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Grain prices plunge, warns report

While struggling to cope with the legacy of drought, Ethiopia has been hit by a dramatic fall in the price of grain. Market prices have plunged to the lowest level in seven years, a recent report by the UN Emergencies Unit for Ethiopia (UN-EUE) said. With southeastern Ethiopia continuing to suffer the effects of last year’s prolonged regional drought, many farmers in the better-off western regions of the country are now facing the prospect of bankruptcy following the dramatic fall in the price of grain. Improved rains in the central and western highlands, considered to be the grain basket of Ethiopia, have led to a higher than average main season harvest late last year - but with market prices plunging to their lowest levels in seven years, many farmers have been unable to recover the cost of the seed and fertiliser, often purchased with loans attracting heavy interest payments. IRIN has circulated this report to illustrate the problems faced by communities and countries after prolonged regional drought last year. IRIN Horn of Africa Web Special: “Struggling with the legacy of drought” looks at the problems faced by communities and countries after prolonged regional drought in Kenya, Ethiopia, Eritrea, Djibouti, Somalia and Sudan. This Web Special is a region-wide look at the devastating effects of drought, and the strategies being designed to break the cycle of disaster, and help recovery. Go to http://www.reliefweb.int/IRIN/webspecials/drought/index.phtml UN Emergencies Unit for Ethiopia Maize price crisis badly hits farmers in Western Ethiopia (Report of a field assessment conducted 20 May - 5 June, 2001) Background, objectives and methodology According to the Ministry of Agriculture (MOA), national grain production in the year 2000 was higher than average but lower than the 1996 and 1998 harvests and still slightly higher than for 1999. In Oromia region in general and in the study areas of this assessment in particular, the 2000 maize harvest was lower than the 1996/97-bumper harvest. However, cereal prices have fallen below the lowest recorded level in the last seven years (USAID/FEWS-April, Ethiopia). In this regard, the price has slumped to a level below expectations and has become unacceptable to the farming community, as it was not economically viable to them. Previous field reports of different institutions revealed that an extraordinary depression of maize prices became a conspicuous threat to the farming community. Based on this understanding, UN-EUE carried out a mission, joined by USAID, which also showed interest in the subject, with the objective of assessing the perceptions of different stakeholders (farmers, development agents and small traders) on the price crisis and also examining social and economic hardship faced mainly by farmers and small traders in the western part of Oromia region. The mission was conducted from 20 May to 5 June 2001 in Jimma (Limu Saqa and Omo Nada weredas), West Wellega (Hawa Walal and Gawa Dale weredas), East Wellega (Gida Kiramu and Jimma Horro weredas) and West Shoa (Bako Tibe, Chaliya and Ambo Weredas) Zones of Oromia region. During this assessment, different organizations, experts, officials, farmers and traders were key informants. Zonal and wereda agricultural officials, researchers, service cooperative members and the Ethiopian Grain Trade Enterprise (EGTE) were interviewed. Furthermore, farm fields and grain markets were visited. Main reasons for the depressed maize price Excessive supply and inadequate demand: Due to an increased use of farm inputs (improved seeds, chemical fertilizers and pesticides) and increased area benefiting from extension packages favoured with good weather conditions of last year, farmers had a good maize harvest in all the areas visited. In order to liquidate various financial and social obligations (mainly land-income revenue, debt of farm inputs and down payments for this year’s planting season and to escape from ever increasing interest of unpaid loans), farmers took their surpluses to local markets during a certain time period. This circumstance led to local markets being flooded with maize and concomitantly fetching a poor price. In East Wellega Zone, one of the areas renowned for its maize production, for example, the price is more than 60% below average clearly indicating excessive supply of maize with insufficient local demand. The price fall was not only contained in maize growing areas but has also extended up to Addis Ababa, the main center for grain market where the retail price for maize went down to Birr 47 per quintal (100 kg) from over Birr 120 the same time last year. This blocked the chance of farmers sending/taking their maize produce to Addis Ababa in search of better prices. In East Wellega zone (Jimma Horro and Gida Kiramu Weredas), for example, farmers had to sell 100 kg of maize for 20 Birr and the same volume of maize to grind 100 kg of maize into