AW'ASU VAIJ.FY Al THOR I IY
ADDIS ABABA
MELKA SADI-AMIBARA PROPOSED IRRIGATION PROJECT
FEASIBILITY STUDY
PARI I I
STUDIES AND SURVEYS
Al/*)
jVOl. <5      LCONOMICTAND
[ITAL.CQN-S-U lt J Rome, JulyCONTENTS
PART I .           GENERAL REPORT PART II -         STUDIES  AND SURVEYS
VOL    1
- HYDROLOGY AND CLIMATOLOGY
VOL.   2
- SOIL SCIENCE
VOL.   3
- GEOLOGY AND HYDROLOGY
VOL.   4
- IRRIGATION ENGINEERING
VOL.   5
- AGRICULTURE AND LIVESTOCK
VOL.   6
- ECONOMIC AND FINANCIAL ASPECTS
VOL.   7
- SOCIOLOGICAL AND HEALTH ASPECTS
PART III
OUTLINE OF THE PROJECTIMPERIAL ETHIOPIAN GOVERNMENT
AWASH VALLEY AUTHORITY
ADDIS ABABA
MELKA SADI-AMIBARA PROPOSED
IRRIGATION PROJECT
FEASIBILITY STUDY
PART II
STUDIES AND SURVEYS
VOL. 6 - ECONOMIC AND FINANCIAL ASPECTS
I I ALCOXSI I T
Rome, July I960CONTENTS
I       INTRODUCTION
2.       THE PRESENT ECONOMIC SITUATION: IMPLICATIONS ON THE COST OF INPUTS AND PRICE OF OUTPUTS
3.      MANPOWER AVAILABILITY
4.       MARKET ANALYSIS
4.  1     INTRODUCTION
4.  2      MARKETING IN ETHIOPIA
4.  3      CROPS CONSIDERED IN THIS STUDY - SUMMARY TABLES
4.  4      TRANSPORT COSTS
4.  5      COTTON
4. 5. 1 The World Market Situation
4. 5. 2 The Situation in Ethiopia
4. 5. 3 Projection of Cotton Demand
4.  6      TOBACCO
4. 6. 1 The World Market Situation
4. 6. 2 The Situation in Ethiopia
4. 7       OIL SEEDS
4. 7. 1 The World Market Situation for Fats and Oils 4. 7. 2 The Situation in Ethiopia
4. 7. 3 Projections of Domestic Demand for Vegeta ble Oils
4. 7. 4 The Groundnut Market 4. 7. 5 Cotton Seeds
4.  8      CEREALS
4. 8. 1 General
4. 8. 2 The Maize Market
Page
1
8
9
I 0 I 1
16
16
18
25
26
26
32
38
38
39
43
45
46
47 47 49A
4.    9 PULSES
4.           10 FRUITS
4.           10. 1 General
4.           10.2 The Export Market: Bananas and Citrus Frui s 4.           1 0. 3 Conclusions
4.           11 VEGETABLES
4. 1J. 1 General
4. 11.2 Tomatoes
4,11.3 Onions
4. 11. 4 Chillies or "Berbere"
4.  12 LIVESTOCK PRODUCTS
4. 12. 1 Beef
4. 12.2 Milk
4.13 SUGARCANE
5.      PROCESSING INDUSTRIES
5.    1 INTRODUCTION
5.           2 COTTON GINNING
5.    3 TOBACCO DRYING PLANTS J
5.           4 SEED-OIL MILLS
5.    5 VEGETABLE CONDITIONING
5.    6 CONCLUSIONS
6.      CREDIT SITUATION
6.        1 INTRODUCTION
6.        2 SHORT TERM CREDIT
6.        3 MEDIUM TERM CREDIT
6.        4 SUPPLIERS' CREDITS
6.   5 CREDIT TO THE SETTLEMENT SCHEME
Page
53 57 57 57 60 61 61 69 69
69
70 70
72
73
75
75
75
77
77
78
79
80
8 0 8 0
81
83
83Page
7. determination of feasible farm sizes
7.   1 INTRODUCTION
7.  2 CREDIT PRACTICES
7.           2. 1 Medium and Long-Term Credit
7.           2. 2 Short-Term (Crop) Loans
7.   3 TAX POLICIES
7.  4 MANPOWER AVAILABILITY
7. 5 UNIT COSTS
7. 6 CONCLUSIONS
84
84
84
85
85
86
86
92
TABLES
1   - TREND IN LABOR COSTS
2   - PRESENT AND FUTURE AVERAGE EX-FARM PRICES OF SELECTED PRODUCTS
3   - ESTIMATE FUTURE DEMAND OF AGRICULTURAL PRODUCTS IN THE PROJECT AREA, 1985 ONWARDS
4   - DIRECTION OF EXPORT TRADE (%), AVERAGE 1966-67
5   - SOME ACTUAL AND EXPECTED AVERAGE TRANSPORT
COSTS
6   - COTTON: AREA, PRODUCTION AND AVERAGE YIELDS,
1962/1963 TO 1967/1968
7   - ESTIMATED PRODUCTION OF SEED COTTON IN 1967/1968 - ACCORDING TO AREAS AND PRODUCERS
8   - COMPARISON OF PRICES OF ETHIOPIAN COTTON EX-TEXTILE FACTORY AND PRICES OF IMPORTED COTTON9               -   SUPPLY   AND   DEMAND   OF   COTTON   AND   ARTIFICIAL   FIBRES, 1967/1968      AND      PROJECTIONS      FOR      1972/1973,      1975,      1985      AND
1995
10   - PROJECTIONS OF COTTON PRODUCTION IN ETHIOPIA AND ROOM FOR FURTHER IMPORT SUBSTITUTION, 1975-1995
11   - TOBACCO: CONSUMPTION BY ZONES AND MAJOR AREAS, 1961 -63 - AVERAGE AND DEMAND PROJECTIONS FOR 1975
12   - PRODUCTION BY ZONE - PAST TRENDS AND FORECASTS
13   - EXPORTS OF SOME DEVELOPING COUNTRIES
14   - TOBACCO: PRODUCTION, CONSUMPTION AND NET IMPORT BALANCES OF LEAF, 1961-63 - AVERAGE AND PROJECTIONS
’ FOR 1975, (FARM SALES WEIGHT)
15   - SOWN AREA, PRODUCTION AND AVERAGE YIELDS OF OIL SEEDS, 1962/63 - 1966/67
16   - ITER OF OIL SEEDS, 1967/68
17   - SUPPLY AND DEMAND OF OIL SEEDS AND SEED OILS, 1967
AND PROJECTIONS FOR 1975, 1985 AND 1995
18   - PRODUCTION OF CEREALS, 1948-1952 (AVERAGE), 1952- 1956 (AVERAGE) AND 1962-1967
19   - SUPPLY AND DEMAND OF CEREALS, 1967 AND PROJECTIONS FOR 1975, 1985 AND 1995
20   - SUPPLY AND DEMAND OF MAIZE, 1967 AND PROJECTIONS FOR 1975, 1985 AND 1995
21   - PRODUCTION OF PULSES, 1948-52 (AVERAGE), 1952-56 (AVERAGE) AND 1962-67
22   - SUPPLY AND DEMAND OF PULSES, 1967 AND PROJECTIONS FOR 1975, 1985 AND 199523    - SUPPLY AND DEMAND OF FRUITS, 1967 AND PROJECTIONS
FOR 1975, 1985 AND 1995
24    - CALCULATION OF CIF. PRICES EUROPEAN PORTS FROM
EX-FARM PRICES
25    - SUPPLY AND DEMAND OF VEGETABLES, 1967 AND PROJEC
TIONS FOR 1975, 1985 AND 1995
26  - MACHINE FLEET,  CROPPING PATTERN "A"  - 1st PERIOD
27  - MACHINE FLEET,  CROPPING PATTERN "B"  - 1st PERIOD
28  - MACHINE FLEET,  CROPPING PATTERN "C"  - 1st PERIOD
29    -     OVERHEAD PERSONNEL EXPENDITURES                 FOR FARMS OF DIFFERENT SIZE
FIGURES
1   - MACHINE FLEET REQUIREMENTS PER ha FOR DIFFERENT
FARM SIZES
2    - ANNUAL OVERHEAD PERSONNEL EXPENDITURES PER ha
FOR DIFFERENT FARM SIZES WITH OR WITHOUT TOBACCO
CURING PLANTS
3    - ANNUAL MACHINE FLEET COSTS AND OVERHEAD PERSONNEL
COSTS,      FOR      DIFFERENT      CROPPING      PATTERNS      AND      DIFFERENT FARM SIZES, PER ha1. INTRODUCTION
In this volume, all the analyses and data are presented which are neces sary for a correct definition of the economic problems of the proposed project. The general economic situation of Ethiopia is analyzed only for the purpose of illustrating its relevance to the project; the reader is not provided with a full description of either the economy or of the agricul tural sector, as these have already been given by other bodies (e. g. Plan ning Office). A brief discussion on manpower availability follows, in so far as this factor of production can represent a bottleneck. A complete analysis of the market position and prospects for a number of commo dities that can be produced in the Project Area is then added. This anal ysis is central to the whole study, as it defines the price and quantity conditions to the sale and the production of different crops. After the market analysis, a brief review of the processing industries likely to
be needed in the Area is undertaken. Another section gives an apprais al of the credit situation in Ethiopia, which is basic to the financial ac counts in Part III of this report. Finally, a section is added which anal yses the feasible size of farms that will occupy the Project Area.- 2 -
2  THE PRESENT ECONOMIC SITUATION: IMPLICATIONS ON THE COST OF INPUTS AND PRICE OF OUTPUTS
Ethiopia has a predominantly agricultural economy, surprisingly• un
DLUlVUlp 4i«3.is» “ 
------------- z 
* • 
'T' 1_ - — 
.
• 
nri of in
r•
encumbered by Government intervention. Thus, current price of in
puts    and    outputs    of    agriculture    bear    at    present    a    rather    strict    relation
ship with market determined prices. The exceptions are few: sugar,
». 
.      .       . 
_ _     'T'l_a a 
f              KllDST.
which is heavily protected through custom duties; cotton, protected,
although to a lesser extent, by custom duties on both imported cotton
and imported artificial fibers; and a few industrial commodities. Price
controls are not operative, and policies of subsidization or incentive to
domestic production are not yet making a significant dent in the eco
nomics of agriculture. The Grains Corporation, which originally had
the task of buying the output of subsistence farming at prices which
would stimulate a rise in productivity, has limited its policy to that
of reducing the monopsonistic character of the market by curtailing
the size of speculative marketing, traditionally in the hands of a few
traders. Non-agricultural inputs are sold by a relatively large num
ber of suppliers, mostly of foreign nationality, in lively competition,
and the market appears relatively free of distorsions.
Substantially the same observation is valid, on a more general level,
when the cost of aggregate factors of production is considered. Ethi
opia's balance of payments has witnessed serious drawbacks in recent
years, the result of low coffee prices on the world market and of the
closing of the Suez Canal. Foreign exchange reserves have declined
drastically in 1965 and in 1966, but have remained ample in relation
to Ethiopia's import trade (equivalent to nearly six month's imports
as     of     June     30,     1968).     Moreover,     the     first     indications     for     1967     appear to indicate that the erosion of reserves has slowed down considerably,
if     it     has     not     stopped     altogether.     Thus,     the     present     official     exchange rate can be considered an equilibrium rate, even though exchange con- 3 -
present one.
i’ <x internal rate of re
sibility  wil... .  l be proven on the basis of the project’s internal rate o  re
. ... 
turn; but naturally, the internal rate of return, to have any meaning, must be compared with even rough guesses for the cost of capital. The present cost of short-term borrowing is used here as such a guess. In any case, the high cost of short-term money gives confidence that the current cost of capital for the economy is strictly related to its economic value, and that no significant distortion in the relative price structure should stem at present from the cost of capital.
Labor costs are low in Ethiopia. Common laborers in the Awash Val ley are paid Eth. $ 1.25 per working day (US$ 0. 50 per day), one of the lowest wage rates in Africa today. However, it would be incorrect to calculate labor costs at even such rates in a feasibility study. Un skilled manpower in the Awash Valley is composed largely of immi grants from the overpopulated Southern Highlands, where unde re m - ployment conditions prevail. When a project relieves underemploy ment, the real cost of labor in that project is in strict relationship with the (low) marginal productivities of labor in the underemploy -
ment areas.
An estimate of such productivities is, of course, impossible. On the ot er hand, the real cost of unskilled labor in the project can also be
thia study, the cost of capital does not piay a pari. 
- ------- —
represented bv that
,- 4 -
Skilled labor, which is scarce and basically fully employed, cannot be
subjected to a similar analysis and the current market salaries will
be assumed to represent the real coat of labor at present.
In an equilibrium situation through time, wage rates must increase at
the same rate as productivity (output per man employed), while both
the cost of capital and the foreign exchange rate remain constant.
Throughout the life of the project, therefore, labor costs will have a
rising trend. The extent of the increase will be related to a hypothesis
of growth in productivity for the economy as a whole in the long-run.
In the absence of a model developed to cover the long-run, recourse
must be had to growth projections covering a shorter period. For the
economy as a whole, the 1968/69 - 1972/73 Five Year Development
Plan projects an increase in output per man of 3. 7% per annum, or
nearly 20% over the five years. On the other hand, the World Bank
has projected total GDP  growth at 4.  5%  per annum over the same pe riod.  implying  a  rise in output per man of only  12%  over the next five
years. A choice between the two module ie
u..*.4
f
I
e
rTREND IN LABOR COSTS (Eth. $ per day)
Years
Real Rate of Unskilled Labor on World Bank
Assumptions of Rise
in Productivity
Market Rate for Unskilled Labor on World Bank
Assumptions of Rise
in Productivity
1968
1969 - 1973
1974 - 1978
1979 - 1983
1984 - 1988
1989 - 1993
1994 - 1998
1999 - 2003
0. 85
0. 95
1. 06
1. 19
1. 33
1.49
1. 67
1. 87
1. 25
1. 40
1.57
1. 76
1.97
2. 21
2. 48
2. 78
Table 1- 6 -
3. manpower availability
Manpower problems in Ethiopia do not impose a difficult analytical ef fort, and can be illustrated quite straightforwardly. For unskilled labor, no special problems arise: supply is far larger than present demand. Urban areas and the surrounding highland countryside have a large number of unemployed laborers, hungry to find a permanent job (a survey will soon be started on the subject by the Ministry of Communications, Development and Social Affairs). In point of fact none of the present industrial farms (Metehara, Nura Era, AworaMel- ka, Wonji, Abadir) had any difficulty in finding labor.
It is understood that the Ministry of Labor will increase the number of regional offices (one is to be opened in Nazareth), through which labor demand will be channeled and easily met.
Even for certain types of semi-skilled and skilled manpower no supply problem appears to exist: watchmen, drivers, foremen and clerks seem to be available immediately or may only require modest on-the- job training. For clerks, in particular, the Commercial School in Addis Ababa and the Asmara Vocational Trade School have a remark able output of graduates.
On the other hand, ascertaining the future availability of technicians, agronomists and agricultural supervisors, irrigation and civil engi neers and farm managers, is much more difficult since all these cat egories are at present in short supply in the country. In outlining manpower requirements in I^.rt III of this report, recourse to foreign personnel will be assumed for a number of key positions in the project.
1 he quality of unskilled manpower is, under expert management, suf ficiently good to satisfy the requirements of cultivation in the Project Area. This is not to say that unskilled laborers are always satisfac tory. However, the abundance of underemployed workers in the High lands is such that the scope for selection by commercial farms is large. Present farms in the Upper and Middle Awash area have been able, through a progressive process of selection, to assure for themselves
a valuable pool of laborers.
Labor productivity is bound to increase in time, as the irrigation area- 7 -
develops. This implies that a smaller number of people will be able to undertake the job in the future than in the past. With the increase in labor productivity, the total wage bill should increase at a lower rate than the unit wage, taking the Project Area as a whole. This phenomenon, however* has not been considered in the calculation of labor costs, since any as sumption as to labor productivity is bound to be very arbitrary. Thus, while the wage rate increases in lime, labor productivity is kept constant. This* of course, introduces a conservative bias in the calculation of cultivation costs on the project, and has not been corrected. Again, the stress is here on prudence in a s sumptions.- 9 -
4. MARKET ANALYSIS
4, 1 INTRODUCTION
In this section , an analysis is made of marketing prospects <>t
the crops listed as ecologically possible. Not all the possible crops arc examined, since for some, the basic marketing information is missing or they cannot be marketed altogether. This applies to sorghum, sisal, and a number of vegetables.
Each crop is analyzed for;
a} World demand and supply
b)      Past trends in demand and supply in Ethiopia
c)      Present demand situation
d)      Projections of future demand and supply
c) Ex-farm prices, present and projected.
Following a recommendation by the Steering Committee, the alter natives of the Suez Canal open and closed are considered, where
r elevant.
Data have been obtained from: Ministry of Agriculture, Central Statistica 1 Office, Awash Valley Authority, FAO pub Lie ati on s and interviews with traders and producers in Ethiopia and in Europe.
To reduce the effects of abnormal agricultural years, the base period taken for projections has been the average of the last three agri cultural year b.
Projections have been referred to 1975 - by which time it is expected that the irrigation area will have started production - to [ 985 and to 1995.
It is assumed:
that the country’s population will increase at a rate of 2.2% per annum from the basic period]- 9 -
that per-capita GDP increases at an annual rate of 2.5% up to 1975, of 2.6% from 1975 to 1985 and of 2. 7% from 1985 to 1995.
It has been deemed advisable for the sake of simplicity, to con struct the demand projections according to a single hypothesis.
Consumption projections are the result of weighing a higher rate of growth in consumption by the urban population (6 to 8% during theperiod covered by the projections) vis-a-vis that of the rural population.
The income-elasticity coefficients of consumption have been esti mated by taking into account FAO studies (l), suitably adjusted on the basis of the present investigation and of the most recent trends. The same applies for the type of demand function adopted for the estimate of future per-capita consumption for each product (the most frequent, for the selected products, are the logarithmic and semi-logarithmic functions).
4 2 MARKETING IN ETHIOPIA
Most of the Ethiopian economy i s of the subsistence type. Espe cially in the agricultural regions and outlying zones, there is al most total absence of money exchange, barter generally being used (2). Monetary exchanges are above all in evidence in the ur ban centers (Addis Ababa and Asmara).
(1) Agricultural Commodities - Projections for 1975 and 1985 - Volume II.
1,2 i In 1966/1967, monetary consumption by private individuals in the agricultural sector was estimated from official sources at about Eth.$ 22 per capita per annum, while that for non- agricultural sectors was about Elh.S 300 per capita.- 10 -
However, the relations between these two cities and Che rest of
the country are at present undergoing a change, while the radius
of trade around the larger centers is extending. Trade in cereals, pulsptt and oil seeds has for some time been regulated by a special organization (the Gram Corporation). With the growing weakness of the coffee export business, traders are looking with greater interest to dealing in new crops.
Furthermore, the closing of the Suez Canal has encouraged ex porters and shippers to find new routes and means of transport more suited to the distribution of products on the international markets. Thus the number of ships with refrige ration equipment capable of making the trip around Africa has increased, while
fruits and vegetables have also been sent to Europe by air cargo. The Red Sea-Suez-Alexandria-Mediterranean route has been opened.
At present the possibility of using containers on the Maseawa (or A ssabj-Aqaba-Haifa-European ports route and on the Middle East runs is also bring studied.
In general, the marketing sector is sufficiently developed to rapid ly become aware of the emergence of new crops to be sold on the home market and abroad.
4. 3 CROPS CONSIDERED IN THIS STUDY - SUMMARY TABLES
In the following pages, the products analyzed (l)are;
cotton
tobacco
sugar cane
(1) The market analyses will often have to refer to groups of products, as a result of lack of data and information on Indi- vidual products.11
cereals (in particular maize)
ail-seeds (in pa rticular cotton seeds and groundnuts) pulses (beans, peas, etc. )
fruit (bananas, citrus crops, etc, )
vegetables (sweet peppers, eggplants .tomatoe s , onions, berbere etc. )
livestock for slaughter.
milk.
Table 2 shows the ex-farm prices which have been used through out the study j and which result from the product-by-product analy sis below. Table 3 gives the projections of consumption, in
the Project Area, on the assumption of a population of SO
TO, OHO,, by the time the project reaches its full production stage. The table has been used to determine the quantities on which ex farm prices appropriate to sales in the area should be applied. This is a well-known procedure, based on the argument that if those products were not produced in the area, they would have
