FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA ministry of water resource
FEASIBILITY STUDY AND DETAIL DESIGN OF BALE GADULA IRRIGATION PROJECTZnX
Federal Democratic Republic of Ethiopia- Ministry of Water Resources 2 easibility Study and Detail Design of Bale Gadula Irrigation Project
VOL 7- Annex 10
Agricultural Marketing
FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA
MINISTRY OF WATER RESOURCES
FEASIBILITY STUDY AND DETAIL DESIGN OF
BALE GADULA IRRIGATION PROJECT
FINAL FESIBILITY REPORT
VOLUME 7- ANNEX 10
AGRICULTURAL MARKETING STUDY
MAY 2010
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List of Volumes in the Final Feasibility Report
VOLl
Executive Summary
VOL 2
Main Report
VOL 3
Annex 1
Meteorological and Hydrological Study
VOL 4
Annex 2
Geological and Geotechnical Investigations
VOL 4
Annex 3
Hydro-geological Study
VOL 5
Annex 4
Soil Survey
VOL 5
Annex 5
Land Evaluation
VOL 6
Annex 6
Socio Economic Study
VOL 6
Annex 7
Settlement Study
VOL 7
Annex 8
Irrigation Agronomy
VOL 7
Annex 9
Farm Mechanisation
VOL 7
Annex 10
Agricultural Marketing
VOL 8
Annex 11
Livestock Study
VOL 9
Annex 12
Environmental Impact Assessment
VOL 9
Annex 13
Watershed Management
VOL 10
Annex 14
Institutional Dev.
VOL 11
Annex 15
Financial & Economic Analysis
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Table of contents
LIST of tables
LIST of FIGURES
acronyms and abbreviations,v
1- BACKGROUND1
2.       objectives of the study
3.         METHODOLOGY OF THE STUDY
4. THE EVOLUTION OF AGRICULTURAL MARKETING IN 4ETHIOPIA
4.1  Agricultural Marketing under the Dergue Regime'
..............................................................Ill
.......................................................................................Ill
4.2  The Post 1991 Agricultural Marketing Policy of Ethiopia..........................................................................................1
5.        THE NATIONAL AGRICULTURAL MARKETING SYSTEM!
6.        THE NATIONAL GRAIN MARKET STRUCTURE1(
6.1  Producers10
6.2  Rural Assemblers11
6.3  Regional Wholesalers
6.4  Central Market Brokers12
6.5  Retailers..........................................................................................................................................................................13
6.6  Consumers13
6.7  The relative importance of product outlets in the marketing chain14
7.         MARKET INFRASTRUCTURE18
7.1  Road Infrastructure and transport facilities18
7.2  Storage Facility19
7.3  Market information20
8.         PRODUCTION, MARKET AND PRICE FOR AGRICULTURAL PRODUCTS IN ETHIOPIA22
8.1  National production of major agricultural produces22
8.2  Marketable surplus and the supply of farm produces24
9.         FARM PRODUCT PRICE TREND IN THE DOMESTIC MARKET27
9.1  Prices of farm products in the regional market27
9.2  FARM PRODUCT PRICE TRENDS IN THE CENTRAL/NATIONAL MARKET29
10.  MARKETING AND PRICES OF FARM PRODUCES IN BALE GADULA35
10.1  Market and prices of farm produces in the study areas35
10.1.1    Market Infrastructure in the study areas35
10.1.1.1   Road network and accessibility35
10.1.1.2 Storage Facility in the study area36
10.2  Agricultural marketing channel, supply chain and farm product price trends in Bale Gadula areas37
10.2.1   Agricultural marketing channel and supply chain37
10.2.2   Farm product price trends in the study area33
11.      THE EXPORT MARKET POTENTIAL AND OPPORTUNITIES FOR FARM PRODUCES42
11.1  Export market potential for farm produces 2
4
11.2  Major Export commodities and potential markets44
11.2.1         Grains44
11.2.2   Pulses 11.2.3   Seeds
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11.2.4 Spices and Herbs47
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11.3  MARKET OPPORTUNITIES FOR SPICES AND HERBS EXPORTED FROM DEVELOPING COUNTRIES49
11.4   FARM PRODUCT PRICES AND THE COMPETITION AMONG MAJOR EXPORTERS49
11.5   Major products and competitors in conventional trade50
11.6   Major products and competitors in organic trade52
11.7   Farm product imports by EU member states53
11.8   Opportunities and threats facing developing countries$9
11.8.1    Product Quality Standards59
11.8.1.1  Oil seeds............................................................................................................................................................ 60
11.8.1.2  Pulses61
11.8.1.3  Spices and Herbs...............................................................................................................................................61
11.8.2    Trade-related Measures that Restrict Entry to EU Market
11.8.2.1  Sustainable Development for Businesses^2
11.8.2.2  Ecolabels........................................................................................................................................................... 63
11.8.2.3  Environmental Standards
11.8.2.4  Health and Hygiene Issues: haccp................................................................................................................... ^4
11.8.2.5  Fair Trade and Social Responsibility^4 11.8.2.6  Packaging, Marking and Labeling
12.      CONCLUSION AND RECOMMENDATION66
12.1   Conclusion
12.2   Recommendation REFERENCE
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list of tables
Table 8.1. Cereals and pulses production, Comparison of 2001/02 to 2006/07 Meher season s area and
PRODUCTION22
Table     8.2.    Meher     Season     Cereals     and     pulses     production     of     Peasant     holding     (2004    -    2008)    2^ Table 8.3: Area and production of cereals & pulse for commercial farms (2007-2008)
Table 8.4: National grain (Cereals & Pulses) supply/demand balance ('000 tons)............................................................. 2^ Table     11.    l    Ethiopia's     Exports     of     Major     Agricultural     Commodities     during     2005/06    -    2007/08;43 Table          11.         2         Consumption          of          pulses          byEU        member          states          (tons),        2000-200245 Table 11.3 Consumption of sunflower seeds by EU membep states, 2000 - 2002 in million tons46
Table 11.4 Consumption of sesame by EU member states, 2000 - 2002 in tons Table 11.5 Consumption of spices by EU member states, 2000-2002 (tons) Table 11. 6 Imports by EU member countries of food ingredients, 2003, € million/thousand tons Table 11.7 Imports of selected organic food products by selected EU countries in Tons
Table 11.8 Imports of spices and herbs by EU member countries, by EU importer and by country of origin, 2001-
2003, €1,000/tons...................................................................... '............................................................................ 55
Table 11.9 Imports of pulses by EU member countries, by EU importer and by country of origin, 2001-2003, €
1,000/tons57 Table 11.10 Imports of oil seeds by EU member countries, by EU importer and by country of origin, 2001-2003, €
1,000/tons58
LIST OF FIGURES
Figure
6.1:                  Market                     Structure                     and                     Flows,
1995/96
15
Figure       9.1:      Wholesale        prices        of        Barely        &      Wheat        in        Bale        Robe       (2000      -      2009)27
Figure        9.2:       Average        prices        of        major        cereals        in        Sinana        Woreda        (2000       -       2006)28
Figure           9.3:         Average           prices           of           spices           in           Bale           Robe           (2003         -         2006)28
Figure           9.4:         Average           prices           of           pulses           in           Bale           Robe           (2000         -         2006)29
Figure      9.5:     The      mean      wholesale      price      trend      for      selected      commodities      in      Addis      Ababa30
Figure      9.6:     Monthly      wholesale      prices      of      Teff      &     Wheat      in      Addis      Ababa      (2000     -     2006)31
Figure       9.7:      Monthly       wholesale       prices       of       Barley,     Maize       &     Sorghum       in       Addis       Ababa32
Figure      9.8:     Monthly      Wholesale      Prices      of      Teff      &    Wheat      in      Addis      Ababa      (2007     -     2009)33
Figure       9.9;      Monthly       Wholesale       Prices       of       Barley,     Maize       &     Sorghum       in       Addis       Ababa34
Figure        10.1:       Average        Prices        of        Major        Cereals        in        Goro        Woreda        (2000       -       2006)40
Figure          10.2:        Average          Prices          of          Pulses          in          Goro          Woreda          (2000        -        2006)40
Figure          10.3:         Average          Price          of          Spices          in          Goro          Woreda          (2003         -         2006)41
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ACRONYMS AND ABBREVIATIONS
AMC             Agricultural Marketing Corporation
CSA              Central Statistical Authority
EFSR           Emergency Food Security Reserve
EGTE           Ethiopian Grain Trade Enterprize
EPRDF         Ethiopian Peoples Revolutionary Democratic Front ECX              Ethiopian Commodity Exchange
EWFS           Early Warning and Food Security
FAO              Food and Agricultural Organization
IFPRI            International Food Policy Research Institute WFP              World Food Program
UK                United Kingdom
USA              United States of America
uVOL 7- Annex 10
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1- BACKGROUND
Irrigated  agriculture  is  one  of  the  available  options  that  would  enhance  the Ethiopian  agricultural  sector  and  its  contribution  to  the  entire  economic development. Irrigation would also enhance the growth of food production and thereby  ensure  the  achievement  of  long  -  term  food  security.  However,  the viability  of  an  irrigation  project  will  depend  on  the  marketability  and  market standing of products that it will supply to the market. When agricultural production is likely to be increased through the introduction of reliable irrigation resources, the knowledge of potential markets and marketing outlets would be decisive to determine the types of crops that should be produced.