flour, indicating a discouraging nature of market price in the area. Overall, the price depression has predisposed subsistence farmers to serious problems of survival and financial constraints. Grain storage facilities; use of insecticides (Actelic) and improved granaries are not extensively adopted and employed by most farmers to keep their maize longer for future use largely due to unaffordable costs, and in some areas farmers used insecticides like DDT (Omo Nada Wereda of Jimma Zone) and malathion (Jimma Horro Wereda of East Wellega) buying from black markets. Reduced income alternatives: In the previous two years, maize prices were good and encouraged farmers to produce more maize than any other crop as a result of high productivity. Based on this price history of the crop and its high productivity, farmers in teff growing areas shifted portions of their teff farms to maize production in which case teff was just planted for home consumption and no more used as an alternative cash crop. At this cross road, farmers were encountered and challenged with maize price crisis and suffered from insufficient income from the crop. Decline of income from coffee: In Jimma and Wellega zones, where coffee is a primary cash crop and an important income source, poor coffee harvests were observed in 1999 and 2000 largely due to the delayed onset of belg rains. CBD (Coffee berry disease) has also contributed to this. The coffee harvest in 1999 was much lower than for the year 2000. Poor local and global coffee market prices capitalized the problem and limited farmers’ alternative income sources. Even coffee producing areas previously relying on purchased maize showed great interest and extensively grew maize as a result of the intensive extension package being practiced by farmers in their neighborhoods. Consequently, they minimized or stopped buying maize for their own consumption and instead became dependent on their own harvest. Farmers are forced to sell off large volume of maize as a substitute to coffee, no matter what the price is. In this case large volume of maize flooded local markets. Marketing and input influences: As part of an attempt by EGTE (Ethiopian Grain Trade Enterprise) to stabilize market prices, the enterprise offered Birr 60 per 100 kg of maize when the normal price was Birr 42 in Bako Tibe Wereda where EGTE bought 2,970 mts of maize directly from farmers. Immediately after the withdrawal of EGTE, the price dropped to Birr 28. Likewise, in Ambo wereda (West Shoa zone) when EGTE withdrew from purchasing in March/April, maize prices dropped on average from Birr 45 to Birr 30. This year the enterprise bought maize rather than other crops in maize growing areas of the western part of the country. At the moment the objectives of EGTE are somewhat contradictory: On one hand the enterprise is expected to stabilize the market, but on the other hand it is mandated to operate on commercial objectives without subsidy from the government. It also has a critical budget shortage. The productivity of maize without improved farm inputs is 20-25 qt/ha while on average 65-70 qt/ha is obtained when a full package is used. In order to cut down debts most farmers reduced or did not use at all chemical fertilizers and/or improved seeds this year and sowed maize without fertilizers. Reduced purchasing power of traders: Most grain traders, who were buying the produce from farmers at local markets and moving it to different areas of the country, have been bankrupted on speculation of local purchase by donors as food-aid. This year therefore, traders are not playing an active role, contributing to less demand and to low prices. Impacts of the depressed maize price Among the negative impacts and consequences of depressed prices on the farming community in particular, the following are the main ones. Production disincentives: Farmers interviewed said that production disincentives emanating from depressed maize price and continued increase in the cost of farm inputs are serious threats to them now a days. In order to cut down debts, large numbers of farmers do not use or reduced the amount of chemical fertilizers and/or improved seeds. They sow maize without using improved farm inputs. As a last alternative, a considerable number of farmers used local maize seed or the second/ F2 generation of hybrid maize (normally never used as a seed/planting material for its degeneration problem leading to significant yield reduction per unit area). In some instances, farmers even refused planting maize, other than just for green maize (in West and East Wellega zones - especially farmers in old settlement areas of Anger Gutin in Gida Kiramu Wereda and Qaqe and Machara areas in West Wellega Zone) for their own consumption. Nevertheless, through intensive promotion, development agents managed to convince farmers to make them accept the idea of planting maize despite the uncertainty of next year’s market prices. There is a farmers’ saying that goes “Never be humiliated like this