to be brought m from elsewhere Thus, sales to the area bear
(
prices generally higher than sales outside the area.
A summary table (Table 4) shows the direction of Ethiopian ex port trade in recent years.
4.4 TRANSPORT COSTS
Table 5 gives some present and expected future transport costs for different means of transport, for main products and for the most important destinations, Data have been obtained from in terviews with authorities and firms engaged in transport activi ties, they have also been checked with farmers and producers in the Awash basin, with the exception of cattle, which is not at pre sent produced in the area.PRESENT AND FUTURE AVERAGE EX-FARM PRICES OF SELECTED PRODUCTS
(Etta. $ AU
Present Prices
Future Prices: 1972/73 onwards (1)
Products
For Sates tn the DomcB tic
Ma rket
For Sales in
Foreign
Market
For Sakes in 
the Project
Area
For    Sales    in the Domestic
Market
For Salen in the Foreign
Market
Col ton
Tobacco (2)
Vegetables (3)
Maize
Cruuridnuls (4)
Beans (5)
Li vc a tock
- Bulls
- Cows
- Heifers
- Calves m
Milk
59. 0
13 0. 0
19. 0
II 5
30. 0
27. 0
-
I JO. 0
19.0
-
24. 0
-
-
-
19. a
15. 5
65. 0
I JO. O/IOD. 0
19.0
-
25. 0
21. o M
-
150. 0/110, 0
19. a
-
22. 2
21. o
40. 0
15. o
50. 0
50. 0
25. 0-30. 0
-
-
-
-
-
-
40. 0
35. 0
50 0
50. 0
37. 0
-
-
io,
-
■
-
0) Taking into account trends on world market price a and improvement of qualities.
(i) prices paid by the Monopoly (average ot the six grades), both fur domestic and foreign market. (3) Average price of eggplants and sweet peppers,
(41 Unshelled.
(5) Prices referred to export quality only (net dry weight}.
(a) For output in excess of the Project Area demand.
Table- 13 -
ESTIMATED FUTURE DEMAND Of’ AGRICULTURAL
THE PROJECT AREA, 1985 ONWARDS
Table 3 PRODUCTS in
Crops
(a)
Demand in the ProjcctArca 1 985 Onwards
(b)
(c)
Cereal s
Potatoes, other root crops
Vegetable s
155. 0
19. 5
I 3. 0
Pulses
Fats and oils
157. 0
_______21.0
14. 0
2 4. 0
9. 420
1, 260
840
I. 440
-  vegetable oils
-  butter and ghee
- others
F rails
- citrus
* bananas
- others
Me a t
- beef and veal
-mutton, lamb, goat
- poultry
- other (pork, camel, game)
gfiB?
Milk
20. 0
5. 1
(3.8)
(0. 6}
(0. 7)>
2.0
(0.2)
(1.2)
(0.6)
27. 0
(13. 8)
(6.0)
(2.3)
(4. 9)
2.4
54. 3
5. 9
(4. 5)
(0. 7)
(0. 7)
g. 5
(0. 3)
(1.5)
(0.7)
27. 0
(12. 0)
(7.0)
(2. 6)
(5.4)
2. 7
53. 0
354
(270)
(42)
(42)
150
(18)
(90)
(42)
1. 620
(720)
(420)
(156)
(324)
162
3, 180
Sugar
3. 2
2. 0
120
[a      )      Ethiopian      ataodird      per      capita.      c      onHurnpEi      on      (hg/yeif      -      Average      19^7-1968), Ite>) Per capita con*Urnptian (kg/yeir
(c) Total dtmaiid (metric trim),
Note: -       Aiitifned; papula Li on of Project Are! 6-0-. 00C
All data art exprelied in lirffll of food con* umptiun (tareal* in terma of Hour. equivalent, meat in terms of carcase weight, milk include* dairy product! other than butter, eipreurd bn !frm» rrf freih equivalent, fruit* and vegetable* in ttrmi of fre*b equivalent nel of waile,
etc).
Source!      For Ethiopian Standard*: FAO - Agricultural CcmmodHic* - Projection* for 1975 and 1985 (data adjusted according Io recent anilyti* and trend*); for Project Area coneuniptioni tta.2crin.HU.lt cotimatcB.-14 *
Table 4
Of’ EXPOKT T*AOE AVERAGE
Red 5*a
pefPlin
Gulf Krnyn etc.
Other
Afri can
Cann trio a
Middle
Ealt Ccnuitrie*
West
European
Countries
Other
AaiAfic
Countries
U.S A.
Products
Cent rally
Planned
CnuntriEfl
- -
Liwitock and meal
Livestock (l J
Frnieii beef
Canned meat
c.r*4>« (!)
Fruits
- OrwR*«
- Mandarin*«
- Lem»n>
- IlinanM
- Other fresh frill!#
Fid IM
20
a
 1
- Harr .cut beam
- Dry pea i( mixed pvat
- Horse bean*
- Lentil*
- Chickpea*
Vrge cable e
45
lOD
40
-‘
65
2£
12
20
70
25
40
4D
20
6
1 B
35
£5
10
21
2
so
so
100
100
75
12
10
5
-
-
50
2
2
30
1
■r -
-
5
-
-
-
J,
2
- ..
5
5
J_
-
4
5
-
-
2
2
■>
JO
■•■ ■
i
to
10
5
£
-
j_5
&
-
35
5
■■
-
4      >■
40
65
35
JO
70
20
70
B
10
35
05
MO
5
40
5
m
45
40
40
-
■
b
JO
40
45
10
i on
ID
70
in
50
46
_
2
25
25
BQ
*+
■•
3
-
-
7
25
-
-
45
-
25
1
B5
I
3
J
■
- -
■» 4
“■
■4
r-
-
- Whole pepper■
- Chilly pnppera
- Other fresh vegetables - Froi’n vegetable*
Starchy root* {5)
3
2
-
-
F ■
-
5
-
-
■
-
Ground pepper and
other splcse
i i
Oil ieede
-
10
3
a .
- Ground null
- Linseeds
- Cotton feed#
- Ciitrjfbiini
- Sesame lerde
- Hijer l.ncug' ateda
- Rape seeds
- Other nil Midi
Oil seed cakai
■
» -
-
-
■+
2
£
ri
-
£2
-
£0
45
-
20
16
*.
1
R
•
-
30
-
-
5
7
1
1R
-
-
1 0
-
-
-
-
(1)               MilnJy  cheep and goatl. (2)               Mainly  dur rah. and mi llat. (l)                 Mainly pot*toe3„
Source: Central Still • tic al Office,5CME PRESENT AND EXPECTED AVERAGE TRANSPORT COSTS
(Eth. $/t}
PrataM Colt* (1)
Exp* clod Coite (2)
DeecrLplion
Car sals.
Pulse*.
Chi Seed ■
Fruit*. Vegeta bias
Ci}
Hi» Cation
Live Gattie
Tobacco (Dry Lea*ea>
Carrals,
Pulse*
Oil Seerfi
Fruit*
Vegetable!
(3)
Raw Cotton
Live Cattle
Tabacco (Dry Leave a)
Sea freight* (4)
- Short distance
Middle distance (Via 5u««) - Middle dLlUsf* (VI* Tran-
■h/prrienl in £(yp<)
- Long di a lance
Ry road
25
35
35*50
50-75
1 AD
70-100
4     4    4
37
3-12<*>
’,,
. . .
zs
35
-..
37
*  *  4
4     - v
-
50
•<*
4  - »
• *
-
50
35-50
50-75
150
70-100
20-30
20-30
35-50
52. 0
-
54
3-IZ<»)
*
...
a ■         1
54
+--
+*
- Project area - AlMh
- Project area - Addii Ababa - Addie Ababa • Aaiab (5)
Railway tariff*
-
■
-
20
30-50
16. 0
-
25-J5
50-80
-
10-15
-
-
-
40 0
I 6. 7<”>
15-20
15-20
20-25
16. 0
*
30
25
-  Addle Ababa - Djibouti
Air Ircighla
-  Addis Ababa/AI mJ re - Pari*/ MiUA7 Frankfurt
52. 0
10
ID
20
40. 0
-
-
-
- * *
*
■
■
d
5D0( >
|'
-
([ ji Su«E Canal open (via C*pc 40-50% additional freLghll, present road system condition*.
(2)    1972/73 onwards, Sfcvt Ciul opeiiT now Addii Ababa - Anab highway.
(3)    According io kind a£ vegetable and preservation. ayaiem (air cooling. air conditioning, (raaaing, ate. ).
(4)    Short distance; Redina, Persian Gulf, Narlh-Eaat Africm Coaita; rniddla distance; Europe (via Sues}. South Asia. South Africa, etc.flong, distance'Euro pa (via Capel AmtHcai. fbrEaat, etc.
(5)    Al praaanl via Datsik.
(a) P*r head (minimum tor iheep and goals, roan mum (or caiile).
(bj Pur square mater.
(c)     Hy rargo or paaaenger aircraft Preaeni tarUfa are : Ekh, * 2. 39 when the ratio package volume/7, 000 <45 kg; Eih, $ 1. when thia raLLu>45 kg,
(d)    Expected special LarlH far regular cargo.lb -
Fur aca freight,  costs both  via Suez and  via transhipment in  Egypt a re shown; the latter,  however,  applies only  to  vegetables.  For other crops,  the alternative route to  the Suez Canal for export to  Euro pe and Mediterranean countries is via the Cape.
4. 5 COTTON
4. 5  I The World Market Situation
+
World cotton production has increased at an annua] rate of about 2. 5% since the mid’fifties, due to an increase in average yields per ha (2, 2-2. 3%) and a limited increase in cultivated area (0. 1 - 0.2%). Over the same period, consumption rose 2,3% annual
ly, on average, with a consequent increase in stocks. Since 1965, partly following a temporary decrease in U.S. production, supply has tended to keep in step with demand.
The result of these trends on world cotton prices has been a con siderable decrease, in particular for medium and short fibers (represented by the American I'1), whose average prices (spot prices, the average of quotations on 15 U.S* markets) dropped from 33, 60 US$ per 100 lbs in 1962. to 23. 00 US$ in 1 96 7 with 
a minimum quotation in the 2nd quarter of the year of US$ 22* 30 and with a tendency to rise in the first half of I 968 (around 25 USSj*
Prices for Sudanese long fiber proved more reaistent although they oscillated considerably ($ 42. 9 in i960, 35. 6 in 1 963, 43. 2 in 1964 and 34. 2 in 1967, with a minimum quotation of 33. 7 in the 2nd quarter). In the first half of 1968 there was a slight improve ment (to over 35
Prices of Egyptian long and extra-long fiber (Liverpool) were more stable, with a clearcut tendency to rise in the early months of 1968 (about 57 $), as against an average of $ 53. 2 in 1967 and of S 41.8 in 1962 and 1963 (I960: $ 49).17 -
Forecasts for the period up to 1980 indicate a relative balance
in world demand and supply of cotton as from 1972. 1971. Supply should be more limited in the U.S. (continuation of the policy of reducing the cultivated area) and in other producing countries (including Egypt and Sudan), where priority will be placed on increasing food crops. Production in developing countries should increase at a rate of 2. 8% a year (especially due to further im provements in yields), and at a rate of 2. 5% in developed countries. In this way the share of the developing countries in world cotton output should rise from 4 i-44% (average of I 965/ 1 967) to some 48% (1980)*
The per-capita consumption of textile fibers of all sorts (it being necessary to consider the effect of substitution between cotton and artificial fib© rs) should rise at an annual rate of about 1 %, i. e. slightly lower than in the past, due to the envisaged reduction in pcr-capita income growth (from 3.4% to 2. 5 according to the average of low and high assumptions as adopted by FAO), In dev eloped countries, p<-r-capita consumption should rise from 11, I to 12, 3 lbs, while chat m developing countries should remain more or less unchanged, around 4.4-4. 5 lbs/annum. However, due to the increased competitiveness of artificial fibers (especially non^ cellulose fibers), the average per-capita consumption of cotton should drop from 7. 6 to 7.4 lbs /annum.
On the basis of the preceding assumptions, it is estimated that the price of short or medium fiber cotton will decrease yet fur ther (reaching a level of about 21 cents/lb by 1975); that of long and extra-long fibers will probably tend to decline, although more moderately (1),
(1) Recent technological prQCeSHeB make it possible to use mid dlings to a greater extent even in the manufacture of yarns (and fabrics) of higher quality, for which Long fibers are nor ma Uy required.IB -
4 5 2 The Situation _in Ethiopia
Areas under cotton in Ethiopia have increased rapidly in recent years, in the last season (1967/1968) reaching 60, 000 ha, with an output of over 32, 000 tons of seed cotton (Table 6).
The territorial distribution of cotton growing last season, accord
ing to an estimate made by the Awash Valley Authority, is set out
in Table 7.
Cotton-growing areas based on more advanced criteria in irrigated areas are located in the Middle Awash Valley (National Resource Dev. S. C., Montanari, A. V.A., H. S. I. Foundation), in the Lower Awash Valley (T. P. S. C. . at Tendaho) and in NW Eritrea (Barattolo, at Tesseney). In these concessions the highest average yields are obtained. Il should be noted that two-thirds of the area cultivated extensively is in the hands of small growers (Sctit Humera, As-
sayta-Ausa): average yields vary between 3 and 10 ql/ha.
In 1 967/1968 there were 8 ginneries in Ethiopia: 4 in Addis Ababa, 3 in Asmara and 1 in Tendaho (the only one situated in the grow ing area and belonging to the growers).
Their capacity varies between 120 tons/24 hs (T  P. S. C. ) and 
+
20 tons/24 hs. Near-maximum capacity is attained only from November to March inclusively. The overall capacity is far higher than the present work load, which is about 25, 000 tons of seed cotton (1967/1968). The difference between the volume harvested (32, 000 tons) and this work load may largely be at tributed to the cotton for the cottage industry.
The average yield of lint is about 36% (between 32 and 39% , ac cording to the concession).,. This high yield is the result of hand picking.
In 196 7/1 968 about 9, 000 tons of lint were produced, used entire ly by the local textile industry.
The cotton is purchased by the ginneries at a price varying be tween 550 and 625 Eth. $/ton, according to quality and above
a fiber length. For the purposes of this study, an average weight - d price of 600 Eth. $ may be taken as representing the presentCOTTON : AREA, PHODUCTION AND AVERAGE YIELDS. 1962/1963 TO 1967/1968
Dr scription
1962/1963
1963/1964
1964/1965
1965/1966
1966/1967
1967/1968
Area
(thousand ha)
Production
(thousand tons)
Yield
(ql/ha)
27
30
4. 6
1, 7
5. 1
1. 7
34
6, 8
2. 0
4 0
50
60
14. 4
27. 0
32.6
3. 6
5.4
5. 4
Source : Central Statistical Office.
9 aiqe.L- ?.n -
Table 7
ESTIMATED PRCPUCTION OF seed cotton IN 1967/1 s6e
according to areas and producers
Area#
---- ”
Middle end Low Awanh Valley
Produce rfl
Sown Area
(ha)
Production (sans)
Average
Yields (ql/'ba)
1 4, 77.0
14. BHO
11. 7
Nur a Bra
Montanari
1. 200
900
7. 5
National Ren. Dev,
360
aoo
22. 21
Abadlr
Awora Melke
Mnntan.it 1
300
ZOO
6. 7
Keeaem Kcbena
H. S. 1. Foundation, S. C.
240
560
21. 3
Amita. r a
Awash Valley Authority
Settl. Scheme
so
130
16. 1
Amba eh
Ambiih Priv. C. Mdo
45
60
17. 8
Diihti
T. P. S. C,
3. 500
4. 3)0
12. 3
Dit Bahri
T. P.S. C.
1. 500
2. 180
1 5. 2
Bant*
Joint Venture
405
500
12. 4
Logia
Joint Vent tire
40
90
22.6
Dubti
Out-growers(AVA)
100
30
3. 0
Ari a rd la - Auik
Sima 11 pr odu cm
5. 000
5. 000
JO. 0
Eritrea
Teaaaney
Eritrea
Rabi
Seth Hume r a
Weal arid South
Arbn Minch
A be Ln
Gibe
Baraltolo
Small producers
Pri ■ one re1 Farm
Small producers
46. rm
3, 000 8. 540
180 35, 000
US 135 500 I 00
I^TIO
3. 500 2. 530
180 10. 500
-
Ministry of Cornrrnarn ty
Development
1 Small producers
Small producers
ToUl
160
750
100
L-6 11.7
3.0
] 0. 0
3. 0
LL.Z
11.9
15. 0
10. 0
60.225
12, 600
h*
iource; Awash Valley Authority (Study of November, L%S).age ex-farm price for cotton ia 590 Eth. $/ton.
The sale price of the fiber to the textile industry varies from
1.680 to 1, 850 Eth.$/ton. oscillating round the price of imported cotton, but is about 20% higher than that of imported artificial fibers (l).
Cotton seeds (62 kg on average per ton of cotton processed) were almost all exported* mainly to Japan and Western Europe. Since the closure of the Suez Canal, they have been sold mainly to Asian countries (japan. China, Lebanon). Since prices appear more un stable and less remunerative* the ginneries tend to sell the seeds to domestic oil production plants or to set up their own plants.
Over 90% of the lint obtained is in the middling staple category, and 10% in the long-staple category. Distribution may be indi cated approximately as 35% of 1 5/l 6 . 30% of 31/32’* 20% of l
rr
lr , 
5% of I. l/l 6  and 10% of greater length* up to 1. 1/4”.
rf
In 1967/1968* the overall demand for cotton fibers and artificial fibers (rayon) by the Ethiopian cotton industry exceeded 24* 000 tons, as follows:
Local production
Cotton imports
Variations in stocks and other sources Total supply of cotton
tons
9. 000 5* 500
930 15* 430r
4
A
I
(- 22 -
Total supply of cotton
Cotton exports
Domestic demand for cotton
- Imports of artificial fibers
Domestic demand for fibers
There are 7 cotton factories operating in the country- Four of
these have an annual working capacity of over 2, 000 tons of fiber (cotton and rayon). In all, they possess approximately ISO, 000 spindles (1). In 1966/1967 some of them used up to 60-70% arti ficial fibers, both in the form of yarns and as flock, for the manu- facturc of mixed cloth or just rayon* With the increase in import duties from 10 to 45 Eth. $/ton, the percentage of artificial fibers
in total consumption of the textile industry dropped from 50 to 40% (1967/1968).
In all, in 1967/1968 some 60% of all fiber consumption (cotton plus rayon) was imported.
Concerning the distribution in consumption of cotton lint accord ing to category of length, another imbalance is noted between the supply structure and industrial demand. Without going into fur ther details, it has been noted that medium-length fibers (between 15/161’ and I'1) account fur the great majority (70%) of fibers taken 
by industry, that 20% approximately are medium-long fibers (be tween 1  and 1. 1/16") and only 10% long fibers (over 1. 1 / 1 6 * )
tons 15,430
4 30
15, 000
9, 540
24, 540
rr
1
p
whereas locai producers offer 45, 40 and 15% respectively. Bal ance is only partly restored by imports, with an overall supply of 50-55, 30-35 and 10-15% per type of fiber respectively. The producers of long fibers normally have to sell their produce at Prices lower than international quotations (see further forward), since in Ethiopia the demand for higher - qua lity cloth (generally made from Long fibers) is still modest. Hence the necessity, sug gested some time ago, to create an agency to arrange coordination between producers, ginneries and the textile industry.
(1) Average output per spindle: about 160 kg/year, against a theoretical capacity of 180 kg/year (200 g r/spindle/shlft or 600 gr/d x 300 d).I
i- 22
The ex-factory prices of domestically produced cotton, in the
-------- -        _«« ixrhftl® the orices of the fibers me
--- — -----------
f
greater length  domestic prices were considerably  lower than those of the corresponding  fibers effectively  imported  (13% 1* er for 1. l/8M) or importable (14-20% lower for 13/l6” and
1, 1/4M) (Table 8),
From these summary indications it may be noted:
that the Ethiopian market is not yet sufficiently selective and reacts but little to the different types of fibers (l):
- that under present conditions the possibility of exporting mid dling is conditioned by a decrease in sale prices more or less equal to the difference between export prices (or prices FOB American ports) and prices ex-Ethiopian factory:
on the other hand, that the possibility exists of exporting long fibers*
Cotton imports take place both freely and under the PL 480 Agree ment (2), with payment CIF Djibouti. On the CLF price, which includes 1 % bank dues, some I 0-20 Eth. $ per ql are payable for sale costs and municipal due®, 10 Eth. $/qI in excise. 8-L0Eth.$/il for transport from Djibouti to Addis Ababa, transit dues and vari ous expenses. The F OB price therefore undergoes an increment of over 25% on the CIF price.
1* l/l6"; on the Ethiopian market the difference
is only half.Table 8
COMPARISON OF PRICES OF ETHIOPIAN COTTON EX-TEXTILE factory and prices of imported cot i on
(in Eth. $ per kg)
Staple Length
Domestic
Prices
Paid (l)
Price of
Imported 
Cotton
%
Difference
I" and less
1. 1/ 32"
L J/16"
I. 1/8"
■1. 3/16"
). 1/4"
1. 68-1. 75
1. 75-1, 80
1. 80-1. 85
1. 87
1. 90
1. 90 (a)
1, 62
l. 69
1. 75
2. 15
(2. 20)
(2.40)
3-8
3-6
2-5
-13
(-14)
(-20)
(!) In general the higher price was paid tu T. P, 5. C. ( ) For modest amounts.
a
Source: Awash Valley Authority, up dated,t
*
■- 25 -
n . l . -r p q r which-
The Hole exports were made by C. P- S< , ■
i i /i £■’ tn T ci nd on ■ placed 43 0 tons warding samples of fiber 1.3/16 to Lonaon P
tor
r
nf this fiber on that marKtu. wrim- v s
* 
.hnt mirket              With the gradual settling of the
world market (unloading of stocks, further ret|uC,lor^
in  the USA), it is considered that the export flow of Ethtopt- " long-fiber cotton - that in excess of specific Loca require ments - could develop favorably.
453 proiec_tion_of Cotton Demand and Production
ficial fibers a_r_e____________                    considered,    _2_. . In the I 96 7/1968 season following 
As a
first approximation, the total consumption of cotton and arti-
_
the raising of the import tax on artificial fibers from 1 0 to 45 Eth.S
per    ton,    out    of    a    total    amount    of    31-32,    000    tons represented by cotton.
For 1972-1973 it is estimated that the domestic demand for fiber (cotton plus artificial fibers) will be about 40, 000 tons, equal to more than 1 . 5 kg per capita (1967-1968: 1. 3 kg).
Considering the rapid development of cotton growing in Ethiopia
