The Irony Behind Wheat Scarcity

Why Ethiopia imports huge amounts of wheat while endowed with vast suitable land for farming

In recent years, wheat shortages have been getting more and more severe in urban areas like Addis Ababa, putting pressure on local businesses engaged in wheat processing, as well as residents. On the other hand, close to 10 million people who have been struck by drought and displaced by internal political conflicts have to wait for months in order to receive wheat. EBR’s Ashenafi Endale explores the fundamental reasons behind wheat scarcity in Ethiopia.

Korsa Tulu, 63, has long been cultivating wheat, maize and beans on six hectares of land he owns in Arsi zone, located in the state of Oromia. In that time, Korsa has witnessed many changes in the price and production of wheat. But the price jumping by 60Pct in recent times is an exceptional phenomenon to him. “At the farm, wheat prices increased from ETB800 to ETB1, 300 in the last few months,” he says. “It suddenly became my highest income generator.” Korsa produces up to 150 quintals of wheat per year.

The main cause of the price increase is the delay of a shipment of four million quintals of wheat at the Djibouti port. In fact, Ethiopia has been importing 10 million quintals of wheat, both purchased and in aid, over the last five years, at an average cost of USD300 million.

On top of this, close to 9.4 million quintals of wheat has been supplied to the market by farmers who cultivated 46.429 million quintals of wheat in 2017/18, according to the agricultural sample survey conducted by the Central Statistics Agency (CSA). Small holder farmers consume nearly 60Pct of all the wheat they produce and sell the rest on the local market.

Let alone satisfying the nation’s annual demand, which is estimated at 63 million quintals, the imported and locally supplied wheat hardly meets the demands of local businesses engaged in wheat processing. According to an assessment carried out three years ago, local wheat processors need at least 24 million quintals of wheat every year.

Wheat, both from abroad and from the local market, satisfies 30Pct of the total annual wheat demand of the country. On the other hand, both sources cover 80Pct of the demand of wheat processors. This is a paradox for a country which is endowed with heterogeneous agro-climatic conditions and vast suitable land for the cultivation of wheat.

The failure to utilize the lands located in these areas puts the 600 local businesses engaged in wheat processing under pressure. Hailu Bogale, deputy general manager at Misrak Flour and Bread Factory puts the problem in perspective. “The demand has been highly increasing, contrary to the declined wheat supply,” Hailu told EBR. Established 30 years ago, Misrak has the capacity to process 50,000 quintals of wheat flour at its two factories in Addis Ababa.

Misrak supplies bread to four universities, including Addis Ababa University and 54 other federal institutions, including Tikur Anbessa Hospital. “The price margin on wheat for bread is too small. Plus we can find only up to 120 quintal biscuit wheat on the market, of which seven percent is made into biscuits,” says Hailu. “The business has been almost dead for the last few years.”

Hailu is more worried about a significant investment his company made in expansion, which will increase its capacity six fold. “We decided to expand after assessing the fast growing demand. But the probability of bankruptcy is high, unless the wheat supply improves.”

Tetemkeh Fetene, secretary of the Ethiopian Flour Millers Association, says wheat processing industries are currently highly affected. “Wheat processors are facing a critical problem. There is no local supply that can address the huge demand. The government supplies imported and subsidized wheat at a fixed price, and processors sell it for a fixed price. However, due to power outages, the wastage rate is high. The profit margin is not inviting. Most processors are operating at a loss bankruptcy. Wheat is currently not subsidized by the government, but by processors.”

Wheat is usually used as a food stabilizer in many countries, including Ethiopia. In addition, wheat consumption in Ethiopia is highly increasing due to rapid urbanization and shifting food tastes towards processed foods. Despite the exponential increase on the demand side, little has been done about the production and supply of wheat in Ethiopia.
Currently, wheat is cultivated on 1.7 million hectares. Some of the areas suitable for the cultivation of wheat, found in Gojam and Shewa in the state of Amhara, as well as Arsi and Bale in the state of Oromia, make up Ethiopia’s wheat belt. However, the area covered by wheat has increased only by 4.2Pct within the last five years, according to CSA. On the other hand, the area covered by teff, and sorghum increased by 10.7Pct and 10.8Pct, respectively, during the same period.

Nonetheless, there have been some attempts to boost wheat production in the country, such as the introduction of the Wheat Sector Development Strategy in 2013 with the aim of achieving national wheat self-sufficiency in 2017. The strategy targeted increasing the average productivity of one million wheat farmers (20Pct of the total wheat farmers in the country), by 50Pct by 2015. It also aimed to raise wheat productivity from 24 quintals a hectare to 40 quintals by 2017 on top of increasing the total wheat production from four million tons in 2013 to 6.8 million tons in 2017. However, the total wheat production remains below 50Pct of the target.