Therefore, agricultural marketing should be an important component of the feasibility  study  carried out to determine the viability  of an irrigation project particularly for crop producing areas where multiple of crops should produced and supplied to the market. Particularly, market aspects  should be given due consideration to certain crops  that would likely  have substantial production potential. Similarly, the market potential and also the available options for the supply of farm products that are perishable, like vegetables; fruits etc should be assessed prior to injecting resources  into the production of these products. Because, low prices of farm produce could discourage farmers to grow particular crops if the project is designed without an adequate account for proper marketing facilities that enable a sustainable supply of produce to the market as well as the delivery of inputs to the project. In view of this, proper marketing infrastructure along with proper crop price support will encourage farmers  to boost their produces  through diversified cropping. Therefore, the marketing study  was initiated to address all important marketing decision variables in the definition of the feasibility of the Bale Gardula irrigation project.
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2. OBJECTIVES OF THE STUDY
Since agricultural marketing assumes an important place in the agricultural and financial planning, the study regarding the marketing facility is very important. The main objectives of the agricultural marketing study are the following:
o Reviewing the agricultural marketing situation of Ethiopia including current policies;
o To identify the market places, services and their distribution in the local and export market;
o To identify the trade routes in and outside the country and possible market sectors; and
o To investigate marketing constraints and opportunities.
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3. methodology of the study
The methodologies employed in carrying out the study are the following.
i- Primary data collection: Primary data was collected through the interviews and discussions conducted with key individuals and experts in government institutions, marketing organizations, farmers, local, traders, both retailers and wholesalers, brokers and commission agents, track drivers and other key  informants  that  have  insight  into  the  local  marketing  system.  In addition, primary was also collected from different regional bureau and offices,  national  level  bureau  and  organizations  including  the  CSA particularly for data on national farm production, consumption as well as exports. Data collection was facilitated with the help of question check-list prepared to guide the key informant interviews and discussions.
Review of literature and collection of secondary data: a considerable number of published and unpublished documents have been reviewed including specific studies like the studies by the Ethiopian Valleys Study Development Authority (1990 and 1992) conducted in the previous Dollo Mena Awraja and also others conducted in the project areas. Moreover, documents and studies conducted on the history of agricultural marketing policy of Ethiopia and the agricultural marketing systems that prevailed during the different regimes witnessed so far have been assessed based on the available documents and studies conducted in the past. With regard to the analysis of farm price trends and development, the study benefited from the EGTE monthly price data that is collected from central as well as major regional markets in the country while the exports market price data was gathered from CSA and other publications that compile the national trade statistics. The export market was assessed based on the data and information  gathered  from  studies  conducted  recently  especially  the Netherlands  Center  for  the  Promotion  of  Imports  from  Developing Countries (CBI), The data and information gathered were analyzed to assess the export market situation, the potential and also the threats facing developing countries like Ethiopia.
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4.       THE EVOLUTION OF AGRICULTURAL MARKETING IN ETHIOPIA
This section provides a detailed analysis of the agricultural marketing policy of Ethiopia and its evolution from pre 1974 to the present period. Based on the relevant documents reviewed, the findings about the past and present situation of the country's agricultural marketing policy, the agricultural marketing system, marketing infrastructure and facilities are discussed below thoroughly.
4.1       AGRICULTURAL MARKETING UNDER THE DERGUE REGIME
The main agricultural policies that observed so far are the pre 1974 policy under the  Monarchy  system,  the  socialist  agricultural  policy  of  Dergue  and  the agricultural policy pursued after 1991 with the liberalization of the country s economic policy. Prior to 1974, the government policy was largely market based and hence the prices of agricultural products mainly determined by market forces with little or no government intervention. Nevertheless, with regime change and the implementation of a suppressive Government policy after the 1974 revolution, private grain marketing was restricted. Thus, during the post 1974 period until 1990, the policy introduced was characterized by a centralized grain marketing
that directly engaged the socialist-oriented government in wholesale and retail trade of farm produces. In order to facilitate centralized grain marketing policy, the Agricultural Marketing Corporation (AMC) was established in 1976. Initially, with the support of the World Bank, the AMC was established to buy grain from farmers and sell to urban consumers and state organizations.
During the Dergue regime, Ethiopia’s agricultural marketing policy was a socialist market policy that restricted private trade and hence imposed major hindrance on the growth of the marketing system. For over 16 years that cover the period from 1976 - 1990. parastatal or government - owned marketing enterprises dominated grain trade to facilitate government intervention to control market and restrict the involvement  of  private  traders  in  the  country’s  grain  marketing  system. Nevertheless, the Ethiopian grain economy underwent a dramatic market reform when the government lifted, overnight, all restrictions on private trade in March 1990 (Lirenso, 1993). Therefore, it is this policy measure that ended the period of
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tight state control exercised over prices as well as the restriction on interregional grain movements.
Until 1990, the Agricultural Marketing Corporation (AMC) strictly controlled grain trade  throughout  the  country.  The  AMC  administered  a  highly  distorted  trade regime in which official prices were set below the producer costs. As a result of the  very  low  official  pricing  system,  the  magnitude  of  producers’  losses  was significantly  high.  The  socialist  marketing  system  of  the  Dergue  regime  also included the administration of a compulsory delivery system of farm produces and the imposition of fixed quotas for major grain on all producers. In addition, the policy forced each farmer to supply a fixed quota of grain to the AMC at fixed prices every year. The primary purpose of this policy was particularly aimed to feeding the army and also the provision of subsidy to consumers in major urban areas like Addis Ababa.