- according to the target figures of the 3rd Development Plan - and the capacity of the national textile industry, domestic out put should be able to satisfy almost the whole of the demand for cotton up to 1975. Imports should be limited to modest amounts of cotton (medium-length fiber ), to quality supplements and to yarns and fabrics of "fine” quality. Imports of artificial fibers will represent only l/4 of total consumption. For the period after 1975 a cotton deficit is bound to reappear.
A choice will be open to producers as to the disposal of longer staple cotton: on the one hand, competitive exports appear passible; on the other hand, longer staple cotton can be sold domestically at the lower prices of middling. In this report, 
for reasons of prudence, the second alternative has been con sidered.
Export prices (CIF) in the foreseeable future have already been indicated. The ex-farm prices for domestic sales are shown in Tab!e 2; they are based on an import-parity assumption, and dis regard the protection at present afforded to domestic cotton.
of fiber, 60% was1
I
i (
I- 2b -
For     the     corning     years     the     per-capita     con-ii
mption of cotton and
rayon     has     been     forecast     according     to     an     income ]   1 with logarithmic function. This would t us rw>- '
-elasticity of
,     •     19,5.     Th!,     eon.uo.ptioh     figure     would     involve     ii     total of over 1 00, 000 tons of fiber (Tables 9 and 0).
2. 5 kg
input
4. 6              TOBACCO
4 6.1 The World Market Situation
From 1953-1955 to 1964-1965 world tobacco production increased
at an average annual rate of 2. 5%, reaching 3. 7 million tons in
1964-1965. During the same period, world exports of tobacco
leaf increased at a rate of 3. 5%, from 630. 000 to 890, 000 tons.
In the past fifteen years, the part played by underdeveloped coun
tries in the world production and trade of tobacco has increased
steadily so that in 1964-1965 these countries accounted for more
than 40% of total world production.
Two assumptions have been made for the projection of the demand
for tobacco to 1975. The first# with minimum values, takes par
ticular account of* population increase# while the second, with maxi
mum values, considers other factors such as the rate of urbaniza
tion     and     industrialisation     and     the     spread     of     smoking     habit,     especial ly among women. On the basis of these two assumptions, an annual
increase    of    Z.6%    and    of    3.2%    has    been    estimated    for    the    demand in tobacco up to 1975. It has been estimated that consumption will
increase more rapidly in underdeveloped countries (see Table I ]), It IS not possible to give details on the trend in Oriental tobaccos in comparison with the others (mainly Virginia. Burley, etc. ), but it may be stated that whereas the demand for Oriental tobac cos is tending (  drop, that for other tobaccos remains firm.
oA
i
(
I
----------- ----------------------. If i
Ix!dxJ
3 - - - S 3 an
fl
: • ■ :■ a an
ini
fl
£
?
3
-1 31= s
•sa-
S 5
H1 *1
*■
aT■" 1 J * *
J : ■ ■: a an
tn
f
; - - S2 3 S
■aT fl *
■"fl! ■*#
i *’ ’■.
___ ______ —------ ----------
—
i : ■ ■: a an
Hij
fl
E
1
- r - S S
jA—— a-  -
« ■*
f?
s *
<|J 3- £
1
- --------
S’ }!?
§♦ J* *
q ; |! ? 3 3 ’ i
•n
a
»
•
1
f*l*i ■S> s *a~ i
e> * -J
rr   M     "
” *s s f
4M4i *m “*
3!
la 35 si J 33"
* « J j 4 J 
2 3 ? I s z s
J * t; ~ z
.» cT
■■» fl
« ■=■
™ ~
-f
5 "
«i
• fl
•1 i
-- fl 1 Jfl £
l 1             i             hill             k             t
M i k i
LI
ilK'i          3 ’1     1
IH       ,       UH       J       =       d       ! J 3 r | 3 3 1 ; < £ | 1 3 r |
I
d
*:■ f «c
r s a i i . > 5• J ■ «n i
phi 3 . . I ?
, . 23
i
i
v
4
J
1
3
i5
♦i
1-
x      :
?£ ---------------- ►
£
r
D+flflH|rfifl«
JH7..'l*i
..rPROJECTIONS OF COTTON PRODUCTION IN ETHIOPIA AND ROOM FOR FURTHER IMPORT SUBSTITUTION, 1975-1995
(metric lone)
1
i
Annual Rate of Change
D< ■ c rip ti Dei
Planned (1) tm/im
Annual Rate o( Cha ng ■
1967-fcH-72/71 (%)
Projetlnd
1975
Annual Rat*
o( Change 197Z/73-I975
W
Proje tied
19B5
Annual Rate
Of Cb*ng,a
1975-1985
l*)
Projected
1995
I9B5-I995        1 (%)
967/68-19^5
1%)
Seedcattan output
Cotton lint output
Export!
Dome■ tic demand {rutEon Uni) Rngrn lor import aubiriEulion:
- Cotton 11 nl
- Seed CDllnn
Poe al bile production ol ■ eed <<d- ton'at Malka Sadi -Arnibara (Z)
64, (SOD 2 3, 100
1, *90
3D,»10
ft, 700
Z4, 1H6
15, 1
15 1
BZ.700
29.700
1,500
3*.M10
5. 0
5. 0
105,600
IT, 90Q
1.500
53.600
5 0
5. 0
134.BOO
*8,400
1,500
Bl,050
5. 0
9. 0
5. 5
5. 5
-
6.610
IB,176
18.000
17, Z60
47,983
i a ooo
r
34, 1 50
94.937
19,000
(
(1} A« par Third Five-Year Development PI ah, ex eluding the planned output iruao Mtlka Sadi-Amita ra. (Z) Bated on Crapping Pattern A. approximate.
Sourcas. *«« Table-9.
TabltlOTOBACCO: CONSUMPTION BY ZONES AND MAJOR AREAS, 1961 - 6 3 AVERAGE AND DEMAND PROJECTIONS FUR 1975
1961-63
Average
1975
1975 Indices
Rates of Growth
Description
Low
High
Lew
High
Low
High
(thousand tone)
(1961-63-100)
(percent per year)
Devc 1 one d Countne ■
North America
EEC
North European countries
South European countries Other developed count Hob
Centrally Planned Countries
1,8158
907. 7
319, 3
ZOO, 7
174. 8
213, 3
390. 3
V, S. S, R.
Eastern Europe
Developing Countries
Latin AmcHe*
Africa
Near East
Far East
WORLD TOTAL (endudlns
Mainland China)
212. 6
177. 7
i ■ 1^0. 4
165 9
108. 0
43 7
,672. a
3, 396. 5
2. MB. 6
I. 091. 3
397. 6
2Z5 6
2M, 2
353. 9
GM J
345. 5
268. 8
1,808. 1
GDI. 3
167. 9
76. 5
962. 4
4. 771. 0
2, 442. 6
1.091. 3
414. 2
228. 8
317. 7
390. 6
657, 6
371. 7
ZB5. 9
1.982. 1
684. 9
204, 1
87 1
1.006. 0
5, 082. 3
129 3
120. 2
124. S
1 I2_4
160. 3
165 9
_157. 4
162. 5
151.3,
LSI. 9
164. 1
155 5
175. 1
14 3. 0
134, 5
120, 2
129. 7
1 14. 0
181. 7
183 1
15B 5
174. 8
160. 9
166. 5
187. 2
189. Q
199. 3
149 5
2. 0
I. 4
1. 7
0. 9
3, 7
4. 0
3 5
3. fl
3, 2
3. 3
3 9
3. 5
4, 4
2 8
2 3
L4
Z. 0
1. o
4. 7
4, fl
4, 1
4 4
3. 7
4 0
4. 9
5. 0
5. 5
3. 2
140. 5
149. 6
2 6
3. 2
l—
SttttXtc: FAO.f
f- 30 -
7
For production (.Or Table 12) the projection to ” ’J“* Lie on the t.,1. oi two a.eumptione. The
rate oi ineroa.e (2. 4%) i. mainly heard on P« might give rl.e to a alight deficit with reaped '» with maximum value. (3. 4%). on th. contrary, there
'
«
a   ample,   ot   about   4.   0-4.   5%.   equal   to   approximately   l=-Z0/. of the world exportable production.
In the first assumption, ft is estimated that the mcr««* u.
world tobacco production will be mainly due to that of under- developed countries, which will cover the increase of the in ternal demand for relatively poor quality tobacco. The highly developed European countries will continue to be the mam im porters and will later be able to reduce their own tobacco pro duction, which, even now, only covers a very small part of their total consumption,
With the second assumption, the situation is different. An in crease in income could stimulate the demand for better qualiry tobacco, especially in underdeveloped countries. £n this case, there would be a trend to increase the production of better quality tobacco in the more highly developed countries, which at present cover almost the entire world demand, Consequent ly, there would be a surplus of poorer quality tobacco, which predominates in underdeveloped countries.
About a quarter of the world tobacco production reaches the in ternational market. The United States is the largest producer and exporter, but an recent years its share of the international market has been reduced from 40% to 20%. This is partly due to keen competition from large quantities of cheaper tobacco produced in underdeveloped countries, and partly to a change in demand from the manufacturing industries in the importing countries. Due to its high quality, leaf tobacco is usually ex pensive in the USA. not least because of US internal policy of artificial support to growers. The change in demand from the manufacturing industries is, however, due more to the fact that the production of filter-tipped cigarettes and blended tobacco, requiring a smaller amount of high quality leaf. ls constantly on the increase, than to price.
t■
PRODUCTION BY ZONE - PAST TRENDS AND FORECASTS
(thousand tons)
1975
1961-1963/75
Zone
1953/55 Ave rage
1961/63
Average
1964/65
Average
1965/66 (a)
Average
min,
ynax.
Average Annual Rate
of Increase
min.
max.
Developed Countries
Centrally Planned
Countries
Developing Countries WORLD TOTAL
1,606
142
1.115
2, U3
1.663
351
1,438
3, 452
1,751
30)
1, 600
3, 652
1.574
23)
1.673
3, 478
1, 977
650
2,076
4, 703
2, 265
728
2. 344
5, 337
1, 3
4. 9
2. 9
2. 4
2. 4
5. 8
3. 8
1 3 4
(a)                Evaluations.
Source: Agricultural Commodities - Projections for 1975 and 1905 - FAO Production Yearbook - 1966 - FAO.
Table I?- 32 -
In 1 961 -1 963. underdeveloped countries in all exported about
l/4 of their production (see Table 13). 
72% of these exports
4. 6. 2
(77% in 1 964 -1 965) come from Rhodesia, India, Brazil, the
Philippines and Indonesia.
Not only the relatively low prices, but also special trade agree
ments and a constant improvement in the quality of the tobacco
leaf, are the reason for the favorable position of these coun
tries on the international market. It is estimated that their
exports will increase farther to play an ever more important
role in the international tobacco trade.
Present estimates indicate that, assuming minimum values,
there will not be any appreciable imbalance between supply and
demand in 1975 (see Table 14).
Assuming maximum values, the projections show that production
exceeds demand by about 250, 000 tons. In this case, it is to be
expected that there will be a slight drop in price, which could
have the effect of both increasing consumption (although the in
fluence of the price on consumption is marginal) and of lowering production in non-competitive areas (underdeveloped countries).
On the same conservative lines,  which are the basis of the pre sent report,  it is estimated that the future price will drop by  a- bout 10%.  Taking  India  as a  basis for flue-cured leaf,  it is as sumed that the price will drop from $ 53. 1 per 100 lb (1962-
1965 average) to S 48. 0 per 100 lb export weight. The Situation in Ethiopia
The climatic and ecological conditions in certain regions of
Ethiopia - including the Awash Valley - appear favorable to
i
the development of cultivation of Virginia tobacco. At pre sent, the cultivated areas are mainly around Robi and in the
Middle Awash Valley (Nora Era, Awora Melka), although they
are still of an experimental nature.- 33 -
Table l_j
exports or SOME developing countries
(thousand tons)
Countries
1961 -63 Average
1964-65 Average
Rhodesia
India
B razil
Philippines
Indone sia
96. 7
5 9. 8
45.0
21.9
13. 8
122. 3
77. 3
57. 6
20. 2
16. 1
Total
Total Developing
Countrie s
WORLD TOTAL (a)
237.2
329. 6
833.2
293. 5
383. 9
890. 5
(a) Excluding Mainland China,
Source : Agricultural Commodities - Projections for 1975 and 1985- FAO.4
A
I
(
FTOBACCO: PRODUCTION, CONSUMPTION AND NET IMPORT BALANCES OF LEAF, 1961-63 AVERAGE AND PROJECTIONS FOR 1975, (FARM SALES WEIGHT)
(thou land tuna)
1961-63 Aver*ge
1975 Low
------------------- ——«------------ - — — -------------------------- --- ---------
1975 High
[leerription
Production
Demand
Net Import
Bilan re*
Production 1        Demand
Net Import
Balance*
Production
Demand
r
Net Import
BalAnco *
Developed Countries Centrally Planned Countries Developing Countries
WORLD TOTAL (excluding M .si ril a nd China)
1.663, 1
351. i
1. 4IB 0
3.452, 4
1.815 8
390, 3
1,190 4
152 7
39. 0
-247, 6
2J96 5
-55 9
1,977. 5
650 0
2. 075, 8
4, 703 1
Z, 14B. t
614 I
1 , 80S, 1
371, 1
-35, 7
-267 7
2.265. 7
726 0
2, 343. 7
2.442. 6
657. 6
1,982. 1
176. 9
-7G 1
-161. 6
4.771. 0
67. 7
5. 337 4
5.092-3
| -2S5 t
4
Source; Agricultural Commoditise - FrojectioniiL>r 1975 and 1985 - FAO5
4
A
I- 35 -
ln  Ethiopia, tobacco a State Monopoly. =o that cultivation, I.
'ontcollea and production is purchased by the Monopoly at fixed prices, depending on quality and grade.
Acebrdmg to data provided by the Monopoly, in the 1967-1968 season about 200 tons of "Virginian" tobacco were Placed as dried leave, (first drying), at the following price. (in Eth $ per kg); 1st quality, 2, 20; 2nd quality. 1.90; 3rd quality, 1. 4th quality, 1.00; Sth quality. 0. 50; and 6th quality, 0,30.
Taking account of the quantitative distribution of the grades (over 50% of all production is accounted for by the first three grades), it has been calculated that the average weighted price of tobacco paid to growers in the Awash Valley by the Monopoly was J. 30 Eth. S/kg in 1967-1968.
The Monopoly intervenes in various ways to support and en courage production: distribution oi selected seeds to growers, free or at reduced prices, particularly to small growers [who are obliged to deliver green leaf instead of dried leaves), tech nical assistance, etc.
In Ethiopia, the level of domestic tobacco consumption is still very low. Potential demand, on the other hand, should be con sidered much higher (l). In 1967-1968, the total domestic con sumption of tobacco (dry leaves equivalent) is reported to be a - bout 300 tons. Imports to supplement production (of dry leaves and processed products, such as cigarettes, cigars, etc. ) come from the US (the highest qualities). Canada. Malawi. Korea and a few other countries.
Due to the increased supply and an estimated more widespread distribution of tobacco manufactured within the country, it has been calculated that domestic consumption could increase over the next few years at an annual rate of 15-20%, exceeding 500 tons in 1971 -1972.
(1) The real value of the income-elasticity in this sector of consumption is difficult to pinpoint. Estimates of future consumption are based on reference data provided by the Monopoly Administration. 
,
Z7M- 36 -
limitation.
The mechanics of marketing the new crop, however, require a
ally, three marketing channels on the world trade:
a)      direct buying from consuming countries in developed or developing countries, based on price of supply^ continuance of the source of supply, quality of supply;
b)      baying by trade houses in London, Amsterdam and Bremen, based partly on price and quality considerations and partly on the possibility of selling merchandise against tobacco;
c)      bilateral agreements between Governments.
The Ethiopian Tobacco Monopoly is already exploring avvnur- (a) above; work on channels (b) and (c) should start well in advance of the first year of production at Melka Sadi-Amibara. First reactions to Ethiopian tobacco samples sent to Japan and Italy are reportedly good. Further tests, requested of the
Italian Tobacco Monopoly, have again proved quite satisfactory. It appears that the Virginia Tobacco now grown in the Valley is ideally suited for Virginia Type cigarettes, as it requires an ad dition of a modest percentage of other tobaccos for taste and color qualities. Nicotine content is not yet low (1. 3%), but this is due to currceur ntr ceul ntt civaulttiion nr     vation pr   actio. actices. On the whole, the out-' 1 11The Ethiopian Monopoly Virginia Tobacco classification fo - lows closely that used by the Italian Monopoly, and agrees with most classifications of other producing countries. Its buying prices for untied Leaves, when increased by the cost of further processing for reaching the export grade, are comparable to the Indian flue-cured, and the resulting ex port prices - for comparable qualities - should be similar . However, and for the sake of prudence, average ex-fa rm prices for untied tobacco have been kept for the first 10 years of production at the low levels experienced in 196*- 1968, namely Eth.$130/ql (corresponding to US$ 24 1001b at the farm or to US $ 34/100 lb, export weight). Such low levels were due to particularly Low quality (it was only the second year of cultivation)* For the rust of the life of the project, the ex-farm price has been assumed at Eth.$ l90/ql (or US $ 34/l 00 lb at the farm or US $ 48/1 00 lb. export weight).
Furthermore, as already commented on above, in crop ping pattern B - which is heavily tobacco based - for the first 1 0 years tobacco cultivation has not been pushed to its limits but has been kept within a more prudent 90% of the double cropped area. Only in the ensuing years has full tobacco cultivation been assumed, The lower level of to bacco growing during the first period was adopted - inter ali* - in order to take account of presently unforeseeable difficulties in the Tobacco Monopoly's organizational ef fort.
Outside the Awash Area, there are no known plans or pro jects for growing Virginia Tobacco. In the rest of the Awash Area, expansion of cultivation could not be ruled out In any case; the possible output from the existing irriga tion areas in the Awash basin would not he large enough to endanger the world market position of the output of Melka Sadi -Ami bar a.(
F- 33
4. 7
OIL SLEDS
The World Market Situation for_Fa£^_^d_Oih
World output of fats and oils probably reached 3 7 million 
tons in 1967. In the last 10-15 years the rate ^crCaSC
has been higher than the rate of population growth: tlw'Ciore
per-capita consumption - at present between 10 and 11 Kg/
year - has increased*
Output rose more markedly in advanced countries (particu 
larly the US. the sole exporter) and centrally-planned coun
tries. Developing countries are still net exporters# but the
volume of their exports appears to be more or less station
ary (1).
Vegetable oils represent 85-90% of total world consumption 
of fats and oils. Pride of place is held by soy.i oi I a, world 
trade in which appears to be expanding considerably. Trade
in and consumption of groundnut and c o<- omit oi Is are also 
increasing, but at a slower rate, while sesame, cottonseed 
and olive oils are more or less stationary. Sun fl ower s e ed 
oils have of recent years grown more important on the world 
market, thanks to the cultivation advances in centrally-plan -
ned countries, particularly the USSR.
An analysis of the prices and stocks of fats and oils over the
past 10 years brings out oscillations of some note in the
short-term period. Over the medium and long term it may. 
however, be stated that the direction of prices for the indi
vidual products has not varied from that represexited by th** 
general price trend.
(1)     Those       of       NiReria,       Senegal,       the       Philipp,neS|           Sudan. Malaysia       and       certain       South       American       countries       are increasing.
iI
-A.- 39 -
+
Medium and  long-term prospects for the market in  fats and oils,  according  to  an  average assumption  (1),  would  lead  to partial changes of trend compared with the past:
a rate of increase in world production higher than the rate
of population growth (further rise in per-capita conaump-
tion);
an increase in developing countries share, especially 
in the sector of vegetable oils and particularly soya, 
groundnut and sunflower oils;
world prices of oilseeds and of fats and oils tending on 
the whole to fall until 1972/1973 (2).
4  7. 2 The Situation in Ethiopia
Over 700, 000 ha are at present under oil seeds, to which should 
be added 60, 000 ha of cotton, with a total output of some 41 0,000 
tons of seeds (Table 15). Over half is constituted by niger seeds
(neug)* Following in order of volume produced arc: linseed, 
sesame, sunflower seeds, groundnuts, cotton seeds, castorbeans, 
rapeseeds and a few others of minor importance. In the past
ten years, production has risen at an average annual rate of a-
bout 3%, The greater part of the seeds (practically all the neug)
grows in non-irrigated areas or areas partially watered by dif
ferent systems.
(1)          See      also      FAO      "Monthly      Bulletin      of      Agricultural      Economics and       Statistics”,       Volume       17,       March       1968,       and       "Agricultural Commodities - Projections for 1975 and 1985", Volume II.
