 Pct), according to the central bank’s second quarter report. The report highlights that the share of live animals in total merchandise export earnings stood at 0.4 Pct, down from 1.2 Pct. It also reveals the significance of the livestock sector manifesting around USD 62 million from live animals in the meat and meat products export business within the first two quarters.
According to the Food & Agriculture Organization (FAO), livestock contributes to nearly 40 Pct of the total agricultural output in developed countries, and 20pct in the developing, supporting the livelihoods of 1.3 billion people worldwide.
Recent figures from the Meat & Dairy Industry Development Institute indicate that the livestock sector contributes about 12-16 Pct of national GDP, 30-35 Pct of agricultural GDP, 15 Pct of export earnings, and 30 Pct of agricultural employment. For instance, the dairy sub-sector contributes 63pct to the total value of ruminant output.
It is abundantly clear that livestock can play a key role in catalyzing economic growth, but, as is evidenced by people like Hana, there needs to be a concentrated effort to straighten convoluted supply chains, improve agricultural productivity, and solve issues surrounding veterinary supplies before that potential becomes a reality.
EBR 11th Year • Dec 2022 • No. 113
Mintesinot Nigussie Asfaw
Ethiopian Business Review
Eden Teshome