Under the Dergue regime, private sector trade was banned entirely in the major grain-producing areas and as a result, inter-regional movement of grain by the private sector was severely restricted (Lirenso, 1993). Thus, as the sole parastatal marketing enterprise, the AMC built 2,200 modern warehouses that have a total storage capacity in excess of 1 million tons were built in all grain producing areas. Numerous warehouses were also built at the major distribution centers close to the main urban areas in order to facilitate its supply to consumers and the army. The  Kella  (checkpoints)  installed  at  all  the  entry  points  of  towns  and  villages played major role in exercising the control and restriction of inter-regional grain movement   causing   the   distortion   of   grain   market.   Apart   from   the   Kella (checkpoints)  set  at  the  gates  of  every  town  to  control  the  movement  of agricultural products, Kebele and other food ration shops for consumers in urban areas that the AMC operated further distorted the grain market in Addis Ababa and the other regional towns of the country.
Until the March 1990 policy reform of the Dergue, which was aimed at achieving a mixed economy that is based on wide private-sector participation, the AMC was able to exercise strict control over grain trade. However, in response to external
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pressures, a radical and abrupt market reform was enacted literally overnight in 1990,  taking  the  government  parastatal  as  well  as  private  traders  by  surprise (Fisseha, 1994). The reform allowed private entrepreneurs to compete with state run trade enterprises in agriculture, industrial commodities as well as in import export trade. According to the proclamation, trade exchange was to be conducted on the basis of free market pricing with the abolishing of the grain control and the quota system. As a result, the AMC entered the free market to operate as a state trade organization.
The March 1990 reform has  removed the major bottlenecks- of agricultural marketing particularly  the restriction of food grain marketing, quota imposition, fixed pricing, legal monopoly  of parastatal organizations  and has  reduced checkpoints (Kella). The liberalization of the Ethiopian grain market spelled the rejection of state-controlled channels, the return of private traders dispossessed of their trade during the socialist regime, and the restoration of age-old trading relationships  and market networks  (Dadi, Negassa, and Franzel, 1992; Amha, 1994; Gebremeskel, Jayne, and Shaffer, 1998). As a result of this reform private trade has been restored while the parastatal was renamed as the Ethiopian Grain Trade Enterprise and transformed into a buffer stock  scheme. The modern warehouses which were entirely used for the AMC's operation were also made available for rental to private entities  and relief agencies  even though the proportion of the warehouses used by these agencies was as low as only 50 percent in 1992 (Lirenso, 1993).
4.2 THE POST 1991 AGRICULTURAL MARKETING POLICY OF ETHIOPIA
As stated already, the liberalization of agricultural marketing policy was actually introduced under the Dergue regime in March 1990. While donors’ pressure was a major factor that forced the regime to liberalize the agricultural markets, the policy reform was also aimed at achieving a mixed economy which is based on wide private-sector participation. Nevertheless, the Ethiopian Peoples  Revolutionary Democratic Front (EPRDF) overthrew the Dergue regime in May 1991 before the implementation of the proclamations that was intended to liberalize the market
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In fact, a fundamental shift in the country’s agricultural marketing policy took place when the economic  policy  of the Transitional Government of Ethiopia was announced in November 1991. This was also the first major policy and a turning point that signaled a move away from the centrally planned economy towards a market-oriented and decentralized economic system. Thus, along with quotas and fixed grain prices, subsidies  on wheat for urban consumers  were abolished in
1992. The ensuing Transitional Government of Ethiopia reaffirmed that all controls on interregional grain movement were lifted and the private sector was permitted to operate in a free market environment.
The reforms and restructuring process in the rest of the economy has influenced the implementation of agricultural market liberalization as these reforms included price deregulation, financial liberalization, fiscal policy reform, institutional reforms, and trade policy reform. As a result, market forces begun to transmit their signals and hence caused grain movement from surplus  producing to deficit regions. Therefore, the price of cereals in surplus-producing regions increased by 12 to 43 percent, while the prices in deficit regions declined by 6 to 36 percent indicating a decline in producer-consumer price spreads (Asfaw and Jayne 1998). However, in the course of the reform process, the volatility of wholesale cereal prices has declined and has had a direct impact on food production and food security. After the reforms, the prices of fertilizers and improved seeds increased significantly.
Along with the grain market reforms, the government-marketing agency, the Ethiopian Grain Trade Enterprise (EGTE), was  downsized in 1992 and hence played only a minor role in the grain marketing system. As a result, the role of EGTE was revised to stabilize producer and consumer prices and to maintain buffer stocks. The eight zonal offices of the EGTE were closed down and the number of its branch offices was reduced significantly from 27 to 11, and the grain purchase centers shrank from 2,013 to 80. I he parastatal's annual average grain purchase from smallholder farmers and traders declined from 258,719 tons during the period between 1984/85 and 1989/90 to 50,608 tons  during the period between 1990/91 and 1995/96 (Asfaw and Jayne 1998).
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The EGTE was explicitly mandated to support producers' maize and wheat prices during the 1995/96 season and its combined purchases of these two cereals from farmers  at the stated support price was  12,373 tons. It purchased less  than 45,000 tons of maize and wheat from traders at negotiated market prices. The state farms were the sole grain suppliers to the EGTE since the supply from the smallholder farmers was diverted to private grain traders. Because these farms are established to supply grain to the army and consumers in certain urban areas through the AMC, most of them are known to have been operating in losses. Even after the reform, the farms continued to be the main suppliers of grain to the EGTE, which was the sole buyer of their-produces.
Thus, because of the inherent inefficiency  and poor performances  that led to bankruptcy and shutdown, the state farms became one of the major targets of the liberalization. As a result, privatization measures have been taken to transform the ownership of most farms to private sector and meantime those farms which were reorganized as state owned enterprises/farms were given the autonomy to market their produces through the free marketing system. Therefore, the EGTE’s became less active in the grain market with the closing of the chapter that ended the era of the centrally planned and command system as a result of the liberalization and the subsequent privatization measures.
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5. THE NATIONAL AGRICULTURAL MARKETING SYSTEM
It is well known that cereals, pulses, oil seeds and horticultural crops are the main agricultural products  supplied to markets  in Ethiopia. Among the major cereals produced are teff, wheat, maize, sorghum, barley  and finger millet. These cereal crops  are produced in different regions  throughout the country  and harvested once or twice per year during the main season (Meher) and the short season (Belg), Most cereals  are grown as  long or short cycle crops  within the Meher season while teff, wheat and barley are grown under the Belg rains.
During the Monarchy, prior to 1974, there was little or no government intervention in the marketing of produces since market forces largely determined the prices of agricultural  products.  Nevertheless,  farm  gate  prices  tended  to  be  low  because the  market  for  agricultural  products  was  undeveloped  and  hence  market  forces were   not   strong   enough   to   transmit   their   signals   to   guide   farm   production. Therefore,   producers   did   not   have   access  to   information  about  the   demand, supply  and  prices  paid  for  their  products.  Since  the  nearest  market  would  take almost half a day, small farmers often sold their grains to local traders who would then  take  it  to  bigger  markets  either  to  sell  to  consumers,  to  another  trader,  a wholesaler  or  a retailer.  The  relatively free market system  of the pre 1974 ended with  the  over  through  of  the  monarchy  by  the  Military  dictator  and  the  socialist marketing system under the Dergue regime.