(2)     For groundnuts, linseed, acaba, copra, palm oil, ground nut oil, coconut oil, linseed oil, an annual drop of 3% be tween 1967 and 1 973 has been estimated.1
*SOWN AREA PRODUCTION AND AVERAGE YIELDS QF QIHEUMJN                ETHIOPIA 1962/61-I *»66/6J
CHI Sv.«■
I ft 1/6 J
Product! <hi
(rh*M4t- t |
I *164/65
1 ft5/64>
Area
<lhouv H*
4
Production
(ihflrUV, 0
Ylild
rql/jLMj
Arts
(Ihoua. he J
•Vcidac lion
(thQMi. tj
Yield
llL/h* I
Area
IthauB. ha)
Producllon
(thoug. 0
ruu
I %»/6? Production
N*ug
■Lin seed
Caitar
Greuiwlnuia
Seaun«
Cnitou aeed
R»p*a«wd
Sirti La v < r
T ft* J
150. Q                ZIG- D                 6. 0                JM, 0
I 04. a
52. -3                  5. a
IC*. 0
m. v
I UH. 1
IQ.i
Area (thoiia,
iti, i I ll. ft
YloLd
hXoua. I)
Source: oUlclil |HjUica & usa; AV A
!- 41 -
As an effect of the progressive increase in domestic demand, especially of industrial oil plants, the surpluses earmarked for export have declined constantly over the past four year«,sothal tht development of oilseed crops is one of the aims of the Govern ment's agricultural policy (1).
Last season, of the 410. 000 tons of oilseeds produced, 21.000 tons were used as reproducing seed, as direct feed (2) and for other similar uses; 57, 000 tons were exported and the remaining 332,000 tons processed into oils (see Table 16),
At present, less than 20% of the oils are produced by a dozen 
oil plants, using processes which are not wholly rational. The remaining oils are obtained using family or cottage systems, on the farms themselves and in smaller centers. It is to be noted 
that the latter types of oil are still preferred by consumers, 
due both to their better taste and to the lower price.
Cakes are practically all exported, Holland continues to be the chief purchasing country (about 22. 000 of the 32j 000 tons in 1967), followed by Germany and other West European countries. 
Quotations for the cakes remained remunerative, especially due
to the high residual oil content, and the small traces of chemical substances (3)+
Tn Ethiopia the pcr-capita consumption of edible vegetable oils has increased significantly over the last few years. In 1967 
this was estimated as being 4.3 kg/year, against 3.5 kg in about 1960.
(1)     In 1963. exports touched their highest level, with 85,000 tons Ln 1964, 76, 000 tons were exported; in 1965, 67, 000 tons; in 1966, 54, O00 tons and 1967, 58, 000 tons. The value of oilseed exports dropped during the same period, from I 3 to 8% of total exports.
(2)     About 4, 000 tons of sesame and 3, 000 tons of groundnuts.
(3)     This because the most widely used process of oil produc tion is simple crushing, without solvents. For this reason foreign buyers, before distributing the cakes as animal feed recover a considerable part of the oils by solvents.^4-
- TITER OF OIL-SEEDS. 1967/68 
(thousands of metric tons)
Oil-Seeds
Output
(Ave rage
1962-66)
Output
1967/68
Estimate
Waste, Seeds and
F cod
Exported
Seeds
Processed
Seeds
Extraction
Rate
on             ' Produced
(l)
Neug
Linseed
Castor
Groundnuts
Sesame
Cottonseed
Rapt; seed
Sunflower
Total
220. 0
55 0
10. 6
17. 5
32. 0
9. 0
5. 3
27. 4
230
60
12
20
36
16
6
30
9. 2
2. I
0. 3
5. 0
5. 0
0. 3
0. 2
o. 9
8. ft
9. 7
1. 9
1. 6
19. 8
11. 2
4. 2
0. 2
212 0
48. 2
9. 8
15, 4
IL 2
4. 5
1. 6
28. 9
35
27
40
27
42
15
32
27
74. 2
1 3. 0
3. 8
4. 2
4. 7
0. 7
0. 5
7. 8
376. 8
410
21. 0
57. 4
331. 6
X
108. 9 (a)
(1)               Mainly crude oil (not refined)
(a)               Of which about 4. 9 for non food uses (castor oil and a few linseed oil).
Source:       Ministries       of       Agriculture,       Planning       and       Development       -       Awash       Valley       Authority       special research.
Table 16/I
I
•-*- 43 -
I 7 3 Projections of Domestic Demand for Vegetable Oils
Projections have oeen based on in increase in per-capita con sumption according to an income-elasticity of 0. 8 and a type of logarithmic function, It has not been thought necessary to take
any price-elasticity into consideration* even if - as noted in the foregoing - world prices of fats and oils are trending downwards. Jn fact, it is probable that domestic prices of vegetable oils will
not undergo any substantial variations compared with the general direction of prices (l). It has also been assumed there will be a certain increase in the demand for non-edible oils (castor oil, linseed for industrial uses, waste oils for soap factories, etc,)^).
The increase in per-capita consumption of vegetable oils for edible uses has therefore been estimated, from the present (1967) figure 4* 3 kg to 5, 0 kg in I 975. to over 6. 0 kg in 1 985 and to 7. 3 in 1995. Considering also the demand for oils for non-food uses, 
a total domestic demand for vegetable oils of over 147. 000 tons would be obtained in 1975. and of over 330, 000 tons in 1 995. Moreover, taking account of the direct consumption of seeds for food uses, of the re-using of seeds for reproduction and of wastes* the corresponding demand for oil seeds would be 443, 000 tons in 
1975 and 970. 000 tons in 1995 (Table 17).
No firm projection concerning supply can be advanced at this stage, for the medium and long run. However,the room for expansion seems very large and it can be concluded* at least prclimina rly, that cropping patterns in the Project Area can without doubt include those oil seeds which, within their profi tability limits, are able to reinforce supply,
(1)     This assumption derives from the fact that industrial oil plants will tend to limit their sale prices, in order to ex tend the radius of marketing in competition with lower priced oils produced on a cottage-industry basis.
(2)     One laundry soap plant is already in construction, with a capacity of 7. 000 tons/year (destined largely to supplant imports). Over I, 000 tons of vegetable oils will be used* in addition to animal tallow.Table 3 7
„ . DEMAND OF OIL SEEI3S AND SEED OH,S, 1967 AND PROJECTIONS TOR 1975. 198* AND 199* SUPP^" A
(■hovisanfti of metric tqn*j
polcrip l
A 4an
1967
(adjust.)
1975
Annual Raf« i
of Gto*th
1967-75
19B5
—
Anneal Rats a of Growth
1975-15
J 995
Artnua 1 ft# ba
©£ Growth
1185-95
Ajinukt AjlIss
O,f Growth
1967-95
4.1 Q. 0
17, 0
6, 0
59, o
129. 0
105. 0
(LOO. □)
(S. 0)
0. 3
416
25
14«
4.6-
719
Ji
110
2 5
1.009
41
Z
2. 5
3 3
WaK* and seeds
Isr fc-sd -J.se ■ (I)
■ arpluB for exports
(iiHttdl)
Processed
Dilfl produced (2)
. edible cil>
. ficn rr?kble Olli (3)
Smtwrf
. oil eteda (4)
- vegetable adlhla oil a                                    C. 5
- wage table nofi edible otle
Donuftlc demand
- Oil aetdi lor luKHi Uirift)
- vsgetabieic-dibif. oils (SJi
■ vegetable nai edible oils ^ftaUAopdent nal domes-
0. I
6. 0
100. 6
5. 1
ilLllcn^nd       ,,   ,  ,
o[ ail    >H  (t
PeT-<^U ''onmmphafi  f
u
pH,            (k./T.iz) ^J,Ql™4*tinu1 (thou mnd s)
337, D
4. 210
23.500
8.9
140. 0
7. 5
UK*
5.010
27.970
5.0
4.2
5. 0
Kl
2. 0
2.2
14. £
210. 0
11.*
JdL_2
6. 050
34. 770
4. M
4. 1
4.5
KJ
1.9
2. 2
21.4
J15. 0
It. 0
910, Q
7.250
43. 220
4. 2
4. 1
4. 5
KI
1-9
2. 2
4e 7
4. 1
4. 6
KI
1-9
2. 2
(II fa (II (<!' (5J
eluding ccnfaetioner y a««a.
I" "tma
Df Cjud
c *« Br ell oth
^Ming lE#d
■ cili,
fir olka for industrial naan (mainly for eoap)
■ for reproduction.
lr «htdj
Thi _
°8 oil* frotn Imported aacdi
r
^pTQi
*
ro^l|l"*  *** *<  rate of extraction incraafling in ths projection period from J2 Co 35£ on Account of
dre
easing rnelhod i (including uie o! solvents].
per-c*feu GDP retss of growth 2. 5 from I 967 io I 975 
■ 7 fTo1* I 985 to 1995.
■uJTled IncDtne-eliatBcity: 0 A (logarithmic fuHctionl
2, 6 from 1 975 to I 985:*nd
lX°J*tCUon* of n
^n edible vegetable oils demand have been estimated taking account of development of a  p
oi
^■ult oitlrriaten arid elaboration cm IB* ba ail ®f official data...a
i
I- 45 -
4- 7, 4
Among different oil seeds, groundnuts appear to be most in keeping with present and future prospects of the domestic and foreign market.
Tlie Groundnut Market
The major exporting countries are all African: Nigeria, Senegal, Niger and Sudan (over 40% entering world trade), The major importers are at present EEC countries and the UK.
CIF prices, European port, of shelled groundnuts from Nigeria* after hitting a peak in 1965 (about 210 US $/long ton) dropped co 
182 US S in 1967. The trend is to decrease even more, and it
has beer, assumed that prices should reach I 72 US S within 5 years (1973). Concerning customs tariffs, it should be noted that, with the adoption of rhe common EEC external tariff, cer tain preferential agreements with associate African countries (Senegal, Niger) have been abolished. Nigeria nevertheless con tinues to benefit from special treatment under the Commonwealth preference. The competitive position of African exporting coun tries not enjoying any particular facilities - including Ethiopia and Sudan - now appears to be improved (1).
On the basis of the world prices quoted above and of the relevant cost elements (transport, etc.), it would be necessary to produce groundnuts at present at an average ex-farm price of about 240 Eth. S/ton (shelled), corresponding to a price CIF European ports of 180 US $/metric ton(unshelled). Bearing in mind the trend to a further decrease in this last quotation, in 1972/1973 the ex-farm price could be 315-320 Eth. $ ton (220-225 Fjth.fyfon, unshelled).
(I) Groundnut seeds whatever their original re exempt from duty in EEC countries; they are subject to a 10% duty in the UK (exemption for Commonwealth countries): Japan applies a 20% duty only on seeds for confectionery pur poses.t
J
I- 46 -
Concerning domestic market possibilities, it is to be noted that the great majority of present oil-producing plants use neug and cotton seed, both because of their low price, and because consu- mers' tastes are not yet accustomed to better oils. However,it
is foreseen that there will be a relatively rapid increase in the demand for vegetable ghee: in this case groundnuts would con stitute one of the most convenient inputs, if regular supply can be guaranteed, For the present report, the ex-farm price for exports has been taken.
4.7.5 Cotton S^eds (I )
At present, cotton seeds, the production of which is increasing rapidly in relation to the development of cotton cultivation (in 1967/1968 approx, 16. 000 tons); are mainly exported (Japan, Lebanon, United Kingdom, etc.) and the remainder sent to the oil plants. With the envisaged increase in supplies, both uses could be developed (2),
The import price of cotton seeds CIF European port is 88 US $/ long ton, corresponding to 175* 180 Eth. $/metric ton FOB Djibouti or Assab. The price ex-Ethiopian ginnery should be between 1 35 and 140 Eth. $/ton to be competitive.
At present, the ginnera obtain prices below this level (125-130 Eth. $/ton), so there is already a margin to meet the likely reductions in the world price, over the medium term (for 1972/73, 83 US $ per long ton CIF. equal to 122-126 Eth. 5/ton ex-gin). In the chief importing countries, including Japan, cotton seeds, ure exempt from duty. To Japan, freight undergoes a 15*% in crease (Eth. $ 49 instead of 32 per ton), while the CIF price is
no different from that ruling in European ports. This circum stance indicates that, with the reopening of the Suez Canal, the rrtajor part of Ethiopian cotton seeds will be able to be placed more profitably in Europe, as occurred prior to the closure of the Canal.
b) Valid In the event ol a cruflhlpg jilint Using flat in the area,
(2) At the time Qf the fle’d work bf ch* Conflultinta i h«W Q11
--s-ish a. capacity of >ome
TZ.DQO tone/year at mixed oils > neuj., cottcsn. f r ouM nut fl. a er. - wan underway, He If of thee* oile were to b# pracrteed into vegetable ghee*. Thera i.e a L*q a furojeet for another oik pUnl which would be b*»ed wholly on cotton »eed«.- 47 -
cereals
4. K
4. R. 1 General
In  1966-1967,  according  to  the latest estimates,  Ethiopia produced over 5.4  million  tons of cereals.  The most common  is tcff.follow ed  by  barley,  maize,  wheat and  other coarse grains such  as millet sorghum, Hurrah, etc. (Table 18).
A considerable part of the crops is grown on the high plateaux 
under rainfed conditions. Latterly, crops have been planted on 
irrigated lands (maize, wheat, barley).
Between I 952-I 956 (average) and 1967. domestic production de
veloped at a rate of between 2. 2 and 2. 5%. or more than the rate
of population growth.
This practically  satisfies domestic demand.  Cereal-based  im ports (flour,  food  pastes,,  biscuits,  etc,) at present account for 1-2% of this demand.
Per-capita consumption - expressed in terms of flour, net of waste, seeds and thr very modest proportions of cereals for other uses: barley for beer, distilling, animal feed - exceeds
1 57 kg/year and its income elasticity appears low. Over the medium term there will probably be a situation close to satura tion, following the expected expansion of consumption of foods based on proteins and fats (meat, milk, eggs, vegetable-oils, etc. ) to the detriment of foods based on carbohydrates.
As already slated in the introductory notes, cereal consumption, especially in the rural areas, occurs Largely on the farms. Some marketing, at more controlled prices, occurs in the urban cen ters, especially since the establishment of the Grains Corpora tion and the setting up of various silos.
^Tiile teff is still the most common cereal, over recent years there has been a relatively quicker increase in the consumption of maize and wheat.PRODUCTION OF CEREALS, 1948- 1952 (AVERAGE), 1952-1956 (AVERAGE) AND 19621967 
(thousands of metric tons)
Crops
—
1948/52 (Average)
1952/56 jAverngit)
1962
1963
---- —------ T
1964
----------------
r
1
1965  |
|
1967
Wheat
Barley
Maize
Tuff and olher
coarse grains (1)
Total
179
623
] 60
1, 714
2, 676
1B4
626
345
1, 873
1. 028
2 60
760
682
2,905 4, 607
266
774
6?5
2,95?
4, 694
282
785
720
3, 047
4, 834
292
805
72 7
3, 032
4, 856
315
822
756
3,097
4,990
330
840
770
3, 150
5,090
(1)             Millet, sorghum, darrah, etc.
Source: FAO; Ministries of Agriculture, Planning and Development, Most of these data were recently modified. In 1967 the wheat output was reported to be 740,000 tons and the total output of cereals 5, 420, 000 tons.
C
o
T-
_ _ -
Table IJ*/
r- 49 -
or
p   projections of domestic cereal demand on the whole, 
an income-elasticity of 0.4 has been assumed with per-capita
consumption tending toward saturation and, over the longer
term, to decrease (type of function selected: log-log inverse
On the basis of these assumptions, the annual per-capita con 
sumption should rise to just over 164 kg in terms of flour in 
19 75. and to 170 kg in 19B5. reaching saturation in the 3ub-
aequent period. In 1995 a per-capita consumption of 168.5 kg 
has been assumed (Table 16),
To  meet these consumption  levels,  domestic production  of cere als should  rise from the present 5.4  million  tone to  6.  H million tons in  1975  (annual rate of increase 2.8%),  to  8.  7  million  tons in 1985 (2.6%), ^d to 10. 7 in 1995 (2. I %).
Official projections on cereal production in Ethiopia, foresee
an annual growth rate in output between 1967 and 19 72 of about 2.9%. It appears reasonable to assume that, in the long run, this rate of growth will decline somewhat (2.5%). Since domes tic consumption is expected to rise at a lower rate (2.45%), an export surplus is likely to develop towards the 1990's (see
Table 19).
4.8*2 The Maize Market
The maize produced in Ethiopia, in areas generally not irri
gated, is almost all consumed in the areas of production, partly because the cost of transport forms a considerable part of the
final price, The ex-farm price has oscillated between 100 and 120 Eth. $/ton.
On the international market, taking the yellow American No. 3 type as the basis, quotations rose until 1966 and thereafter feLi
In 1967 the average price was about 64 US$/long ton CIF London and it is estimated the price will go on falling until 1969, to be
come stabilized at a level of about 58 US$ per long ton. *
In Ethiopia in 1963/1965, the per-capita consumption of
was 32,5 kg/year, in 1967 it was 32.8 kg/year. Accord!
maize
income-elasticity of 0.4 and an inverse l    function 
ng to
Og
consumption should rise to about 34 kg in 1972
this^ipPLy anbof.x**'0"
CEREALS. 1967 AND PROJECTIONS
{rhoueandi of mstriic tana}
of Cr^th
I9B$-’S
ArtFiu^l
Hatt*
o f Gro*t*
19&T-95
1975
r^.cripHon
1967
(Adju-t-d)
Annual
JLaltfl
□I Growth 1,47-TS
1985
Annual
RalO
o f Grffwtfa
3975-65
B.659
2. 5
5, +00
6. 7AB
2. 9
2. 5
production In Hour
*^ui >•*!■* rtt ' "I
Tmporii|nour
5.905
3.
29
10
1D
Surplus for *«po* * ^ ‘
I>on-i»»tic Eoniuinpti
n
3
4,613
13
-
-
-
J. 700
<600
2. 7?
5.915
2. 55
157. 4
164. 4
0 55
170. 1
0. 35
Total    demand
far ceraalr
f*apiii Mtion (thcxufindi)
5.W
lb 500
6,760
27.970
1. 75
0. 7D0
34., 770
2. 55
2. 2
.
21
<n            .. .................................. *nd h<M> (004 «o"»'imPoon
-  A..um.d ,.^G P ..U. " — 
D
-  *num«d lncoma0. < (lag-log ln
■umptiaq: 171. 6 in I 9BB)
I<aleaninJt ■ ■ti main ■ and elabcraticna.
I r>S 2 iirom H15to 1HJ.
l.v.t of con-I
I
IThe maize market is slightly different from the overall cereal market, a* consumption is likely to grow faster than production, thus creating a small deficit to he supplemented by imports (see
T itle 20). Any new production in the Melka Sadi-Amibara area, therefore. may well be directed to satisfying domestic demand. Recently, the Grain Corporation has given a warning about an undue accumulation of maize storks. Since it is expected that
the area may produce around 20. 000 tons of maize, of which about one half would be consumed in the area itself (in the form of maize or of other cereals from the Highlands exchanged for maize), even though no marketing problems would appear to exist in the sale of the surplus output at least over the long run and for overall quan tities, it is not unlikely that surpluses may from time to time appear. In these conditions, since maize produced in the Melka Sadi-Amibara area would bear the same prices - delivered to Addis Ababa - as the maize produced in the Highlands, and since it would be of substantially better quality, the Project Area would win in the scramble and replace traditional producers. Such an occurrence is likely to appear again and again in the future devel opment of new projects in agriculture, and is a constant feature
of the effects of improved technology in all countries. In any case, a possible export market, yet to be explored, exists in Saudi Arabia. Its size is not large at present (5,000 tons), but
it could represent an interesting outlet for any surplus that may accumulate for the Grain Corporation.
Prices to be imputed to maize produced and consumed in the area should equal the price of maize produced elsewhere in Ethiopia and delivered to the area. WTiolesale prices at Addis Ababa oscillate betw-een Eth. $ L30-140 per ton. for a lower quality grade than that produced in the area. Assuming that tastes will not differentiate among maize qualities, the ex-
farm price in the area should average Eth S 155 per ton
t Or Sdles to the Addis Ababa market, the ex-farm price is of course, lower and should average Eth* $ 115 per ton. Thus
the average ex-farm price of maize can be taken at Eth. $ 13 5 P   ton. since about one-half of total output would be sold on th,. Addis Ababa market.
er.SVPPLy AND DEMAND OF MAIZE. 1967 AND PROJECTIONS FOR 1975. 1985 AND 1995 (thousands of metric tons)
Descritpion
1967 
(Adjusted)
1975
Rates of
Growth
1967-75
1985
Rates of
Growth
1975-85
“1 1995
Rates of Growth
1985-95
Rates of 1 Growth  ' 1967-95
Production
I m ports
Surplus for exports
Domestic demand 
(in terms of grains)
Per-capila consumption
(1) (kg/year)
Population (thousands)
770
► »-
■r
770
32. H
23, 500
976
-
a
968
34. 6