year’s maize “. This is to indicate that the price of maize this year was unexpected and not acceptable to them at all. In East Wellega Zone in April 2000 a quintal (100 kg) of maize fetched Birr 92 while it was dropped to Birr 28 in April 2001 (70% reduction). This year, due to less use of farm inputs and reduced area of maize planted with improved inputs, reduction of maize production is anticipated. The late arrival of fertilizers (mainly DAP (di-ammonium phosphate) - late by one month) for instance, in Bako Tibe and Jimma Horro Weredas, and reduced use of improved maize seeds (as farmers wanted to cut down debt by avoiding improved inputs), will inevitably contribute to this anticipated reduced production. Depletion of productive assets: Farmers sold their productive assets like oxen, heifers, cows and shoats to pay back debts from farm inputs in the survey areas. This sale of animals is in most cases driven by the hope of price increases/improvement in the future so as to buy animals later on. Sale of coffee stands for a very cheap price for one production season (in Gawa Dale Wereda of West Wellega zone). In areas where farmers had alternative cash crops like oil crops, the effect of the price depression is not as painful as it is to areas with limited cash crops. Furthermore, in some instances (in Jimma Horro Wereda, for example) farmers also leased out their farm plots (Birr 60 for a quarter of a hectare for one production season) to better off farmers. Forced repayment and down payment for farm inputs: Despite farmers’ financial hardship to effect use of farm inputs, repayment rates were mostly over 75% in all the visited zones and weredas. But this was made possible mainly by impositions and by putting farmers under pressure by government bodies at grass root level. Among the methods used were denying the provision of improved farm inputs for the upcoming planting season besides the fear of farmers in the increase of loan interest. For instance, in Jimma Horro wereda, out of 1,500 ha of land planned to be covered with a full extension package, it is only 365 ha that was actually materialized this year. Similarly, of the plan to distribute 725 quintal of DAP to users, only 165 qt was distributed. Remote and inaccessible areas are most affected by depressed maize prices not only because the price has dropped but also because the price for fertilizers increases in proportion to the distance to be traveled. Conclusion and recommendations It is evident that use of improved farm inputs increases agricultural production, provided the necessary care and precautions are followed so as to avoid undesirable results. In all zones visited, expansion of improved farm inputs was reported and hence the good maize harvest last year. Nevertheless, physical production does not necessarily reflect and address the food security situation of an area. The agricultural extension package being provided in Ethiopia has some shortcomings. Among the setbacks, the programme does not have a market component but only focuses on physical production without planning for the profitable disposal of surplus produced stock. The current price crisis is a direct reflection of the setbacks like lack of a stable market for surplus production obtained like last year in such areas as the western part of the country. This should be taken as a very useful and important lesson to be learnt by government, NGOs, donors and farmers rather than just envisaged as a failure as such. There would have been means and ways of stabilizing market prices for the producer other than just leaving it for chance that could discourage farmers to produce more and more food grains. In this case, establishing an institution mandated to stabilize local market prices is an essential and indispensable issue. In this case, the best scenario is restructuring and amending the objectives of EGTE, strengthening the enterprise and exploiting its existing merits. EGET has the potential to stabilize grain prices at local level with slight modification and improvement in its financial, personnel and infrastructure facilities. Linking Farmers’ Service Cooperatives (FSC) that are also undertaking grain trading locally to the enterprise is useful and important in that the enterprise receives their grain stock at the end of the day. In fact, FSCs are still at their infant stage and need to be strengthened both technically and financially. Once a market stabilizing institution is established and organized, local purchases would be facilitated and could be used for food insecure areas of the country by moving the stock to food deficient areas of the country instead of importing relief foods. www.telecom.net.et/~undp-eue

This article was produced by IRIN News while it was part of the United Nations Office for the Coordination of Humanitarian Affairs. Please send queries on copyright or liability to the UN. For more information: https://shop.un.org/rights-permissions

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