During the post-1974 period of the military dictatorship, the government adopted a policy  of  direct  intervention  in  order  to  keep  farm  prices  at  low  levels.  Farmers were  forced  to  deliver  a  significant  proportion  of  their  produce  (quota)  at  fixed prices   to   the   state   owned   Agricultural   Marketing   Corporation   (AMC).   Private traders were not allowed to buy grain; even to buy the balance after the quota was deducted,  since  transporting  grain  from  one  region  to  the  other  was  restricted strict  control  of  grain  movement  through  the  checkpoint  (Kella).  When  the  "Mixed Economy  Policy"  was  introduced  in  March  1990,  the  AMC  quota  system  of  grain delivery,  restriction  on  grain  movement  though  the  Kella  and  the  system  of  fixed pricing for farm produce was removed. Moreover, with further liberalization of the grain   market,  the  AMC  was  restructured  to  create  the  Ethiopian  Grain  Trade Enterprise   (EGTE)   limiting   its   role   to   wholesale   trade   which   is   primarily   for
regulatory purposes and stabilization of markets.
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6.    THE NATIONAL GRAIN MARKET STRUCTURE
Similar to several African markets, marketing chains in the Ethiopian grain market remain relatively short (Food Studies Group 1992). This is primarily due to the low level of commercial grain processing and the lack  of specialization of grain wholesalers, who are often engaged in retail and other types  of trade as  well. However, as Lirenso (1993) notes, the marketing chain in Ethiopian became more complex after market deregulation, with the selling outlets for farmers increasing threefold, to six outlets, and the supply sources for urban consumers increasing twofold, to four sources. The Ethiopian grain market is structured so that grain moves from producers to rural assemblers, then to regional wholesalers (sellers), then on through central market brokers to regional wholesalers (buyers), then to retailers, and finally to consumers. Market liberalization also increased the number of players significantly as the market structure consists of all the major players including retailers, assemblers, wholesale traders  and others. Thus, as  the product moves from the production point to its final destination, it will pass through the various  market intermediaries  that have distinct role in the provision of marketing services. The main players in the market and the services they provide are discussed in brief as follows.
6.1 PRODUCERS
The major producers  of agricultural products  especially  grain are smallholder farmers, private commercial farmers and state owned farms. About 95 percent of the Ethiopian grain is  produced by  the smallholder farmers  produce (Kuawab Business Consultants 1994). There are four principal ways through which grain reaches the market and these are by means of direct sales to rural and urban consumers, direct sales to rural assemblers, direct sales to retailers, and direct sales to either regional wholesalers or millers (Gebremeskel, Jayne, and Shaffer, 1998). Farm produces  are transported to the nearest regional market by  the farmers themselves, either using pack animals or carrying sacks themselves over relatively  short distances  of up to 20 kilometers  to sell directly  to wholesalers (Lirenso 1993).
At the local or village level, farmers  sell small quantities  of grain to rural assemblers who are known as “farmer-traders," while larger scale farmers also
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assemble grain from a large number of farmers and transport it to the regional market  using  horse-driven  carts.  Grain  buyers  from  primary  or village markets assemble and transport the grain using pack animal and small trucks for sale in the secondary or urban markets. A large number of assemblers (village collectors) play a vital role in consolidating the products sold by small producers in the village or  farmer  -  trader  markets.  Farmers  particularly  those  in  close  proximity  to regional  markets  also  sell  grain  directly  to  retailers  in  regional  market  towns. Finally, the fourth sales outlet through which farmers sale their products is made directly to wholesalers in the regional market or sell to regional traders who move from village to village, purchasing grain until their trucks are filled.
6.2       RURAL ASSEMBLERS
These are mainly farmer-traders who are mostly independent operators that buy grain at primary or village markets for sale at the next large market (secondary, urban or regional) depending on accessibility and the availability of transport. Assemblers buy grain from farmers in rural markets for the purpose of reselling it to consumers or regional wholesalers. They typically operate independently but they may also act as agents for wholesalers on a fixed-fee or commission basis (Gebremeskel, Jayne, and Shaffer, 1998). According to the studies carried out by the Grain Marketing Research Project in the late 1990s, assemblers are estimated to handle about half of the marketed volume of maize from the smallholders. Their major sales outlets are the relatively larger wholesalers who handle roughly 75 percent  of  the  total  marketed  quantity  of  maize;  the  remaining  25  percent  is directly sold to rural/urban retailers and consumers (FAO/WFP, 2006).
6.3 REGIONAL WHOLESALERS
In the context of the Ethiopian grain marketing structure, wholesalers  are generally  licensed grain traders  who receive grain from farmers  and rural assemblers at their stores, in secondary markets. The wholesalers at the level of the regional market purchase grain either from farmers or from rural assemblers and they usually sell their grains to private companies, other wholesalers in urban
areas, or urban retailers, or sell it to nearby mills. The wholesalers play a key role
in the grain trade because they act as the main suppliers who store and move a
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large volume of grain. Most of them have the capacity to store between 50 and 500 ton of grain (FAO/WFP, 2006).
Next to the wholesalers there exists a substantial network of private traders who buy, store, transport and sell grain on local, regional and inter-regional markets within the country. The bulk of the grain traded in a given season is held in the wholesalers  store  between  January  and  October  until  the  inflow  of  the  next harvest. Assemblers and retailers do not hold stocks of any size and the larger merchants equally prefer to remain liquid, buying from wholesalers as and when they need to meet a contract.
6.4CENTRAL MARKET BROKERS
There is no adequate market information system in most local markets including the major regional markets in Ethiopia. Therefore, most traders operate through specialized  brokers,  mainly  located  in  Addis  Ababa  and  other  major  regional markets like Adama (Nazareth). The brokers serve as mediators between traders in surplus areas and wholesalers in terminal and deficit markets, processors and private companies. Central market brokers operate as representatives of buyers or sellers and most of these grain brokers are located in Addis Ababa. They also operate in new market hubs like Nazareth. Brokers acknowledge receipt of the grain  from  the  regional  wholesalers,  inspect  its  quality,  determine  its  market clearing  price,  and  proceed  to  sell  it  on  behalf  of  their  clients  (Gebremeskel, Jayne, and Shaffer, 1998). Brokers may identify as buyers other traders, flour mills,   hotels   or   restaurants,   government   agencies,   or   nongovernmental organizations.  When  the  grain  arrives  at  the  central  market,  it  will  be  sold  in different quantities to various buyers that include local relief agencies, retailers, hotels, consumers etc.
The brokers operating in the main terminal markets normally coordinate inter market grain flow. They are specialized by route and coordinate grain buying,
selling, transporting and pricing activities  ((FAO/WFP Mission Report 2006). Typically, a grain broker representing a seller will interact with a grain broker representing a buyer. If no buyer is found, the grain remains on the truck for up to
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two days, after which it is off-loaded into the broker’s warehouse. The seller bears the off-loading costs as well as additional storage costs charged by the broker. These costs are extremely high compared to the broker’s commission fee and due to these high costs; shipments are often sold from the seller’s truck on the date of arrival.
The nature of the market structure would hinder direct flow of agricultural products from surplus to deficit areas because of the relationship between the traders and brokers at each stage in the marketing system. There are two key aspects that make the flow of products. The first is the hierarchical nature of the system, with the brokers in Addis Ababa controlling flows both to and from the Capital, and secondly  that it is  based upon personal contact and trust since most of the regional traders are loyal to their respective client broker.