27, 970
3. 0
-
-
2. 9
0. 7
2. 2
1. 249
16
-
1. 265
36. 4 34, 770
2. 5
-
-
2. 7
0. 5
2. 2
1,599
31
-
l, 630
37. 7
43, 220
2. 5
-
-
2. 6
0. 35
2. 2
2. 6
-
-
2. 7
0. 5
2. 2
(l)
For the purpose of the present preliminary research, the consumption - in terms of grain and not of flour - is assumed to be only fur food uses.
Notes:              - Assumed pcr-capit^GDP rates of growth: 2. 5 from 1967 to 1975; 2. 6 from 1975 to 1985; and 2. 7 from 1985 to 1995.
- Assumed income-elasticity: 0. 4 (log-log-inverse function). Source:            Italconsult estimates and elaborations.
Tabic 20i4. 9
PULSES
p L es growing is widespread throughout Ethiopia, especially on 
u5
the high plateaux under rainfed conditions. In I 967, output was estimated to be about 600, 000 tons Over the last decade, out
put is reported to have increased more ar lens parallel with population growth, The most common pulses are chickpeas (28% of the total), peas (19%). horse beans (1 9%h lentils (16%) ,md haricot beans (1 1 %). The growing of horse beans and chick peas has increased at a higher than average rate (Table 2l)+
As already noted for cereals, the majority of the pulses are con sumed on the farms. Barely 10% of the pulses are exported (60-
70, 000 tons). Horse beans figure in first place, with almost
Z5, 000 tone in 1 967. mainly destined to Arab Countries and Japan. Next come haricot beans (i 8, 000 tons), sold especially in Europe (1 0, 000 tons to West Germany alone); lentils (l 5, 000 tons) export - cd also to Europe (especially the UK), Ceylon and the Middle East; and chickpeas (about 11. 000 tons), mainly for Ceylon. The ex
port of other types of pulses is negligible.
World trade in these products increased at annual rates exceeding considerably those of population growth. World prices have been fairly stable. Demand for Ethiopian pulses is still high. It is estimated in this respect that, over the medium and long term, 
the amount of surpluses will not rise substantially.
Tn 1967 the per-capita consumption of pulses is estimated to have been about 22 kg/year. According to a fairly low income - elasticit y (0. 4. also in conformity with the FAO studies) and a semi-logarith - rnic type function, this Level should rise to just over 23 kg in 1975 and to 26 kg in 1995. corresponding to a total domestic demand of 650, 000 and 1, 130, 000 tons respectively (Table 22).
In the long run, domestic output is likely to rise at approximately the same rate as domestic demand, leaving a constant export sur plus (see Table 22). Any production of pulses from the Melka Sadi Amibara area over and above the Area own consumption, wouldI
I
IPRODUCTION OF PULSES, 1948-52 (AV. ), 1952-56 (AV. ) AND 1962-67 (thousands of tons dry weight)
t
----------------------------------------
Pulses
1948-52 Average)
1952-56 (Ave rage)
1962
1963
1964
1965
-------------- r
1966
1967
Haricot beans
Peas
Chickpeas
Horse beans
Lenti I s
Others (1)
Total
69
1 34
154
96
71
6
72
J 50
1 55
100
75
a
61
1 12
162
101
91
8
62
113
165
103
93
7
63
116
169
105
95
7
6.3
115
1 68
113
96
6
65
1 18
172
1 16
9ft
6
67
120
175
118
100
5
530
560
535
54 3
555
561
575
585
(1)             Unspecified pulses excluded.
Source: FAO, Ministries of Agriculture, Planning and Development,JSUPPLY AND DEMAND OF PULSES, 1967 AND PROJECTIONS FOR 197^ 1985 AND 1995 (thou a Andi of metric tom, dry weight)
De scripti on
1967
1975
Annual
Rates of
Growth
1967-75
1935
Annual
Rates of
Growth
1975-05
1995
Annual
Rates of
Growth
1985-95
Annual        i Rates of
Growth i 1967-95
Product! on
Imports
Surplus for exports
Domestic demand
Pcr-capita         consumption (kg/year)
Population (thousands)
505
70
515
21. 9
23,500
7 59
-
109
650
2 3. 2
27.970
3. 3
-
-
2. 95
0 75
2. 2
972
-
112
860
24. 7
34,770
2. 5
-
-
2. 8
0. 6
2. 2
1,244
-
114
1, 130
26. 1
43.220
2. 5
-
2 8
-
-
2. 75
0. 55
2. 2
-
2. 0
0. 6
2 2
Notes; Assumed per-capita GDP rates of growth: 2. 5 from 1967 to 1975. 2. 6 from 1975 to 1935, and 2. 7 from 198$ to 1995.
Assumed income-elasticity: 0. 3 (semt-logarithmic function).
Source; Italconsult estimates and elaborations^
■ •. -i —ft*-.-I
■w ■
■ ■■■           ,.
Table Zi1
I- 56 -
rfore have to be marketed outside Ethiopia. However, for elSCins indicated elsewhere in this report, cultivation of beans
docs not app*ar to b* aB remunerative an that of other crops (i).
The present export flow is based on the following ex-farm prices: $ 230-250 for haricot beans; Eth.S 120-130 for horse beans;
Eth $ 200-220 for lentils; Eth.S 160-170 for chickpeas; and 
Eth.S I 45-160 for dry peas.
In general, pulses traded inside the country are purchased ex-
farm at average prices about equal to those destined for foreign markets, for the same qualities. This applies especially to the Addis Ababa region, where with the setting up of the Grains Cor poration, prices appear to be relatively more stable than in the
past.
On the domestic market,however, there exists a greater diver si -
i
fication of types and therefore of prices. In general, more ordi nary qualities of pulses are consumed domestically than are ex ported. In this case the ex-farm prices are also considerably 
lower +
The consumption of pulses by the population based on the area when full production is attained (50-70.000 inhabitants) has
been estimated at around I. 500 tons/year.
In the case output in the Project Area does not exceed the area’s consumption, an ex-farm price of Eth. $ 250/ton has been assumed cor re 6 ponding to the price to be paid for beans of comparable quality imported from Addis Ababa.
(1) Compnt*ifr0n with mat**:
Mai t ■;
Cultivation com (I46S) per he
Output per ha (average 1 it 1 0 y*ari)
z 241 Eth. S
a                      10 ql
Price per q|
>3
115  Eth. (
Total revenue
405
Eth. $
Revenue-culcivaEiDri cqiu
—
164
Eth. $
E"* a n ■ r
Cultivation CQiti (1
per ha
=
224
Eth. $
Output per ha (average let JO yvtr«)
PricC per q|
s                    16  qi
ST 210 Eth. s
Total revrnue
■
ifee
Eth, 1
R*v#nue-cultivation com
X
144
Eth. $
C*B
j  twol/hi
n
pfl, 50$ of output fold Ln fcht ama * FElarkeE.
11
4FRL ITS
General
According to official statistics fruit production in Ethiopia is reported to have reached 72, 000 tons in 1967. with an annual rate of increase of almost 5% since 1961. Moreover, two-
thirds of the production is now accounted for by bananas whose cultivation, especially in Ethiopia, has extended rapidly during the last few ycar9. The other fruits are paupaws. citrus crops, melons. various kinds of tropical crops- beside small quantities of table grapes- strawberries and other temperate climate fruit widely grown in Eritrea.
Imports amounted to more than 6, 000 tons (weight expressed in terms of fresh fruit) in 1967, including fresh, dried and various ly conserved fruits (dates, bananas, oranges, apples, raisins, jams and juices).
Exports - more than 20, 000 tons in I 96 7 - consisted mostly of bananas (l 7. 500 tons), the rest being citrus crops (mainly lemons) and various other kinds of fruit.
Domestic demand projections have been estimated assuming an income-elasticity of 0. 7 and according to a semi-logarithmic function which pre supposes ad rop in this coefficient, without reaching, however, a saturation point. A per-capita consump tion of 2. 8 kg is thus obtained in I 975 and one of 3. 4 in I 995, corresponding to levels of domestic demand of about 80, 000 and 149, 000 tons respectively (Table 23). These quantities
Are  too small, taking also into account supply from the alterna tive areas (c. g, Eritrea), to consider fruit .is one of the crops to be produced on a large Scale in the Project Area,
Market*       Bananas ■»nd Citrus Ftuil
The     ex-fa
rrn       price     of     bananas     to     enable     them     to     be     competitive
,aS exports in the countries bordering the Red Sea and PersianAJVT> DEMAND OF FHUJTS, I»67 AND PROJECTIONS FOR IM75, 
(metric tons, frrah weight)
14R5 Autro IQqS
1 D'"rtpu“
■'-------------- 1967
(adjusted
—
1975
Rates of
Growth
1967-75
1985
Rates of
Growth
1975-85
1995
Rates of
Growth
1985-95
Rates of
Growth |
1967-95 )
Production
Imports
- fresh and dried
nuts
- dried fruits (fresh
equivalent)
- preserved and pro cessed fruits (do. )
Exports (fresh equivj Domestic demand
Per-capita            consump tion (1) (kg/year) Population (thousands)
74, 000
6, 300
(1. 320) (2, 500)
(2, 480) 20, 300
60, 000
2, 55
23, 500
i
79. 7)5
2, 85
27,970
3. 6
1. 4
2. 2
110, 570
3. 18
34,770
3. 3
1. 1
2. 2
149. 110
3. 45
43, 220
3. 0
0. 8
2. 2
3. 3
1. 1
2. 2
(I)
For Lhe purpusa of Che present preliminary research and due to the lack of exhaustive data (lose and waste
between       harvesting       and       consumption,       calculation       of       net       output       for       food       usee,       convnrsioa       factors       into       fresh equivalent, etc. 1 the per*capita consumption is expressed in raw terms.
Note*; - Assumed per-capita GDP rates of growth; 2. 5 from 1967 to 1975; 2. 6 from 1975 to 1985; and 2. 7 from
I9»5 to 1995.
- Assumed income-elasticity: 0. 7 (semi-logarithmic function).
Source; lUlconsult estimates and elaborations.
Table 2 3- 59 -
Gulf is Eth, $ I 50/ton during virtually all the months of the year. ’J'q be able to export bananas to Europe, via the Suez Canal, it wO uld be necessary to produce them at about Eth. $ 120-130/ton, directing the crops towards the quality in demand (which would also enable losses to be reduced) and concentrating the consign- xnents into the winter months (during the summer the demand for bananas drops because supplies of many other kinds of fruit reach the market).
As a result of the closing of the Suez Canal, exports of bananas to European countries, which could be effected at competitive prices, has practically dried up. At present Saudi Arabia is almost the only importing country. This situation, added to the fact that the type of banana grown in Ethiopia is hard to sell in most developed countries, represents a serious obstacle to further cultivation.
Even in the hypothesis of the Canal being open, however, export prospects are uncertain. To bring about a substantial change in the varieties grown and to bring down ex-farm prices to about Eth. $ 120-1 30/ton seems to constitute a practically insurmoun table obstacle (cultivation costs per ton are about Eth. $ 100). Moreover the necessary varieties require further experimenta tion. Finally, the marketing of bananas in the present situation 
of world over-production requires the presence in Ethiopia ot one of the large international banana companies: a very uncertain condition.
The exportation of oranges to European countries in the summer- autumn months was difficult even before the closing of the Canal on account of the growing competition especially from South Africa and  to a lesser extent, from overseas Spanish Territories
t
(Canary Island).
h-foreaver, in comparison with the Awash Area, Eritrea would appear to be on the whole in a more advantageous position for the growing of oranges during the summer months (exploitation °f a number of climatic strips}, In this region, the ex-farm
P ce i  around 100 Eth. $/ton in the months of greatest pro-
ri
s
d uction (November-March) and up to 300 Eth. $/ton during the summer months (July-November). At the present time these Prices make it possible to export to countries bordenng the Red S a and Persian Gulf.
et- 60 -
g
ar
■  the case for bananas and oranges, to the nearest countries, 
but it is that an ex-farm price of between 250 and 280 Eth 5,ton would enable the fruit to be sold in a number of Europe in count rie«. with shipment via the Suez Canal. Large quantities of first qua-
hty mandarines could be sold in this way at CIF prices which would be competitive with those obtained by other countries (the Canary [glands, Italy, Spain and Israel), On the contrary, shipments via
j  would not be profitable, even in the event of air rates being reduced.
The prospects of extending the sale of lemons and gr ipr fruit to abroad appears less likely. In fact the first European markets are already supplied throughout practically the whole year, while the consumption of the second is still relatively small (1).
4J 0. 3 Cone hi s ion s
It has not yet been ascertained whether the production of citrus fruit in the Middle Awash can. in fact, coincide with the dead season for Mediterranean and South Africa producers Thrre
•s, therefore, insufficient evidence for introducing these crops into the cropping pattern* for the Project Area, while the market ing prospects for large productions is quite uncertain.* 61 -
VEGETABLES
4J1
According to available data* about 330. 000 ton* of vegetables were produced in Ethiopia in I 967/1 968 (excluding spices, M gesho". "musa enscte” roots, potatoes, y.imi and other
starchy roots). Between 1961 and 1967, this production devei- oped at an annual rate of increase of 2.5to2,B%. Imports have been estimated at slightly less than J. 000 tons, including pro cessed and canned vegetables, in terms of fresh equivalent. During the last few years, exports have increased amounting, in 196 7 to 1 I -12, 000 tons. About 9-10, 000 tons were exported to Europe (despite the difficulties arising from the closing of
the Suez C anal),the remainder to the Arabian peninsula. Ship ments of fresh vegetables to Europe during the winter months, as already noted for several fruits (bananas, citrus crops) now encounter greater difficulties. However, some exporters - especially Eritreans - are in a position to sell several types of fresh crops in the major European markets, uiing air transport and refrigerated ships.
Ethiopia exports to Europe mainly sweet peppers (64% of the total), eggplants (18%) and green beans and other vegetables (18%). To Arabia go mainly tomatoes and peppers,
a ) European Markets
A complete analysis of the winter vegetable demand in Eu rope is practically impossible, under present conditions, due to the uncertain effects of marketing frozen vegetables on the demand for fresh vegetables. Experience is too recent to provide an indication on the future size of the market for fresh vegetables. In other countries (e, g. the United States) with longer experience it has been shown that fresh vegetables maintain a sizeable share of the mar ket at premium prices throughout the year. However, the applicability of US experience to European conditions still te mains to be tested.After interviews with traders, transport firms, and pro
ducers in Ethiopia and Eritrea; interviews with importers
and firms specialized in the study of agricultural trade in Italy; and a study of available data, it was possible to 
identify the main points which are strategic to a projection 
pf the European market for fresh vegetables in the medium- term. They are:
i)        the income-elasticity of fresh vegetables demand is not very high, and the future size of the winter market will probably be determined by the price borne by winter vegetables;
ii)       if prices of winter vegetables were comparable to those of summer vegetables, urban per-capita consumption in the winter would rise at approximately the same level ae summer consumption, and a logarithmic price elasticity function can be assumed;
iii)      open-air vegetables bear a premium over glass-house vegetables.
The analysis which follows has been based on France, Germany, Italy and the United Kingdom. Other European countries - although important in the aggregate - could not bo investigated individually.
For sweet peppers, European producers drop out of the market in November, Thereafter, sales of imported pro ducts in recent years have averaged some 12, 000 tons, at an average CIF price of Eth. $ 1,52/kg. It may be estimated that, if the CIF price were lowered, the market could grow as follows:
Tons Sold
(Eth. $)- 63 -
Taking account of population growth, income growth and an income-elasticity of 0. 5> at the lower price of the list,the
total market for this product in 1974/(975 would be 40. 000 
tons, if Ethiopia s share in the total remains constant at
the low 1967/1968 level (30‘-u).Ethiopia could export some
J 2» 000 tons. However, it is by no means impossible that Ethiopia's share could rise a great deal. For this product, 
Ethiopia enjovs a natural advantage over its main competitors; Cuba and Canary Islands over the first a shorter transport
time and better overall quality, over the second a fuller pro- duction season, better quality and greater availability of
water. Moreover, the Canary Islands have higher labor and 
input costs and relatively smaller cultivable areas It there' 
fore appears reasonable to assume that other countries will increase their sales at a (probably generous) rate of 10%
per annum (to i 7. ODO tons, from 8500 tons in 1967.68), leaving the remainder to be covered by Ethiopia, or 23,000tons in 197^7^-
For eggplants, cucumbers md squash. European producers enter thr market in March and April (glasshouse products from Holland). Sales of imported produce in recent years have averaged some b0, 000 tons, nt a GIF price of about Eth. $ 1.08/kg. If the CIF price is lowered, the market could grow as follows
Pri.-f kji
(Eth 5)
Tons Sold
1, 08
60.000
. 92
87. 000
. 76
145, 000
64
1 90. 000
faking accuLUH ill iiu'iHiie mil population growth, lhe total market at the niuiinHun prices could reach 2HAW0 tons
by 1974/H75 It Ethiopia's share in the total remains con* 
•U<tt at it* 1967 level (4%), Ethiopia could export some VUOQ tQim by 1974/1975 However. Ethiopia’s share is low mainly biu-ume only Unntrd area-* are it present suit- able for cultivation of these prcnlurts.- 64 -
Since the Melka Sadi-Ami bar a area could grow them in large quantities, the present limitation to output should not con* tinue in the future. Deciding on Ethiopia's possible future share, however* is a difficult task. Ethiopia’s competitors
aro Bulgaria. Spain and the Canary Islands. Some natural advantages exist for Ethiopia (longer growing season, lower labor coltflh but they are difficult to assess with precision 
On the other hand, could rhe competing countries increase their production for export* to Europe at a rate of over 21 % per annum between 1967/1968 and ’ 974/1975 implicit in a new market of 170, 000 tons; this appears an unreasonably high rate. With a rate of 15% per annum, for example* total sales of competing countries would rise from 59, 000 tons in I 967/1 968 to some I 60, 000 tons in I 974/1 975. leaving some 74- 000 tons for Ethiopia
For ojher vegetabIes  the analysis cannot be as detailed as
r
for the products above Taking only few (green beans main ly)* the market could grow from 20. 000 tons in 1967/1968 at a GIF price of Eth, t I. 20/kg, to some 55. 000 tons at a GIF price of Eth. 5 0. 80 kg T iking account of income and papulation growth, the market by 10 74 1975 at the lower price could be as large as 67. 000 tons Ethiopia’s share, 
at present, averages about 5 % By I 974 I 975. the same
share over the larger market would permit sales of at
least some 4. 000 tuns
In conclusion. it the lower prices of the ranges indicated above, the total market tn Europe for Ethiopian vegetables could reach, by 1974. some 100.000 tons under these rather prudent assumptions
These quantities are expressed in weight. net of handling 
and transportation kisses which may be calculated* on average, to be ibou’. 22% of the gross weight. Thus gru^s Wright of ex farm Sales could total some 128.000 tons.
From this total, it is use rm* ar % to subtract present exports U> Europe lor the types of vegetables discussed above [Home
000 huid  nd the prospective production out of new area* 
4
ki the .\wash Valley itself (Nuri Era and Abadtr farms) and in Eritrea (Ghirui a)< The biter ire s si invited to produce1somr ZO.OOO tons by I ??4/l 975. Other producers are likely 
to develop in still other areafl by that time, and these have
