Ethiopia’s wheat conundrum

5 Nov

Editor’s Note:

    Before Prime Minister Hailemariam’s announcement that Ethiopia has become food secure faded from the minds of Ethiopians, the National Bank of Ethiopia (NBE) signaled that it has arranged $600 million in loans for food imports (wheat mostly) and $120 mil for sugar to stave shortages-caused price hikes off.

    Although the donor community was well aware already long before spring 2014 that it has to feed upwards of ten million Ethiopians up until 2020, the TPLF leadership signed agreement at end October the operationalization loan document with the World Bank for the donor supported-assistance mechanism known as Productive Safety Net Project IV (PSNP IV).

    That much for our nation’s unrealized food security, which President Obama was also misled into giving his testimony. Further there is another problem regarding when to import. Neither the Ministry of Finance nor the Trade Ministry or the Ethiopian Grain Trade Enterprise (EGTE) have any idea of what and when to execute the purchase order, as the article by Addis Fortune below has related.

    This is an indication that, like everything else, perhaps the TPLF security apparatus may also have taken control of imports determination. Of all things so far, big and small, this would reduce the prime minister’s office to erand functions, i.e., to take orders and ring the inflation danger signal, following which he authorizes the import of wheat, sugar or oil.

    Of that, Addis Fortune recalls that, last time within a month after the trade minister declared no wheat import would be required this fiscal year because of good harvest, Ethiopia ended up ordering two million quintals.

    Without going into the dilemmas of Ethiopia’s agriculture, it seems the TPLF has lost faith in modern economics, which could have informed its actions that fast value losing currencies are the inevitable wombs of killer inflation, potent as it is in disrupting the lives of vulnerable members of society and destabilizing national growth and development.

    Who to blame for that – perhaps opposition parties, terrorists, OLF, ONLF, Ginbot 7 or Eritrea?

The TPLF regime is importing four million quintals of wheat for 2.4 billion Br in the current fiscal year; it is also in the process of procuring two million quintals more, out of a total plan for 6.5 million quintals for the entire year (Credit: Addis Fortune).

Posted by The Ethiopia Observatory (TEO)

Nationally, wheat has been harvested on 1.5 million to 1.6 million hectares of land yearly between 2009/10 and 2013/14. In 2009, the area used for harvesting wheat was 1.6 million hectares, which decreased to 1.5 million hectares in 2012/13. However, wheat yield has been somewhat unpredictable, increasing from 30 million quintals in 2009/10 fiscal year to 31 million quintals in 2012/13 (while the plot decreased), but showing a 0.5 million quintals reduction from 31.5 million quintals yield in 2011/12. For 2013/14, which will be harvested between November and December 39 million quintals are expected.

During the last four years the average yield of wheat per hectare increased from 19ql to 24ql, according to Tadesse. The higher yield expectation this year is a result of a good rainy season, improved seeds, as well as DAPS and Urea fertilizers, according to Matios Ashamo, coordinator at Areka Agricultural Research Centre in the Southern Regional State.

The government is importing four million quintals of wheat for 2.4 billion Br in the current fiscal year; it is also in the process of procuring two million additional quintals out of a total plan for 6.5 million quintals for the entire year, according to Etenesh Gebremichael, public relations& trade information head at the Ethiopian Grain Trade Enterprise (EGTE).

EGTE was re-established in 2009 by incorporating the Ethiopian Oil Seeds & Pulses Export Corporation. In May 2013, another Agency, the Strategic Food Reserve Agency (SFRA), was established with overlapping responsibilities. The SFRA buys from the domestic market and from its reserve supplies the domestic and export markets. The EGTE does basically the same thing in addition to being authorized to import grain.

The government imported 17.7 million quintals of wheat spending 15.5 billion Br between 2009/10 and 2013/14.

Following a shortage of wheat at flour factories, the EGTE is distributing wheat at a subsidized price of 550 Br per quintal to 288 flour factories across the country starting in August 2014.

The price of wheat nearly doubled between 2009/10, when it was sold for 574 Br per quintal, and 2013/14, when the average price was around 1,040 Br. The prices Atlaw managed during the year varied from 970 Br to 1,200 Br. The good harvest and the imports could bring the price down to 800 Br this year, Atlaw fears.

In his interview with Fortune last August, Minister of Trade, Ali Siraj stated that the government would not import more wheat unless it sensed a gap in supply seeing the harvest between October and November.

“We expect good yields during the October to December wheat harvest, but if we feel there is a gap, we will import more wheat after we have seen the harvest,” he said.

However, within a month of that interview, the Ministry of Finance & Economic Development (MoFED) announced an international auction for the supply of two million quintals of wheat by mid-September 2014. According to an official from EGTE who wants to remain anonymous, in the previous year the government had expected a good harvest and had avoided imports, which led to the supply shortage; this latest order was intended to avoid that kind of mistake”. The other main reason for the new import is to avert a shortage until the farmers collect the new harvest.

Tadesse says that as demand continues to grow, Ethiopia would not still stop importing wheat even if yields increased. The number of flour factories has also grown from 204 in 2009/10 to 288 in 2013/14.

In the current fiscal year, 12.6 million hectares of land are being harvested for crops including teff, wheat, maize, barley and sorghum of which 1.6 million hectares or 12.7pc of the total is harvested with wheat. The government forecasts a total yield of 300 million quintals this year, up from 253 million quintals last year, according to data from the Ministry of Agriculture (MoA).

According to CSA’s projections, Oromia will produce the highest amount of wheat, 23 million quintals from 837,000ha, followed by Amhara, where the yield is expected to reach 11.2 million quintals of wheat from 529,649ha. The least yield will be from the Harari region, where a yield of 1590ql of wheat is expected from 72ha.

According to Asrat Gebretsadik, representative of communications of the MoA, the high rate of population growth (2.9pc) is the main reason for increasing imports despite of a growth of 25pc in domestic harvests.

The increase in production does not match the increasing demand for wheat and, in urban areas, for bread, says an expert from Food & Agriculture Organization (FAO) who has conducted research on wheat. Places in the areas known as the wheat belt could produce upto 80ql a hectare, he says, which is possible, since there are areas that are already producing 90ql per hectare.

Read the full article on Addis Fortune

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