The long-term relationships which are often based on the trust between brokers and regional traders have hindered the flow of product from surplus to deficit areas. The relationship of Brokers  with regional wholesalers  blocks  contacts between merchants operating on different routes and in different regional markets. Instead, surplus grain moves first to Addis and is then redistributed to deficit areas. Regional wholesalers in deficit areas, through the services of a broker in the central market (Addis Ababa) purchase grain from regional sellers. Therefore, the circuitous route that partially is enforced by the very nature of the existing road network considerably increases the overall transaction cost of grain.
6.5 RETAILERS
Retailers purchase grain in semi wholesale quantities (less than 1 ton) from the regional wholesalers in the regional markets located in deficit areas or urban centers. They can also purchase directly from farmers, from mills, or from the central market using the services of brokers.
6.6 CONSUMERS
Prior to the reform, consumers did not have adequate access to regular sources for the purchase of farm produces. But since the reform, consumers have had a
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umber  of  supply  sources.  Thus,  they  can  purchase  grain  directly  from  farmers, from assemblers, from regional traders, from processors (mills), or from retailers.
6.7 THE RELATIVE IMPORTANCE OF PRODUCT OUTLETS IN THE
MARKETING CHAIN
So far, the major players  and/or actors  that participate in the marketing chain have been described in detail. Furthermore, the relative importance of the different market outlets  is  discussed with the help of the following figure 1 adopted from a previous  study  (IFPRI, 2001) that analyzed the market structure and flows  of products during 1995/96.
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1
Source: Adopted from IFPRI market study .
At the farm-gate level, the volume of direct sales to consumers is surprisingly high, 31 percent of total sales, while sales to rural assemblers play a minor role comprising only 12 percent of sales. The most important pattern is seen in sales
1  Eleni Z. Gabre-Madhin, 2001. Market Institutions, Transaction Costs, and Social C’l' Grain Market. International Food Policy Research Institute
a P,ta ,n l^e Ethiopian
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by  farmers  directly  to regional traders, which make up 36 percent of producers sales. The bulk  of sales  by  rural assemblers  (76 percent) are to the regional traders. Overall, regional traders  handle 45 percent of the total domestic  marketed surplus, or 1.2 million tons. In turn, most of the sales  by  the regional traders (nearly  70 percent) are made in the terminal markets, either through the services of brokers  or directly  to regional wholesalers, constituting of roughly  800,000 tons. Either regional traders  or brokers  in the terminal markets  sell grain (mainly  wheat) to processors, their sales  constituting 40 percent of the total marketed quantity  of wheat, or some 120,000 tons. Of the 54 percent of the total marketable surplus that is  passed through retailers, the- largest share is  procured from wholesalers (740,000 tons), followed by that purchased directly from farmers (520,000 tons).
Finally, as  expected, consumers  purchase a large share of their total grain from retailers, 55 percent or 1.43 million tons. However, a surprisingly  large share of purchases, 31 percent, is  made directly  from producers. This  confirms  the relatively  unsophisticated nature of the market and shows  that most of the transformation of unprocessed grains  is  undertaken by  consumers  themselves. In particular, it is  surprising that processors  have not acquired a more significant role in the market in the wake of market reforms. Recent studies  reveal that one of the dramatic  effects  of market reforms  in eastern and southern Africa is  the emergence of small-scale maize mills  that have significantly  reduced consumer prices (Jayne et al. 1999).
In the Ethiopian context, the nature of the market structure would hinder direct flow of agricultural products  from surplus  to deficit areas  because of the relationship between the traders  and brokers  at each stage in the marketing system. There are two key  aspects  that make the flow of products. The first is  the hierarchical nature of the system, with the brokers  in Addis  Ababa controlling flows  both to and from the Capital, and secondly  that it is  based upon personal contact and trust since most of the regional traders  are loyal to their respective client broker. The long-term relationships  which are often based on the trust between brokers  and regional traders  have hindered the flow of product from surplus  to deficit areas. The relationship of brokers  with regional wholesalers blocks contacts between merchants operating on different routes and in different
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VOL 7- Annex 10
9 I markets. Instead, surplus grain moves first to Addis and is then
stributed to deficit areas. Regional wholesalers in deficit areas, through the rvices of a broker in the central market (Addis Ababa) purchase grain from
regional sellers. Therefore, until recently, the circuitous route that partially is enforced by the very nature of the existing road network considerably increases the overall transaction cost of grain.
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7. MARKET INFRASTRUCTURE
7.1ROAD INFRASTRUCTURE AND TRANSPORT FACILITIES
The  level  of  transport  infrastructure  and  the  quality  of  road  network  in  Ethiopia  has been  one  of  the  major  obstacles  to  the  development  of  market  and  is  also  one  of the  major  factors  that  impose  major  limitation  on  the  flow  of  grain  from  surplus  to deficit   areas   causing   market   segmentation.   The   rugged   nature   of   the   Ethiopian landscape  with  its  steep  valleys  and  high  upland  areas  makes  the  transport  of bulky   commodities   both   difficult   and   expensive.   Because   the   construction   and maintenance  of  road  infrastructure  itself  is  expensive,  the  existing  road  network  is also  limited.  As  a  result,  it  is  very  difficult  to  reach  many  villages  in  rural  areas  by motor  vehicles.  As  a  consequence,  grain  price  differences  between  markets  are considerably  high  owing  to  the  cost  of  transport  and  the  difficulties  involved  in moving   the   product   from   primary   market   to   major   regional   markets   and   from surplus to deficit areas.
Access  to markets, especially  for dispersed and remote rural communities, is often limited by  poorly  developed transport infrastructures. Normally, farmers  have to sell their surplus grain production in markets that are 5 to 20 km away from their
villages .
2
As  a  result,  transport  costs  are  a  significant  element  in  the  determination
of  the  final  market  price  and  they  represent  the  major  share  of  the  price  differential existing between surplus and deficit markets.
According  to  FAO/WFP  report  (2009),  about  75  percent  of  farmers  live  more  than a  one-halfday's  walk  from  the  nearest  all-weather  road.  Thus,  the  role  played  by  a large  number  of  rural  assemblers  is  crucial  since  they  mostly  work  at  primary markets  collecting  and  transporting  the  grain  using  pack  animal  and  small  trucks for   sale   in   secondary   or   urban   markets.   However,   the   situation   is   gradually improving  due  to  the  substantial  public  investments  in  road  construction  that  have characterized   the   development   agenda   in   the   last   few   years.   According   to   the PASDEP  2006/07  Annual  Progress  Report,  the  road  network  has  expanded  from 37  000  km  in  2004/05  to  42  400  km  in  2006/07,  with  improvements  also  in  road quality.  In  the  same  period,  the  average  time  needed  to  reach  an  all-weather  road decreased from 5.7 to 4.5 hours.
2  FAO/WIT, Crop and l-ood Security Assessincntjyiission to Ethiopia, Phase I, January 2009
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According  to  the  International  Fertilizer  Development  Center  (1993),  the  majority of  traders  do  not  own  means  of  transport,  they  rely  on  rented  trucks,  for  which markets  are  incomplete  and  linked  to  the  transport  of  manufactured  goods  and fertilizer,  which  constitute  the  backhaul  cargo  After  liberalization,  the  road  freight sector  has  increased  private  sector  participation  and  as  a  result,  private  fleets constituted  up  to  81  percent  and  38  percent  of  short-haul  and  long  haul  trucks, respectively  in  1993  In  the  area  of  rail  transport,  a  single  axis  used  to  link  the neighboring port of Djibouti with Addis Ababa. With the exception of trade into Dire Dawa.   rail   transport   is   not   an   important   means   of   moving   grain   in   Ethiopia particularly at present when the existing single axis rail is no more functional.