been estimated at another 20. 000 tons. Thus, for the Melka
Sadi - Ami ba ra area, the potential market (in gross weight)
i? about 80. 000 tons To be prudent, given the hypothetical
nature of these calculations, it has been assumed that vege
tables will cover only 10% of the irrigated area exploited 
by commercial farms for a total output of between 25 and 
40, 000 tons depending on the area occupied by commercial
farms and on the yield considered.
Production  of vegetables could  be apportioned  among  sweet pepper?i eggplants,  and  other vegetables as follows: 50%, 40% and I 0%.
The relevant weighted average CiF price works out, there fore,. Eth. $ 0. 78/kg. The corresponding ex-farm price depends, to a large extent, on the means erf transportation. Table 24 shows the calculation of the ex-fa rm price accord ing to whether air-cargo, Suez Canal, or Red Sea - Egypt - Mediterranean route a are considered.
Am can be seen, even with the Sues Canal closed, ex-farm prices for vegetables remain it a satisfactory level. With the Suez Canal open, of course, with the same ex-farm price, a considerably larger market could be created, as CIF prices would decrease substantially (l 2%). In this report* the size of such a large market has not been con- side red both because of the uncertain nature of these pro
jections and because of the possibility of the Suez Canal being opened cannot be expressed. at present, in any meaningful terms
The question may arise, at this stage, u to why production Of vegetables for export - having a large and profitable mar ket * has not been pushed more strongly in the pa at by the private Meitur III tact, I he private sector has been active - P^rtlcuUrly In Er itrea wherever water mil entrepreneur-
■’hip were available. The possibility of extending this cul- ri  vat ion hl the Melka Saih - Amibara area becomes reahstic pmclsely because water U available and entrepreneurship 
■eerfli* lu be fur|hcUTIHIIg-- 66 -
calculation of gif
Table 24
PRICES EUROPEAN PORTS FROM EX-FARM PRICES (Eth. $/ton)
Description
Sweet
Peppers
Eggplant
----------------------- -
Other
Ex-firm prices
Ex-fl rm weighted average price
Loading, unloading transport to port Substitution of losses packig ing, c onditi on big Commissions, export taxes,
■umpa, etc. Exporter,' profit
£00 price
freight
^"Uflgencie,
3£_weighted
260
100
190
50
50
50
40
ZOO
580
Red Sea-Egypt-Mediterranean
200
Air Cargo
500
20
1. 100
180
20
780
Suez Canal
90
20
690
— -- —- 67 -
It is clear, however, that such an enterprise iB tea.iMe only 
in  bo far aa the area is connected to the ffea by a good road: without it. vegetable growing would be restricted to the domestic market.
The Domestic Market
Winter vegetables can also be marketed in Ethiopia. Here, uncertainties on the share of the market that could be occupied by output from Melka Sadi-Amibara are basically those relat- ing to alternative supply areas.
During 1 96 7/1 968 the domestic demand for vegetables was estimated at 320, 000 tons, corresponding to about 300,000 tons in net terms, equivalent to slightly less than 13 kg/Vear per capita (of which about half in the winter months).
For 1975 and 1995 the expected consumption will be 1 4. 2 kg and 17. 3 kg respectively, on the basis of an income-elasticity of 0. 6 tending to decrease during the period, according to a function of semi-logarithmic type. The corresponding levels of gross domestic demand would rise from 420, 00Q tons to 790  000 tons, showing during the whole period covered by 
r
the projection an average annual rale of increase of 3. 3% (Table 25). Winte r consumption would remain at about half these levels.
There appears to be little scope for sales from the Melka Sadi-Amibara area. Such rates of growth can be obtained under rainfed conditions in farms surrounding the main urban centers,
c ) The Arabian Market
The Arabian Market ia rather an unknown, due to the lack of data on imports, consumption and Local production* Eri trea is a traditional supplier of vegetables, but a large in crease in quantities sold seems problematical. For this reason, any growth of this market may well be covered by Eritrean producers.SUPPLY AND DEMAND OF VEGETABLES (lh 1967 AND PROJECTIONS FOR 1975. I9B5 AND 1995 (Shuusara^ of metric tain, fresh. weight)
Description
1967
(adjusted)
1975
Annual
Ratee of
Growth
1967-75
1965
Annual
Rates of
Growth
1975-85
1995
Annual
Rates of
Growth
I9B5-95
Annual
Rate* of
Growth
1967-95
Product! on
Imports 1.2)
Exports
DumeiUc demand
- in raw terms
- net of was lei
Per-capila net toneump-
tion (kg/year)
Population (ihftueande)
330
3
12
120
30 3
12. 9
23. 500
420
397
14 2
27.970
3. 4
3. 4
1. 2
2. 2
5»
549
15. a
3 4,770
3, 3                            79D
3. J
74 e
1. 1                          17. 3 2. 2                    43, 220
3. 1
3- 1
U. 9
2 2
1
J. 3               '
3. 3
1 1
2. 2
(1)                Excluded: potato* a and other atafchy rufltl. Onions, girlie, avast poppiri, cJuMjss are included^
(2)               Til eluding precessed vfigatabLsa (fresh equivalent).
Nptes; - Aisumed per-capita GDP rales of growth: 2. 5 from 1967 to 1975; 2. 6 from 1975 la 1915- And 2. 7 Irnm ] to 1995, - Assumed income-elasticity; 0. 6 (semi-log* ri I torn I c funciion).
Source. Italconault oslimatcs And elaborations
Table 25j'it''-- 69 -
r fornilS^
4J>-2
Exports to Europe are virtually non-existent. Those by air determine gelling prices to the consumer that are absolutely out proportion with those of canned   peeled'  tomatoes, with 
11
the result that the few sales made interest very small quantities. Tomatoes sent by se.i arrive at their destination considerably altered by "freezing' (this also occurs if they are sent through the Suez Canal)*
Hence the present few eales are made at Bhort distances (in the countries bordering the Red Sea), apart from those on the home market, where absorptive capacity could increase provided prices were reduced. Another alternative to boos* supplies has been indicated with the creation of a canning factory. The pro fitability of this, however, must be looked upon with many re- s er vati on s .
Present ex-farm prices range widely during the various periods; from 70 to 130 Eth. $/ton in Eritrea, from 100 to 200 Eth, $/ton, in other regions.
u
1<4
*
Prospect 5 of exporting onions to Europe (at present almost nil) are uncertain. Exports could, however, be made from October
to May, by sea (air-conditioning is sufficient onboard), mainly 
to the United Kingdom and to North-Central Europe, where the demand tends to increase, starting from ar. ex-farm price of
not  more than 140-180 Eth. S/ton for the quality most in demand (white).
^-•h^lUeb or ''Bcrb e r e "
At  present the chillies grown on the plateaux, under rainfed con-
dltl ons, are exported to many- countries in the form of dry powder
c lse i  their
n              natural state, i, e. semi-dry. A foreign compiny 
aa  recently invested in a plant for oil extraction near Addis Ababa. J "Bed on plateau production. Marketing prospects for areas of
Production do not appear favorable.I- 70 -
jjVESTOCK PRODUCTS
4.‘(l) 2
Because of the health-nutrition situation of the animals in Ethiopia t he death-rate is high. This circumstance, added to the need to 
U 5e the animals for agricultural work and other unfavorable fac- torS, is reflected in a email rate of increase in total numbers (about J % PKr year over the last ten years, and 0. 5% during the Last five-year period).
From these factors derive the need to find methods aiming at giving priority to the qualitative improvement of the species, 
and at providing greater meat supply for the home and foreign market as well as greater supplies of milk, which at present
are not sufficient to meet the demand.
In the lasL few years the total demand for meat has in fact risen not least because exports - above all of canned meat - are under going favorable development (l 16-130, 000 head slaughtered be* sides 5-100, 000 head of cattle and 60-100 thousand head of sheep or pigs sold on the hoof) (l).
(l) There are at present some ten or so firms which export canned meat (and a small quantity of frozen meat) to coun tries where imports from Ethiopia are not forbidden. Three of these have a slaughtering capacity of more than 20, 000 head/jgear. According to the programs approved by the Authorities, it is expected that for 1972 the present exports
canned and frozen meat will be doubled. More limited Appears the exportation of Live animals, which will almost exclusively consist of sheep and goats for countries border ing the Red Sea.- 7! -
Tlie c
passa&f the animals from the stackraiser io ’he slaughter-  and to the consumer takes different forms f  m region tp 
rq
h °Uf n, while P
o                        Ticca 3re likewise differentiated [l)_ The lack of
knisetl market as such prevents reliable and unambig-ic-js an  jvsfB- The iveatock aTld Meat Board", recently set up at
/ Ababa, has the task of controlling and regulating this
[t lS calculated that each year 2. 3-2. 4 million head of cattle are slaughtered. Bearing in mind exports [in the form of frozen or canned meat), it has been estimated that the present per-capita
L  on sumption of beef is 13-14 kg per year in terms of carcass - weight (average weight i 30 kg). Per-capita consumption of all types of meat is estimated at about 27 kg, a level which is
among the highest encountered in developing countries.
Assuming the income-elasticity calculated by FAO (2), i,e. 0, 7. and admitting that this coefficient tends to decrease in the medium long term (thus using a semi -logarithmic function), in 1985 per- capita consumption of meat would not be less than 34 kg. This would presuppose an increase in the supply of meat for the do mestic market and an annual rate of increase of about 3. 5%. 
This rate would not be easy to reach without an adequate pro gram for the reinforcement of the livestock population.
fl) Aia guide only, below are Hated 10m* prle*i cf b**f quoted in the Aridli
Abib* mirket (in Elh, S/kg):
pric e* paH to Eh* at&ckraiier by ihe central iliugM* r-'houie or hr induetfi*! oiiughter-homei or on th* fr*« mark** from 0, 52 to 0. 50
live weight
■ ■lling price* «t the c*ntral ■l*ughi«r-hauitfe ta riUdiri 0, 50-Q. BO
WlA.il, ■■Lling price* applied by Suptr market! 0. lfl-2, GO (men! obtain*
■d from fhfe central ■laughter-hou**} eccording to th* quality and <ut cho*«n
•■Hing pric«e applied by other local ohopo: 0 fcG-l. 50 (meat Obtained from the ctntral -laughter-hour or on th* mirbei)
’ el*il ■■Hing prices applied by lb* -null rejaittri 0. SD’Q.60 abiainod from she central aUughier-kioui* or cm th* Tree
r ^*t) by quarter or by circa**,
A iritull
Comin&ditliii - Projection* for 1975 and C 9S5 - Vol II,- 72 -
Fut ure total consumption of meat in the irrigation area - on the
basiF of a total population of 50*70^00 inhabitants - has been esti mated, preliminarily and as a guide, at about ‘,600 tons (assum-
ing =*• per-eapita consumption of 27 kg). half of which is assumed fo be catHe meat .according to the present distribution of domestic C ons nmption by ‘yP«-
por the purpose of cnlculating the vilue of production in the project Area, an average price of Eth, S 0 35-0 50/kg. live- w eight has been taken, calculated from a price of Eth. $ 0. 40- 0 50/kg liveweight, at the central abattoir in Addis Ababa
There is no precise information on thr overall production of milk in Ethiopia. On the basis of the number of milking cows and on average unit production * about l Z5 liters day - total
r
production has been estimated at 1,4 million tons. To this must be added 140 thousand tons of sheep’s and goats  milk. Overall production would thus be about I. 540. 000 tons at pre
1
sent.
Including imports (powdered milk, condensed milk, evaporated milk, butter. ghee and cheeses) expressed in fresh milk equi valent, a total domestic consumption of more than 1, 600, 000 tons is obtained and an annual prr-capita gross consumption of 6B kg of milk for all uses (1).
The absolute majority of the milk produced is consumed by the farmers. Marketing, as for the other agricultural products, 
occurs almost exclusively in the zones centred on Addis Ababa
■0 Tot the purposes of the present study it has not been felt necessary to deduct the milk processed into butter and ghee (classified in the food lists among fats and oils) or that used for feeding livestock, or the wastes. According to FAO docume nts, net consumption of “ilk as a foodstuff, including cheeses, would amount to 54 kg per capita in 1965 in Ethiopia.- 73 -
f
Asmara and, to a lesser extent, in the non-rural papula- on <>  other minor centers. In the two cities named above, 
the mil* is delivered to the respective depots for sterilization * d pasteurization.
n
0n rhe Addis Ababa market, the farmers arc paid about 0. 25-
0 30 Elh. $ per liter and the milk is sold to the collecting depots it  Q 50 Eth- S (losses and waste account for about 15%),
The pasteurization milk is sold in half-liter bottles, for a price o f 0. 50 Eth. $ (bottle to be returned) and thus at Etn. $ i per liter, a  price which is undoubtedly high if referred to the low incomes of the country.
Milk requirements for the future population of the irrigation area have been estimated at 3, 200 tons on the basis of a per-capita consumption of 53-54 Uters/year. Should local production not be in a position to meet consumption, the milk obtained from the "collecting depots" in Addis Ababa and transported to the Area could be sold there at 0. 50-0.55 Eth, S./liter, giving rise to a local ex-farm price of 0, 37 Eth. $/liter.
4 B SUGAR CANE
In the present modern sugar estates at Won Ji and Meteh.ira owned by Lhe HVA - a company with Dutch capital - sugar production is already sufficient to meet almost the entire domestic demand (1). 
during the 1966/1967 crop season domestic production of cane "Counted to 850, 000 tons (average annual production during 1  952/195 7 was 140, 000 tons), with an output of more than 
000 tons of crystallized sugar.
(- )
1
1^1967, sugar imports £*800 tons.
□f various kinds amounted to4
I
I- 74 -
per .c»P*ta con.ump!on ha. mcrea.ed year. although .1 .t.U
po.tad to have boon J. I kg i„ I%7 K it
. 
„„ ,he
al a rath„ ]qw
5U g,ir not produced in th. 
large amount, of honey were consumed in it. place (in , amounts of honey are still eaten in the rural areas)
, lnd impQrt>
'
’
According     to     the     HVA,     sugar     production     from     rhe in  Ethiopia will be able to meet the grouan deniJ d 
, u 1,7S. In thin year demand Mil r.aA a.Z " !
hypothesis (income-elasticity coefficient i ’ . "8   ■’f'dium
e3ta‘CS
0
lion) 1 35. 000 ton. on th. bj, o(
5 t
<>«•
in he noted that dome.tic oroduction ,m„, 
“
the prices which would have m Cap‘n.d o 
t
""
would      be      much      lower      than 
iho3, 
Ukely 
,, 
„c
^“ahWoTtC
present producers. 
r
lor inc
In    this    study,    the    crop    has    not    been    analyzed    in    detail,    consider ing:
a) that present thinking among sugar cane producers is to 
diversify cane cultivation regionally, avoiding further con
centration in the Awash Valley;
bl that cane cultivation  and  sugar milling  require long-stand ing  experience and  specialized  knowledge.  which  cannot be obtained today in Ethiopia outside the present producers;
c ) that, more importantly, it is doubtful whether continuing domestic production of sugar is an economic proposition, when world market prices remain much lower than the costs of production in Ethiopia, and are expected to re gain at such levels,- 75 -
5. PROCESSING INDUSTRIES
tN TROOUCTION
The feasibility study of the irrigation area of Melka Sadi-Ami- bara does not include an analysis o£ the profitability of plants processing the main crops produced in the Area, In other word! this study does not include investment in processing plants as part of the project.
It is necessary, however, to show that the installation of such plants is likely or that productive capacity for processing al ready exists, in order to avoid a situation wherein the output of the area cannot be marketed for lack of processing facilities.
An important exception is that of tobacco curing plants. These arc an integral part of the tobacco cultivation process in Ethio pia, and both their current and capital costs have been included in the economic and financial calculations of the project.
In the following paragraphs, the need for processing plants will be examined, the availability of private entrepreneur ship for their Setting up or expansion will he assessed, and their rela tionships with the irrigation will be studied. The study is based °n extensive interviews with entrepreneurs in Addis Ababa and Eritrea.
C °TTON ginning
s  °f a ginnery Located at Addis Ababa have for some time- 76 -
been cu
o nsidering the possibility qi setting up another plant in the
.
M iddle Aw*3h
-cording to the alternative cropping patterns, and thus to the
riouS
9e edcotton output, it is possible to set up one
3  more plants consisting of one or more batteries, made up of
in s and one baling press. As a rule, each battery should prod-
uC e 8 standard bales of lint per hour (480 lbs equal to 218 kg). 
Thus a ginnery of the minimum economic size fare battery) would have a theoretical capacity of more than 40 tons/day equal to about I 10 tons of seedcotton (three shifts of eight hours). Considering 
that a ginnery is in full or practically full operation for about
5 months (from November to March, for the harvesting calendar
of the Middle Awash), the maximum productive capacity for that period would amount to about 5, 000 tons if three shifts were worked (1 3, 500 to 14, 000 tons of cottonseed) and to about 3,300 tons, if two shifts were worked (about 9.000 tons of cottonseed).
Private enterprise is eager to invest in these facilities, and no serious obstacles exist to the realization of new plants, if produc tion should in fact develop. Their location, however, may not he on the irrigation area, since other production areas in the Awash basin would also utilize the new plants.
l ) The reason is that all the cotton ginned in Addis Ababa comes from the Awash Valley. The owners of the ginnery think that ie  would be advantageous to process the cotton on site and transport the fiber *o AHoiR Ababa and the seed to Assab (ex port) and/or Addis Ababa (oil mill) rather than transport the “eedcotton to Addis Ababa, both to save on transport coats and  to avoid loss in quality, due to the present state of the tracks and roads.- 77 -
q oBA
.     CCO DRYING PLANTS
prying plants for tobacco are without doubt necessary in the Pmduc tion Area. Ihis 13 what farmers are doing at present and what the administration of the State Monopoly suggests. The Monopoly grades and fixes prices of tobacco after the first curing (practic ally only the smali farmers, on account of their small financial capability, deliver the green leaf to the Monopoly),
A curing plant will have to be technically equipped to grade, cure, process and pack the tobacco leaves collected. A minimum econo mic size is considered that capable of treating 10 tons per day of fresh leaf. Calculating an average loss of BO’',, the production of dry baled leaf is Z tons. The period of full operation vanes accord ing to the harvesting calendar, climatic conditions, etc.
The costs of investment and operation, adoptedin the feasibility study, have been estimated on the basis of the experience acquir ed by the Tobacco Monopoly and by the farmers in the Awash Valley, These have been checked with supplies o: machinery in Europe.
5 .4 SEED-OIL MILLS
Two unfavorable factors would   *™_ 
se
* -irbviae aeainst the uniting the unprornising possi-
up of an cal mill in the irrigation 
hilities of export of oil vis-a-vis see
subject to duty by the EEC while^mpor