The Agricultural Commercialization Cluster (ACC) project was another attempt intended to improve the productivity and production of wheat in Ethiopia. Introduced three years ago, the project, which covers 56 woredas located in the states of Oromia, Amhara and Tigray, particularly aims to raise wheat productivity to 90 quintal a hectare by using quality inputs and the right agronomic practices. “The project was our anchor initiative, launched with the aim of increasing productivity by clustering nearby farms, and linking them directly to industries in the value chain,” explains Eshetayehu Tefera, ACC Crop Value Chain Director.

But the project has not been successful so far partly due to a lack of legal frameworks to facilitate contract farming. “A draft bill was prepared two years ago and submitted to the Ministry of Agriculture and Livestock Resource (MoALR),” says Eshetayehu. “Discussion is still underway about whether it should be regulation or directive.”

Although the experiences of countries such as Brazil, Chile, India and Mexico, which introduced ACCs long before Ethiopia, reveal that the initiative can improve productivity by as much as 75Pct, Korsa argues that a significant portion of farmers in Arsi who are included in the project prefer cultivating beer barley rather than wheat over the past few years. “The income from malted barley is almost competitive with the wheat. There is also a better seed supply in beer barley than wheat. The demand for malted barley is also high. I am afraid that more wheat farmers will turn to malted barley in the near future.”

Hailu says government need to do many things to curb that. “The technology supply and market chain in wheat has been very weak. Technologies and machineries are usually supplied to cooperatives and unions, but they do not reach the farmer on the ground. This must improve as soon as possible.”

The other measure the MoA has been taking is increasing production by increasing the number of model farmers. All in all, the efforts so far have targeted increasing production at a small scale farming level.

There are almost 14 million farmers in Ethiopia, over 95Pct of whom are small scale, with an average of 0.5 hectares of land per farmer. Most of them are highland farmers. However, the largest portion of the country’s arable land is located in the vast lowland. Despite this, commercial farming in these areas has been insignificant due to absence of infrastructure, irrigation, mechanization, finance, government support and private sector interest.

“The main reason for the local agricultural production failing to cope with the demand is due to the highland agriculture mentality,” argues Kebede Bezawork, Crop Value Chain Wheat expert at the Agricultural Transformation Agency (ATA). “We have been misled for so long. But now we have prepared a new strategy for wheat, focused on the lowland areas.”

However, Kebede stresses that the new strategy needs matching activities in order to be successful. “The strategy will not work without irrigation, mechanization and improved seed. In 2018/19, we will start by utilizing 25,000 hectares of land in lowland areas.”

Ethiopia’s renowned wheat belts are highland areas located 1,800 meter above sea level. However, the lowlands go down to 900 meters above sea level. “It is still good for wheat cultivation, once there is water. The nights aren’t too cold and the temperatures are less than 20 degree Celsius,” adds Kebede.

A team of experts is surveying the lowland areas in the states of Afar, Ethio-Somali and SNNP, to locate some 25,000 hectares of land to start lowland heat farm, starting this year. The plan is to turn land irrigated for the purpose of sugarcane farming, into wheat famrs. These include irrigation infrastructures built at the Wabishebele, Awash and Omo rivers. “The new lowland wheat production strategy will expand in these areas,” says Getachew Abera, crop agronomist at MoALR.

The strategies’ focus stretches from technology research to market strategy. “Policy attention is coming towards wheat now, to expand wheat farming to lowland areas. But research and adaptation of wheat varieties to lowland environments is needed. In the highlands, wheat is cultivated with rain,” argues Dinknesh Abera, cereal crop agronomist at MoALR. “But irrigation and various technologies are needed in lowland areas. All in all, effort is needed to start commercialized wheat farming in the lowland parts of the country.”

“Ethiopia, an agrarian economy still relies on imported wheat, mainly because of failures in agricultural modernization targets. There is no shortage of natural resources. There are just shortcomings in the effective implementation of strategies,” said Yinager Dessie, newly appointed governor of the National Bank of Ethiopia, during discussions he held with representatives of the private sector on July 19, 2018. “The root cause for the difficulty in industrialization is shortage of financing. However, the ETB6.4 billion the Development Bank of Ethiopia disbursed to commercial farmers could not bear fruit, because of a lack of commitment on the private sector side.”

Experts argue that, so far, the government has been trying to modernize agriculture through inefficient extension systems and inadequate technology supply. “We have no extension skills for lowland farming. The government has to incentivize and provide finance and support to the private sector for large scale farming in the potential lowland areas,” argues an agricultural expert who has worked at a consulting company for the last two decades. “Otherwise, there is no explanation for why a country with huge potential cannot feed itself.”

6th Year • Aug.16 – Sep. 15 2018 • No. 65