Moreover, the prospects  for the development of rail transport network  are more likely  impractical because of the difficult landscape and the extremely  rugged topography, undulating mountainous, gorges  and hills  that constrain the development of rail network in much of the country.
7.2       STORAGE FACILITY
One  of  the  handling  problems  that  cause  product  quality  deterioration  is  the  lack of  storage  facility.  Particularly,  quality  deterioration  due  to  poor  storage  is  a  major problem  of  products  supplied  by  small-scale  farmers  and  local  traders  as  well. Farm-level   storage   is   carried   out   by   means   of   primarily   traditional   basket granaries   while   traders   generally   store   grain   in   warehouses   with   an   average capacity  of  100  tons  that  has  poor  ventilation  and  dirt  floors  (Dadi,  Negassa.  and Franzel  1992).  About  72  percent  of  the  total  grain  production  is  retained  for  on- farm   uses   (Gebremeskel,   Jayne,   and   Shaffer   1998).   Moreover,   weak   storage infrastructure   leads   to   potentially   high   storage   losses,   with   crop   vulnerability   to damage from weevils, termites, rodents, birds, and moisture.
Even   though   storage   capacity   has   increased   after   the   enactment   of   market reforms,  roughly  two  thirds  of  traders  indicate  that  their  storage  facilities  are  still inadequate   in   terms   of   availability,   capacity,   and   location   while   19   percent   of traders    reported    that    they    were    unable    to    obtain    rented    storage    space (Gebremeskel,  Jayne,  and  Shaffer  1998)  Due  to  the  susceptibility  of  agricultural products to pest damage and the lack of adequate storage facilities, traders,
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A g ri c u I tu rajMarketmg
particularly  primary  and secondary  market traders  are often unwilling to store stocks  beyond the minimum turnover period. In most surplus  producing areas, private traders  can use the modern storage facilities  of the state-controlled grain marketing system to store their stock. The traders  would have access  to rented space in the 2,200 modern warehouses  with a capacity  of 1 million tons  located around the countryside. Although the warehouses  have a large capacity, the total capacity that private traders used in 1992 was less than one-naif (Lirenso 1993).
In   summary,   agricultural   markets   in   Ethiopia   are   fragmented,   unregulated,   lacking in    open    market    information    systems,    saddled    with    high    transaction    costs, constrained     by     inadequate     liquidity,     tending     to     operate     only     when     price differentials    are    considerable    -    all    of    which    limit    the    extent    to    which    any commodity   can   move   from   an   area   of   surplus   to   an   area   of   deficit   in   most Ethiopian    markets.    Moreover    infra-structural    constraints    increase    import    parity prices   and   lower   export   parity   prices   to   such   an   extent   that   marked   price fluctuations  can  occur  when  the  supply  of  a  commodity  with  a  relatively  inelastic demand varies above or below the requirements of the domestic population.
7.3 MARKET INFORMATION
Beyond infrastructural issues, market access  is  also determined by  the availability of reliable and timely  information. The CSA collects  food prices  for the preparation of the Consumer Price Indices  and recently  the historic  monthly  consumer price data base (covering all major commodities  in over 200 markets) has  been posted on CSA website and regularly  updated. At the same time, EGTE collects  and
publishes   wholesale   prices   of   main   cereals,   pulses   and   oilseeds   for   about   20
markets. However, the rapid and growing diffusion of mobile phones  is  the most remarkable change in price information management system.3 It is  contributing to develop new market strategies, with more possibility  of spatial arbitrage by searching in different markets  to compare prices  and reducing use (and costs) of intermediaries.
An   important   change   in   the   functioning   of   Ethiopian   agricultural   markets   is   taki place with the launch of the Ethiopian Commodity Exchange (ECX) on M
1 Between 2005/06 and 2006/07, the number of mobile subscribers had a growth rate of abou
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2008. Drawing inspiration on Chicago’s original board of trade, the ECX intends to
create  a  new  market  place  where  all  market  actors  (from  farmers  to  traders  to
processors  to  exporters  to  consumers)  can  take  advantage  of  more  transparent
market  information  as  well  as  the  possibility  to  hedge  against  price  risks  through
standardized  contracts  for  immediate  or  future  delivery.  The  ECX  guarantees  the
characteristics  of  the  traded  commodities  through  warehouse  receipts  issued  by  a
6   ECX-run   warehouses   network   in   surplus   areas,   where   produce   will   be
independently  weighted,  graded  and  certified.  The  goal  is  to  provide  a  reliable
system  for  handling,  grading  and  storing  commodities,  matching  offers  and  bids 
for  commodity  transactions,  that  allows  farmers  to  better  negotiate  prices  and  to
gain  a  market  premium  according  to  the  quality  of  their  product.  ECX  intends  to
create  trust  and  transparency  through  aggressive  market  data  dissemination  to  all
market  actors,  through  clearly  defined  rules  of  trading,  warehousing,  payments 
and   delivery,   and   through   an   internal   dispute   settlement   mechanism.   The
establishment  of  Electronic  Price  Display  Boards  located  in  public  sites  in  Addis 
Ababa  and  other  major  markets  in  the  country,  coupled  with  extensive  media
coverage,   provides   market   players   with   updated,   independent   and   real   time
access  to  price  information.  ECX  trading  started  with  four  commodities,  namely 
maize (white and mixed), wheat (soft and hard), haricot beans (white pea and red
kidney)   and   sesame   seeds   (Humera,   Gondar   and   Wollega).   Coffee   trading
recently  started  at  the  beginning  of  December  2008.  The  ECX  trading  system
works  as  a  physical  Trading  Floor  located  in  Addis  Ababa,  where  all  interested
sellers  and  buyers  verbally  negotiate  simultaneously  during  trading  hours.  Over
the  next  five  years,  ECX  has  the  ambitious  commitment  to  establish  5  000
Information   Kiosks   at   village   level,   networked   into   a   national   system,   where
farmers  can  receive  up  to  date  information  on  market  prices,  production  trends,
global  commodity  outlook,  weather  forecasts,  as  well  as  cropping  technologies,
fertilizer and seed prices, and other key information.