and the decentralization of a plan 
industrial services (available only in . e _m;c;illy worthwhile tries are operating), which would not be -on^nic^ ]famar and
of the former are latter are not)
of
where other indus-
creating locally. Moreover, 
Private enterprise appears willing 
v elops. In any case as shown ir. t e m that production from Melka Sadi-Amibar in the form of seed.
1 cap>
, f pToductiDn de.
analysis, it is likely
be  mainly exported- 78 -
VEGETABLE conditioning
S5 V
Th is is an indispensable activity in the area. A vegetable center
vvith refrigeration plant and a department for processing the pro
ducts tfSUld enable:
«
The collection  and  grading  by  types,  and  uniform and  homo- gencous quality  of the various products,  improving  their ap pearance according to the requirements of the market;
The staggering of export consignments, when necessary:
The utilization of more suitable packings, with criteria of standardization, thus ensuring greater economy in pur chasing;
The more economical employment of means of transport by using rational loads.
It is thus advisable to create a common organization for such services and consequently provide coordination between produc tion and exports (l),
The ’’center" could consist of a structure for pre-processing, refrigeration, conservation and packing of products to be mar keted fresh. The structure should be equipped with a pre-re- frigeration plant and an air-conditioned workroom. The dimen sions and the capacity of these plants should be determined by the expected average stocks and rates of supply of the various products,
Although facilities for vegetable conditioning are necessary at the Project area level, since vegetables cannot be shipped toport un- le5a conditioned, such facilities have not been madr? part of the
Cooperaticti c^n also take the farm of suggestions made by ex portera on indications by foreign buyers, to the growers re g-irdin  the type and characteristics of the products most
R
ln  demand.- 79 .
prO e
j ct. The reasons are, pri
already very active ln thifl
ncipa]Jv
take up the conditioning and aIJ
transport to port; cold 3torage
that  *e private
. and is
(refrigcratcd
vegetables to Europe. Moreover,
Eritrean      exporter      has      already      aaked         ,      ge        and         «perieneed
Melka Sadi-Amibara, and may We)I . • facilities. 
5    6 CONCLUSIONS
3 co«ce
hxmedf
i
B# on in tf)e
provide
No serious difficulties exist for the setting up of new plants or the expansion of existing plants for the processing of agricultural crops grown in the area. The private sector is active in this
field, and is already interested at the prospects of investing in the area or for the purpose of the area. The private sector is experienced and can undertake the job competently, In all calculations of ex-farm prices for the products included in the area's possible future cropping patterns, the profit margin at present enjoyed by processing industries has been taken into account. Such profit margins are large and constitute an incen tive for expanding activities.6. credit situation iNtropucti°n
While a full survey of the present credit , 
outside the scope of the present study the V ”* Ethiopia ia
which bear on the financial position of th' 6 CmentB oI the situation xed. For this purpose, the following pne'S?*’
lending institutions, their resources Ornr i nvcsh£ate the lending, for short and medium-term credit*  aT
analy’
5
suppliers’ credits locally available will be ^ertak^"
SHORT TERM CREDIT
There are four commercial banks in Ethiopia with business of a national character. They are constantly expanding over the national territories and, by and large, are able to fulfil their role in commerce and industry. In the agricultural sector, on the other hand, commercial banks have had little or no activity, partly because facilities and personnel for supervising short Irrm
cannot readily be made available; and partly because th 
modern, large-size commercial enterprises have not had major short-term credit requirements. Thus* moat of the financi g agricultural production - and, in particular, of coffee, n 
export commodity - has been the responsibility * traders who in turn, have been able to receive commercial bank cans. The. e_ is little doubt that an irrigation project oi the size □
Annibara shall give rise to a demand for short-term □ few commercial farms expected to cs
« th. Project Ar
„.  „.
.
ons 3hould
p    Mt conuneroal
Permit the granting of short-term ere
Assab - Addis Ababa road - the. con -
q q£ ent
. „„
erpri es
S
efficient
the existence of
 a responsible body 
a branch m
conditions for one or
more commercial
the area.
Th^.
short-term borrowing can be estimated*
for the purposes
° Present study
, at 8. 5% per annum..•        -
~‘i- 8] -
m edium term credit
Ther
agricultural credit. Those which 
sources adapted to the need£ of the
e are a variety of in t
9 ltutinn$
^ ngaSe in mediUm.t or «*nizatioa and
in       practice,    only    two:    the    Develop,™'    *    &<|i-Aniib*ra      ar<?a      ar
,„a the Commercial Bank oI Eew
!U ch as the Lihmp.a Inve.tmml Co mostly tatoreated in ,actor, ofter lha^
B ’”‘ ■>< Ethiopia (DBEJ ’
' S '
“•Htutioa,
The DBE is not exclusively geared to the agricultural sector. 
However, about 50% of its outstanding loans, as of the end of
1966, were for agriculture, of which about one-half in non-coffee
branches. The DBE has a variety of sources for its loanable funds:
a)   the Government, which up to 1967 had contributed some Eth, j
11 million, either from its Treasury or from IBRD financing;
b)  IBRD and USAID loans totalling USS 4 million;
c)      tied    credit    lines    with    France,    Belgium    and    Yugoslavia,    which have not been used to date;
d)  a German credit line, untied, in an amount of Eth. $ 6. 25 million.
APart from (c) and (d) above, all other resources
zed,   and   DBE   lending   would   have   to   be   base   o   y 
ments of past loans. No new source of funds is ,n
within the country. Future activity will th« have
point (d) above, plus new borrowing -
The possibility  of utilizing  tied  loans uncer ?
exl4 s acJ iQ
, on t ; how-
.  us
problems
ever, their non-utilization up to now in n. 
”*ist,. connected with the difficulties in maai g goods and services from a predetermine* source, a- P n °t competitive.
borroWers accept
Moreover, by the time the
■faara                  impl well have been
Rented,   both   sources   (c)   an   ,   me;nt5   for   the   MeUs Thu., rn.aium-t.rn> credit w***"^. 
” =I,
Ur. 
ln
 sight. This implies that co°r in prO ect.
pvoject
wU1      m0,t    likdy    l»«    “    heIwe.»    AVA    .»■<    DBI-    ■
j
Operative before the launching o- az -
Th( , 
charged by DUE In grace period can be extended (or up tn 3
„
'-
*. of th. loan »P“=
10 >-r . DBE , 
s
,
‘ e on real property and machinery. in th.
;  the value °< “>« 1«" •’ ’eeurity. WH1. 
f
the int
„ ,  „„
e (        apoea„
a  subsidized one, which could not be sustained if the bank now had recourse to the local capital marketer to international financial institutions, collateral requirements appear extreme Thus
gauming that new resources could be fbmd, borrowing by tommer cial farms in the Project Area can be assumed to take place at a higher interest rate (9%), but with substantially liberalized colla teral requirements.
problems of credit supervision should not arise for DBE, as the area is territorially limited and AVA will possess a full staff
which should be in a position to assure the bank as to the farmers' efficiency.
A possible alternative to DBE financing is recourse to CBE. It
is not possible to anticipate, at this stage, whether CBE will
have the necessary resources to satisfy the Project Area's
mediuin-term credit requirements; thus, it will be necessary for AVA to contact CBE, by the time the project will be implemented. CBE is the major commercial bank in Ethiopia, and it has had some activities in medium-term lending, including the agricul tural sector (Tendaho plantation, in the lower Awash Valley). In principle, there should be no obstacles to lending to commercial farms in the Middle Awash area. At least CRE's subsidiary for building loans (Mortgage Company of Ethiopia) could finance the building investment in commercial farms. It is unlikely, however, fhat CBE will agree to become the sole lender of medium-term
£unds. and the presence of DBE in the Project .Area is thus needed. '-'hE s terms of lending are agreed, from time to time, on the
Jas,s of negoti tions with prospective borrowers. It appears a
re ^°nable a
ssumptiOn that terms will be the same as those assumed 
ur  Possible future DBE lending. Credit supervision should not
P°se any serious problem for CBE. While other commercial banks
■ be wGling to anrtertake similar initiatives, it is unlikely that
the  experience and 3km required for financing agricul- P^Cts.- 83 -
inclusion, medium-term lending €OTlm rt
,
^.itut.onnlb- !>«••> « ««U-ible. Pr.blms exl„
* lhe availably ot loanable funds, s„d AVA toltia„ve
‘"ailed tor ‘o “7"” th»l lDtal “I loreipi resources are mustered r  the project's credit requirements.
sU ppUERS CREDITS
•
r
t*
Local suppliers of agricultural machinery may extend a limited £  m of credit to their buyers. Such credit takes the form of a
0r
2-year loan, aL an interest rate of 10% per annum, secured on the the equipment sold, atid covering up to 50% of the price of the equipment. Recourse to suppliers’ credits, although more expen sive than medium-term credit, should be taken into account for reasons of prudence when assessing the financing of the project. As little is known at present regarding the availability of medium term credit, it appears safer to rely, for equipment purchases, on known sources o£ finance, such as suppliers’ credits. Further more, farmers appear to prefer to deal with suppliers, for equip ment financing rather than with banks, probably because the former do not have collateral requirements, and because they are more willing, when financing, to extend assistance in repair ing and spare part stocking. There is a fair chance that such credits will not imply a rise in the purchase price of the equip ment. as competition among suppliers exists on the Ethiopian market.
credit TO the SETTLEMENT SCHEME
P«*-rt from a few instances, dispersed m time, of bank credit to ^“^P'iratives, Ln practice no credit institution is at present geared S ,’L.en^' ^operatives. This is a problem for the Settlement
‘  m  which, moreover, is not in fact supposed to become a
e
e
i Tll°^eTative scheme before a number of ye^Ts from the date a: P ^mentation of the project.
fu^t? descri^g the project, in Part Lil, this question will be
ui
a| her Stnd^d. However, it will be necessary for AYA to coord-
c
 * lts action on the Settlement Scheme with DBF- ana with 
^^cial banks, well in advance of the implementation date.- 84 -
7  QgJL^-RWNAT1-^ FEA_SIBLE farm sizes
1    [NTROduction
During the course of the study, it became apparent that decisions ijy AVA on the fiize of commercial farms to he assigned to concessionaries! should be accompanied by an analysis which could provide the basic guidelines for such decisions. The Consultants were therefore called upon to establish such guide lines.
The analytical approach to the determination of feasible farm
sizes in the Melka Sadi-Amibara irrigation area,was based on the following considerations:
a)       any limitation on minimum size imposed by credit practices, tax policies, qualified manpower availability;
b)      behavior of unit costs at varying farm sizes.
.After an in-depth survey in Ethiopia based on discussions with the competent authorities, and further study of farm costs, the Consultants concluded that the minimum feasible farm size is of about 400 ha and that the optimum size is probably nf about
11 000 ha or ab ove.
All sizes referred to in this section are understood as the net cultivable area.
CREDIT practices
oli cie8       o/       the        Development     Bank     hive     changed     considerably     in 
r ^ent
yearSt         shirh         from         small         loanS
to      a      multitude      of      small
t ^ rrn^rs to larger loans to bigg« site ^rms. The reasons for 6                   Policy shift were:ft
■i;      •. ■
• - •- 85 -
a)
difficulties        in        collecting        loans many beneficiaries and over a
When           l^yare        spread among
wide area;
b)
uncertainties      as      to      the      economic      benefits traditional agriculture;
of small loans for
c)      problems of assuring coordination between lending and technical assistance activities.
Nevertheless, no lower limit to farm size is established in principle by the Bank, and nothing prevents it from extending loans to small farms, particularly if the latter are concentrat ed in one area and are assisted by an organization like AVA
7 2. Z Short ■ Te rm (C_r op J _Loa ns
Here again, nothing prevents commercial banks from making loans to small farmers, provided, however, that they have the assistance of an organization like AVA. In practice, rela tively little crop lending has been done in recent years outside the coffee sector.
- 3 TAX policies
7
a definite lower limit is implicit in the "Investment Proclama tion" No. 242 of 1966, whereby a 5-year income tax holiday is granted to investors, if the invested sum exceeds Eth. $ 200,000, or when the investor's equity contribution alone exceeds this
su ». Taking the most restrictive interpretation, this sum COrresponds roughly to the investment needed in a farm of about 400  ha in the Melka Sadi-Amibara area.■
- ' te • 
.
.C; ■:
!i’
! 1>.‘ ;
•
. ■**• r
•'»
-
1_r
■- B6 -
7.4
mAKPOWER availability
A  possible limitation to the size of farms could have been the availability of qualified manpower . principally, experienced small farmers-. If such manpower could not be found in suf ficiently large numbers, the number of farms would hzve
to be reduced. Such availability cannot, however, be assessed with precision. That experienced farmers are rare is an immediate conclusion, as irrigated farming is still very limit ed throughout the country. But the extent of the limitation 
c
ould not be ascertained.
7.5 UNIT COSTS
On the basis of the appraisal described above, it became soon 
clear that only an analysis of the variability of unit coats of
future farms, at the change of farm size, could give a satis
factory answer.
Ideally, a full financial analysis for many farm sizes should 
have been undertaken. Time constraints, however, prevented 
taking this course, and a simplified approach was followed.
This approach consisted in analyzing all farm expenditures, 
identifying those which do not change proportionately with 
the size (or, in other words, those which do not remain fixed 
On  & per ha basis). Then costs are;
^vestment      and      operation      costs      of      agricultural      machinery an d implernents;
overhead personnel expenditures.
minor coat items may also change on a per ha basis
"■ 8 housing for the management of the farm), but they norm- ally derive from the two major categories mentioned above. 
; °r
category of costs, a complex analysis under-
ta ^n, baBed on the machine-work diagrams (see Part. U.Vol. 5)•>.* ’- 87 -
For each cropping pattern, the req. 
machinery were calculated fOr
haS  been assumed that no coopcrative ’lzes of farmB. ft prise for machine rental would exiat i COrnmerc>al enter- case at present for the other irri«H " the area> i» the
and upper Awash basin. Tables 2* 2^ needed on farms varying in size from
*" ^kultura!
middle
±e tIUchin* fleet
three    cropping    patterns    "A"    »<«..    3       .    *    t0      1-°°0    ha.for    the
year period of each cropping pattern ' ' 
shows the investment costs
per ha
terns and for each farm size. 
** ftrst 10*
con9^ered). Fig ,
T€e croPPing pat.
For the second category of costs (overhead personnel expen ditures) the requirements in personnel at the central level
for each farm were studied: they are shown in Tabic 29 which also includes the annual salaries for each category of person- ncl. These costs do not change with size either. The unit
costs used in the table are slightly lower than the unit costs which have been adopted later on in the calculation of both economic and financial accounts. This difference does not alter the results. Fig. 2 shows the annual expenditure on this account, per ha, for farm sizes ranging from 1 00 to
1. 000 ha.
In order to show the effect on unit costs of both phenomena, they were combined in a single chart (Fig. 3), which adds the costs per ha as shown in Table 29 to a fixed percentage (20%) of the costs per ha shown in Tables 26-28. This per centage is in lj eu of an average annual cost of the whole ma chine fleet. The new chart clearly confirms the indications
°f the previous charts.
These are, in brief:
■ that the decline of unit costs decelerates substantially f °  cropping patterns at 400 ha,
r
b)       th
l - 000 ha;
*t the next decelerations occur at 600 ha, 800 ha and
c)
th^ the ranSti of sizes surveyed, 1, 000 ha represents c  minimum unit costs.MjAGHINK fLEtl, CROPPING PATTERN "A’1 - lit PERIOD
Minimum Fleal far H>
I          Typ* of Machine »nd Implempnl
Ha
ftr Machine
J
Machine
Retail Price
(Eih. it
100
200
300
4Q0
500
600
7 DO
900
m|
Tractor (65-TO HP)
PlMfh
Harrow ' }
Furrowar
Ditcher
Land. lev alar
Trailer
Drill
CulUvaier
Dl<r«r-ihikrr
■L• Kwfia‘pvi«.h a^r » «r
106
mj jpsO
62$
-a-..
fm>;
12, 500
h 550
1,550
1,050
F -?Q0
7 JO
k 100
>. aoa
V y'.O
l. fado
iwo
l. 05D
h 000
rS'iW/
JOO
i
1
1
1
1
2"
1*
1
I
1•
f'J
3’
—
1-
’7'X r'
1
1✓
t yiv
i*
L
iA
i-
■J /✓1J
£
j
i*
s.i, n'J
■i
»4-b 3 k*P
2
S' -V’-?
1
t
VW
■m ’.3j
t
5, DOO ;*M
-
1.150
Vf£
i»* x*r
*
I '--
; *? 1/9
I-
(r 4r-i-i>
1 *,
/     /     srp L -^1
/f, lrtr>
J
5
2
I
1
l
6
2
I
i
1
7
J
2
1
I
8
J
2
1
L
*
3
2
2
1
1
1
I
i-
I --
5- /
L
I
<
i
4
5
L
4
1
2
&
v
hY
1
1
I
k
1
1
I
1
l TOTAL lUZik. »)
I Pai ha {Elli. II
l|
ri.       no * it a
* 35,5
4rb(p®i>
14.BflQ
IM, 4
•iff, r *
<*- lad
.35*
1^.6
uM /Xml-
•‘u,     7^ nm
r
U3
Ti. Q >O 154. 1
70, Slfl
1 JU, V
10 T. 144
151.1
-—
ua. Ua
1 $a, 7
i>». na^
111.a
Hair A *F« of Flea^ilhy hat Lw»" *?|.LIeJ In di t • r FT. Ln* LI !,4 numb.i «f iracvora for mh *L|Vj Uu. io ik* f*r* th>.
ptrmkti .Um< aUitldly In U. paAh rtmlag caLculMM le
ellcrwaibh Whlla far CFoppInf pniiwri.* tt *•>*! C, kk«
Uy l* ja%
4is r«rn.
C           k >«,
.*
RW rri
' HaattikUly 4a Id ,« (|, w. if
. .. ..
-- - -------------------
>»« n■r
MAGHIKE FLEET. CROPPING PATTERN ’B” - J PERIODMACHINE FLEET, CROPPING PATTERN "C’» - 111 PERIOD(*•) Hlghtf (<*) Ptti-limt.
«vp«rvitOT.u-3.1 c i
MACHINE FLEET REQUIREMENTS PER ha
FOR DIFFERENT FARM SIZES (ETH $)
27093
ITALCO^HITDH H34 siscn
FIG.2
ANNUAL OVERHEAD PERSONNEL EXPENDITURES PER ha FOR DIFFERENT FARM SIZES WITH OR WITHOUT
TOBACCO CURING PLANTS
(ETH
zFIG. 3
ANNUAL machine fleet costs and overhead personnel COSTS, FOR DIFFERENT CROPPING PATTERNS
AND DIFFERENT FARM SIZES, PER ha
(ETH $)
*••-27095- 92 -
Although noL tabulated, calculations undertaken on sizes above 1, 000 ha show a very slight decline whichjhowever, is not con
tinuous. Interruptions in the decline appear, from time to time, as those shown in the foregoing charts, between 600 and 700 ha or between 800 and 900 ha.
L 6 CONCLUSIONS
On the basis of the above, it would appear that sizes of
400-600 ha, 800 ha and 1,000 ha are feasibly Although the 1, 000 ha farm appears less costly than a 400 ha farm, the difference in unit costs is not substantial. It is, therefore, confirmed that the concession layout now tentatively agreed upon at AVA is feasible. And, subject to minor changes
due to the calculations of net farm areas from gross farm areas, this will be taken as the basis of the financial ana lysis of the irrigation area.

