ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE

Ethiopia’s value chains on the move: The case of teff

Bart Minten, Seneshaw Tamiru, Ermias Engeda, and Tadesse Kuma IFPRI-ESSP-EDRI

Conference on “Improved evidence towards better policies for the teff value chain”10 October 2013Addis Ababa

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1. Introduction

• Major changes happening in food markets worldwide and especially in developing countries:

- Supermarket revolution- Share of high-value crops increasing - Quality demands on the rise- Food safety requirement export countries- Vertical integration- Up-scaling, dis-intermediation, and branding

• No clear to what extent value chains are transforming in Africa and/or Ethiopia, often because of a lack of good primary data. This is the purpose of the analysis.

• 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

2. Data and methodology

• Increasing adoption of modern input use over time3. Teff upstream in the value chain

Unit Number of 10 years Now

observations ago Modern inputs Adoption of improved seed share (%) 1199 7.3 35.8Use of chemical fertilizer:DAP kgs/ha 1128 50 91urea kgs/ha 1121 34 64Adoption of herbicides share (%) 1197 31.9 65.3Adoption of pesticides share (%) 1197 4.3 13.1

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

3. Teff upstream in the value chain

Unit Number of 10 years Now observations ago Type of teff Farmers' interviews:Red teff share (%) 1200 36.2 19.9Mixed teff share (%) 1200 17.6 11.7White teff share (%) 1200 40.7 54.2Magna teff share (%) 1200 5.4 14.1Community focus group interviews:Red teff share (%) 60 32.7 14.4Mixed teff share (%) 60 31.8 21.6White teff share (%) 60 26.5 40.2Magna teff share (%) 60 7.7 24.3

• Reasons for the decline of red teff:

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

2. Higher productivity of white teff now because of availability of improved varieties; traditionally red teff would do better compared to white teff

3. 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 using enough modern inputs:

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

2. Improved teff seeds: Unable to find them or unable to find more

3. Teff upstream in the value chain

Dynamics in adoption of fertilizer 0

.51

1.5

quin

tals

/ha

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

DAP now DAP 10 years agourea now urea 10 years ago

Adoption of quncho (new variety)

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02

03

04

0

Sh

are

Qun

cho

in

teff a

rea (

%)

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

• Quncho only started in 2010; in 2013, 32% farmers used itTake-off of quncho

2010 2011 20120

10

20

30

40

50

60

70

80

90

100

Year of adoption of quncho

% o

f qun

cho

adop

ters

• Teff retailing in Addis: 61% mills; 29% cereal shops; and 8% consumer cooperatives

• Traditionally (as seen in other towns or rural areas), mills only 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

4. Teff downstream in the value chain

4. Teff downstream in the value chain

10 years ago Now

Unit No. of Value No. of Value

obs. obs.

ServicesShare 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

4. Teff downstream in the value chain

10 years ago Now

Unit No. of Value No. Value

obs. of obs.

CompetitionNumber of mills in in the kebele number 92 6.11 250 9.30Number of cereal shops in the kebele number 75 2.86 202 4.10

Often queuing of consumers % 102 30 276 12

• About 20% of teff sold in Addis as prepared enjera

4. Teff downstream: Foodservice industry

10 years Now Now Unit ago (weighted)Type of customers for retailers (share)Consumers % 80.4 87.0 82.1Enjera wholesalers % 0.8 1.1 2.1Enjera wholesale companies % 0.3 0.1 0.1Enjera retailers with fixed shops % 4.7 3.1 4.3Enjera retailers without shops % 8.7 5.6 5.5Institutions % 0.7 0.3 0.3Restaurants % 1.9 1.2 4.2Supermarkets % 0.0 0.2 0.8Others % 0.1 0.1 0.2Total % 100.0 100.0 100.0

• Mixing is on the increase5. Mixing of teff with other cereals

10 years ago NowUnit No. of Value No. of Value

obs. obs. % of teff consumers that mix teff with Sorghum % 101 22 271 26Rice % 101 8 271 20Wheat % 101 1 271 0Maize % 102 8 271 12Other cereals % 102 2 271 2

• The poor and enjera sellers behave differently

5. Mixing of teff with other cereals

Consumers Enjera sellers

Poorest Middle RichestWith fixed

Without fixed

income shops shopNumber of observations 275 274 251 79 86Type of teff bought (%)Red 23 5 3 3 2Mix 64 35 5 46 70White 11 50 35 44 25Magna 2 9 57 7 2Total 100 100 100 100 100Share of customers that mix teff with other cereals(%) 60 43 15 79 71

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

Unit Mean/ PercentContact extension agents:Received a visit of an agricultural extension agent in the last 2 years share 74In last 12 months:Farmer visited a demonstration plot of teff share 37Farmer visited a government office of agriculture and discussed teff issues share 27Farmer awareness of technologies:Farmer knows the recommended fertilizer use on teff plots share 51

2. Important improvements in road and communication infrastructure

6. 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 characteristics of teff (doubling of income, 110% increase in teff consumption expenditure); these factors combined might have led to doubling of commercial surplus into Addis in last 10 years

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

6. Drivers for change

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7. Conclusions Important changes in the teff value chain:1. Modern inputs increasingly adopted, especially by these

farmers living close to urban areas2. Quality demands are on the rise, important shifts from

cheap red varieties to more expensive white ones3. 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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7. Conclusions

Despite changes, still in early stage of agricultural transformation:1. Upstream:

a/ Adoption of improved varieties still lowb/ 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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7. Implications

1.Major room for improved seed development; Better knowledge on other technologies to improve teff productivity needed. Large returns to improved technology development, i.e. return to Quncho development more than 100% 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)