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PRODUCTION. MARKI 1 AND PRICE FOR AGRICULTURAL PRODUCTS IN I THIOPIA
8 1 NAT ION Al PRODUCTION OF MAJOR AGRICIJI FURAL PRODUCES
'  he  e  *s  sk  .vci!\  of  accurate  data  that  provides  a  precise  estimate  of  the  country's ac   \\   hnai   production   disaggiegatrd   by   crop   types   and   year   Generally,   it   is ohwiH   to  pet  annual  production  and  yield  data  since  the  agencies  like  the  CSA a^o  t^e  MoARD  that  have  the  mandate  to  carry  out  agricultural  surveys  do  not have   the   resources   required   to   undertake   the   assessment   of   crop   yield   and production   estimates   every   year   Therefore,   forecasts   and/or   projections   are   made based   on   the   data   from   surveys   conducted   in   the   past   or   make   approximate est  mate  of  production  on  the  basis  of  educated  guess  and  estimation.  This  is  also me   methodology   used   by   the   FAO/WFP   Mission   to   carry   out   crop   and   food se:<.'  ?v  assessment  in  Ethiopia  every  year  At  least  partially,  the  time  series  data
o
4
a ea
r           and
crop   production   estimates   shown   on   Table   8.1   below   was   also
obta  ned  based  on  previous  surveys  and  the  Missions  own  assessment  of  crop yield every year
Table 8 1 Cereals and pulses production, Comparison of 2001/02 to 2006/07 Meher season’s area and production
Year
Cereals
Area Production Area
Pulses
Total cereals &
pulses
Production
Area
Production
(000
ha)
(‘000 tons)
2001/02 9 845 10.960
2002/03 9 502 8,157
(‘000
ha)
1,502 1,515
(‘000 tons)
(‘000
ha)
(‘000 tons)
1,005 767
11,347
11,964
2053/04                     9 036             10,699         1,268
794
1,299
1,407
1,834
11,018
10,304
2004/05 9 234 13,751
2005/06 9 967 16,8/5
2006/0/ 10 458 18,282
1,408
1,449
1,690
10,640
I 1,417
12,148
8,923 11,493 15,049 18,281
Souicfc I ACJ/WI I  > Crop and I ood Security Assessment Mission to Ethiopia January 2009
20,110 Phase 1)
Hu- tot il nma and P,o(juctlon °*
iunl pulses dining 2001/02 to 2006/07
bhowri on„nf•<lu*>ibovr table is based on the I AO/WI I’ estimates which was derived I y n-< oik ihiig the (ASA pm haivest yield assessment, yield estimations carried out l,y iin- MoAKO and the mission's own assessment of yield and production of the
niiitiy (ieiKHiilly, il •*» <;|oai ,rom lt,IH
/Wo/ioz area and production has
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been increasing during 2001/02 to 2006/07 with the exception of the year 2002/03. Thus, total production increased from 8.9 million tons  in 2002/03 to 20 million tons  in 2006/07. According to the estimates  of the FAO/WFP mission, regional totals  of the 2008 peasant Meher area and production of cereals  and pulses  harvest from 10.42 million hectares  was  17.1 million tons. For comparison purpose, the 2004 - 2008 time series  data for the peasant sector area and production of cereals  and pulses  is  shown on Table 8.2 below. According to these data, the 2008 production estimate for cereals  and pulses  is  the highest that has been achieved to date. Nevertheless, its  validity  hinges  on the accuracy  of the area and yield estimates  prepared by  the BoARD staff and which was  adjusted by the FAO/WFP Mission.
Table 8.2: Meher Season Cereals and pulses production of Peasant holding (2004 - 2008)
Year
Cereals
Pulses
Total cereals & pulses
Area
(ha)
Production
(tons)
Area
(ha)
Production
(tons)
Area
(ha)
Production
(tons)
2004
7,637,524
10,030,836
1,349,116
1,349,579
8,986,640
11,380,415
2005
8,081,401
11,624,271
1,292,470
1,271,247
9,373,571
12,895,518
2006
8,471,920
12,879,793
1,379,046
1,578,622
9,850,966
14,458,414
2007
8,730,001
13,716,991
1,517,662
1,782,739
10,247,663
15,499,730
2008
8,999,351
15,554,073
1,433,627
1,534,160
10,432,,978
17,088,233
Source: Derived from FAO/WFP Mission report of Crop and Food Security Assessment, January 2009(Phase 1)
In comparison with Meher season, the belg season production and harvest is relatively  lower even under normal weather condition. Climate change related yield reduction and crop failure is  also more common during belg season than meher season crops. For example, the 2008 belg rains  were universally recognized as  having been extremely  poor. Thus, the MoARD estimate that 2.1 million tons  of different crops  were produced from 1.48 million ha during the 2008 belg harvest compared to 4.1 million tons  from 3.16 million tons  in 2007 which shows  a 50 percent reduction in area and a significant decrease in total production.
The  production  for  commercial  farms  in  meher  2007  and  08  which  are  estimates based on the CSA data for 2008 and also the estimation of the FAO/WFP Mission.
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■
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■
■
■
■
■
■
ti
■
■
■
■
■
■
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Thus, the cereals, pulses are oilseeds production data for Molier 2008 is as shown on Table 8.3 below.
Table 8.3: Area and production of cereals & pulse for commercial farms (2007-2008)
Type of crop Total Gram
Commercia Area (ha)
l Farm 2007 Production
(tons)
Commerciz Area (ha)
299.993
470,965
287,194
Cereals & pulses
178,290
410,965
141,315
I Farm 2008
Production
(tonsj_
439,131 350.943
Total cereals
158,031
380,965
139,984
349,456
Teff
4,577
7,613
109
89
Barely
614
1,150
1,481
2,549
Wheat
33,494
66,141
19,544
51,445
Maize
53,780
190,989
4,640
165,270
Sorghum
65,508
114,994
80.210
130,103
Finger Millet
58
78
-
-
Oats
-
-
-
Rice & others
-
-
-
Pulses
20,259
30,000
1,331
1,487
Oil Seeds
121,703
60,000
145,879
88,188
Source: FAO/WFP Mission report of Crop & Food Security Assessment, 2009 (Phase 1)
The  Mission  admitted  the  incompleteness  of  the  2008  data  that  were  provided  by zonal  agricultural  bureaus  and  by  the  commercial  farms.  Because,  compared  to the CSA data for the previous year a further 34 000 ha of maize and 19 000 ha of pulses   that   have   not   been   recorded   to   have   been   planted   commercially   in Amhara,  Oromiya  and  SNNPR  Regions.  Thus,  the  2008  Meher  season  total  area and  production  of  commercial  farms  would  be  much  higher  than  the  estimate shown on the Table.
Based  on  the  above  estimate  of  the  FAO/WFP  Mission,  the  national  harvest  of meher  season  2008  is  the  combined  peasant  holding  and  the  commercial  farm which  was  estimate  to  be  10,563  million  ha  total  area  and  17.435  million  tons  of total  cereal  and  pulse  production.  A  total  of  15.90  million  tons  of  cereals  were produced  from  9.129  million  ha  of  area  while  the  total  production  of  pulses  was only 1.535 million tons from a total area of 10.563 million ha.
8.2 MARKETABLE SURPLUS AND THE SUPPLY OF FARM PRODUCES
For various reasons already mentioned, accurate estimate of production data that is disaggregated into various uses like the amount used for consumption, seeds feed, marketable surplus, etc is not available particularly for the smallholder
sector Due to the lack of data that clearly indicate the actual amount of produces used for different purposes, it is difficult to make an accurate estimate of market
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supply  for  each  crops  produced  in  the  country  Apart  from  the  lack  Vrf^ata^on marketable  surplus  or  aggregate  supply  of  each  agricultural  produce,  thoTFls  also scarcity  of  data  that  shows  the  actual  demand  for  the  respective  products.  As  a result,  one  would  not  easily  arrive  at  a  precise  estimation  of  the  demand  -  supply gap of farm produces in the domestic market. Therefore, in order to make an
approximate estimate of supply  - demand relationship, the annual reports  of FAO/WFP Mission assessment of the national grain supply  - demand balance has been used since it is the most reliable estimate of the domestic supply of farm
products  particularly  cereals  and  pulses  and  also  the  aggregate  demand  for  these products.   Accordingly,   the   national   grain   supply   -   demand   balance   estimated   for the  respective  years,  i.  e.,  2004/05  -  2006/07  compiled  and  depicted  by  Table  8.4 below  shown   the  trends   in   the   aggregate  production  and  supply   of  major  farm produces.