< <

Summery

ITALCONSULT Project Summary

ITALCONSULT Project Portfolio Summary

Document Overview

This document presents ITALCONSULT's experience and personnel qualifications for two major projects in Ethiopia:

Melka Sadi - Amibara Final Design
Angelele - Bolhamo Feasibility Study

Prepared in September 1972 for the Imperial Ethiopian Government's Awash Valley Authority.

Company Profile

ITALCONSULT

Established: March 1957

Registered Capital: Lire 1,500,000,000 (US$ 2,400,000)

Staff: Approximately 500 permanent staff

Services Offered

Preliminary surveys and feasibility studies
Final design
Construction supervision
Project operation

Areas of Expertise

General planning for economic and social development
Land, water and agricultural development
Power, industry, transportation
Community facilities, human resources, tourism

Key Projects

Country	Project	Client	Construction Cost (US$)
Ethiopia	Melka-Sadi Amibara Irrigation Project	Awash Valley Authority/IBRD-FAO	15,000,000
Ethiopia	Technical Feasibility Study of the Meki River Diversion Scheme	Awash Valley Authority	12,000,000
Algeria	Agricultural Development of the Abadla Plain	Caisse Algérienne de Développement	10,000,000
Argentina	Rio Colorado Development of Water Resources	Comisión Técnica Interprovincial del Río Colorado	441,000,000
Burma	Mu River Irrigation Project	United Nations Development Program	185,000,000
Peru	Pampas de Olmos Agricultural Development and Hydroelectric Power Project	U.N. Special Fund (FAO)	380,000,000

Key Personnel

Name	Position	Specialization
Paolo Balbo di Vinadio	Sociologist	Training programs, community development
Pier F. Baldi	Senior Agronomist	Agricultural development, irrigation
Ferdinando Bigi	Joint Director, Economics Division	Agricultural economics
Marcello Bolognini	Hydrogeologist	Geological and hydrogeological surveys
Marcello Marini	Joint Director, Civil Engineering Division	Structural engineering, infrastructure
Fabrizio Rallo	Chief Soil Scientist and Land Classifier	Land classification, soil science

Notable Ethiopian Projects

Melka Sadi-Amibara Irrigation Project

Scope: To determine the technical and economic feasibility of developing, through irrigation, an area of 17,000 ha for agricultural purposes.

Services Performed:

Control and analysis of meteorological and hydrological records
Detailed soil surveys and land classification
Appraisal of drainage problems, waterlogging and salinity conditions
Study of ecologically possible crops and selection of cropping patterns
Study of population make-up, distribution and growth
Marketing studies and economic/financial aspects

Technical Feasibility Study of the Meki River Diversion Scheme

Scope: To study the technical possibilities of diverting the Meki River into the Awash River to increase water resources for power and irrigation.

Services Performed:

Study of probable effects of diverting part or all of the Meki River
Examination of alternative possibilities for diverting flow
Hydrogeological investigations of Lake Koka
Geological and subsoil investigations of diversion structures and canals
Preliminary design of diversion structures and canals (total length about 20 km)