Table 8.4: National grain (Cereals & Pulses) supply/dcmand balance ('000 tons)
k 
-
Description
Supply - Demand Balance
2008/09
I 2007/08
2005/06
2004/05
Domestic Availability (Supply)
17,599
20,950
18,998
15,759
- Opening stocks
214
522
407
400
- Total domestic production
17,385
20,428
18,591
15,359
Utilization (Demand)
18,259
20,950
18,998
15,759
Food use
14,456
14,253
12,930
11,395
Seed, feed use. etc & losses
3,509
5,038
4,746
3,707
Commercial/informal exports & closing stock
294
1,659
1,322
657
—J
Source Computed based on the FAO/WFP crop and food security assessment reports.
As  shown on the above table, the total domestic  production fluctuates  every  year. The total produce domestically  available in 2004/05 which was  about 15.8 million tons  is  the lowest as  compared to the total production of nearly  21 tons  estimated for 2007/08 which was  the highest in the last four consecutive years. For the purpose of this  study, the total at national level supply  would be approximately equal to the domestically  available grain which is  the sum of total domestic production and closing rosorvo, which is  the grain kept in warehouses  to meet an unanticipated emergency situation. Similarly, demand is assumed to be equal to
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more  than  the  total  grain  utilization  which  includes  the  grain  used  as  food,  seed, feed,  etc  and  also  the  amount  allocated  for  export  and  closing  stock  each  year. The  opening  stock  or  the  food  grain  held  at  the  beginning  of  each  year  and  the closing  stocks  or  the  amount  kept  as  reserve  by  the  Emergency  Food  Security Reserve (EFSR) and in the WFP warehouses vary from year to year.
On the basis  of the data compi'ed from the food security  assessment of the Mission, at the minimum, demand would be the amount of grain mainly  cereals and pulses  required for food and also the total grain exported through formal and informal commercial entities  each year. Therefore, the total volume available for commercial and/or informal exports  and also the closing stock  which is  the volume of grain allocated as  reserve for emergency  programs  are the potential market outlets  for domestic  producers. Apart from the demand for food in the domestic market, the annual reserve requirements  would be one of the major sources  of demand for the produces  of the irrigation project. As  wheat and barley  account for the bulk  of the closing account or the volume of grain which the EFSR and WFP would purchase from domestic  sources, the project could be a major supplier of these products each year.
In addition, the low volume of exports  in some of the years  shows  inadequate availability  of export supply  for some commodities  and hence indicating a tremendous  export market potential for the project. As  the last line of the table shows, the amount of commercial/informal exports  and closing stock  was  the lowest or only  about 294,000 tons  in 2008/09 while it was  much higher during the previous three years. The two likely reasons for the decline in are 1) the decline in export market demand mainly  due to the global economic  recession; and 2) the decrease in the number of people that depend on emergency  food and hence a smaller reserve requirement for this  particular year. Nevertheless, a significant amount of grain is  purchased by  organizations  like the WFP and other relief agencies  in order to supply  food grain to food insecure population each year and hence serving as  a potential market outlet for the project of the project. Therefore, one of the priority farm produces of the irrigation project could be the production of food grains  particularly  wheat which humanitarian agencies  would purchase for supply to food insecure population.
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FARM product price trend in the domestic market
■1 prices of farm products in the regional market
2006, the wholesale prices of wheat and barley in Bale Robe market lr >ed relatively stable despite a slight price rise during 2006. However, the
ncrease in prices was more than double during 2007 - 2009 as depicted on the
following graph
I
■
Figure 9.1: Wholesale prices of Barely & Wheat in Bale Robe (2000 - 2009)
I
■
I
■
I
■
I
0
I
Even though the crop price data for 2007 - 2009 was not available during the field
work,  the  average  prices  data  collected  from  the  Early  Warning  and  Food  Security 
(EWFS)  office  in  Robe  is  almost  similar  to  the  wholesale  price  compiled  by  the
EGTE (Figure 2 above). Since the Robe market is both the regional market and is 
also  the  major  market  for  Sinana  woreda,  Figure  9.2  below  which  is  constructed
on the basis of the EWFS average price data for the five major cereals will provide
a clear picture of price development in the regional market.
0
0
0
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Figure 9.2: Average prices of major cereals in Sinana Worcda
(2000 - 20
06)
Spice  especially,  Cummins  and  Fenugreek  are  the
two  maj
or
products  traded
in
the  regional  market  and  the  trend  in  their  prices  is 
shown
for
the  period  2003
-
2006 (Figure 9.3). As the graph depicts, average prices of Cummins black for Bale Robe market was about 250 Birr per quintal in 2003 and this increased to 800 Birr in 2006 which is an increase of almost three folds. Similarly, Fenugreek price rose from  less  than  150  Birr  per  quintal  in  2003  to  about  Birr  550  per  quintal  in  2006. Though  data  is  available  only  for  two  years,  ginger  price  trend  will  more  likely  be similar to the price trends of the two products.
Figure 9.3: Average prices of spices in Bale Robe (2003 - 2006) Figure 9.3 Average prices of spices in Bale Robe (2003 -2006)
— Cummin black ~         ~ Fenugreek • x- Ginger
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ricultural_Market
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As 
pulses 
particularly 
lentils,   hose
beans   and
chi
ck 
pea
are
commodities
of
inter
national
commercial
importance,
it
is  necessa
ry 
that
the
proje
ct  give  gre
ater
attention to the developments  of pulse prices  both in the domestic  market and export market. Accordingly, the prices  of pulses  in Bale Robe regional market have been collected to assess  the price trend (Figure 9.4). There was  relative stability  in the regional market price of the major pulses  namely  lentils, hose beans  and chick  during 2000 to 2004. The price level tended to decline slightly from 2000 to 2003 and then, increased gradually  during 2004. Starting from 2005, prices  of all pulses  rose significantly  with a sharp rise in the price of lentil during the subsequent years.
Figure 9.4: Average prices of pulses in Bale Robe (2000 - 2006)
Figure 9.4 Average prices of pulses in Bale Robe (2000-2006)
750 " — 700
o 62,0 600
.5 550 - CO 500
o 400 “■  300  - m 250 Cd 200 -
------------------------ — 
X-
A
----------------------------------------------- x 
/
a/
/
------
---- ——
q 150
> 100 -
<       50
0
------ - _____________ ___ /■-—
2000          2001          2002          2003          2004          2005           2006
—♦— Lentils —•— Horse beans        Field peas         Chick pea
9.2 FARM PRODUCT PRICE TRENDS IN THE CENTRAL/NATIONAL
MARKET
Prices  of major cereals  are characterized by  large seasonal fluctuations. Generally, prices  start to decline from September onwards  as  the large supply  that floods  the market after the major harvest, meher will increase supply  exceeding the demand since the bulk  of the annual sales  of farmers  take place are usually during the months  from December to February. Therefore, supply  will increase pushing prices  further low as  farmers  need cash to fulfill their tax  and loans obligations  contracted along the season and to purchase other food and non-food
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commodities. Between November and December, prices reach their lowest le
for maize while it is in January and in March respectively for wheat and teff. Then,
prices start rising again and reach their peak in August, during the lean season,
the available stocks gradually get depleted before the new meher
approaches In general, seasonality is higher in the case of maize due to tech
difficulties of storing the product for long time as a consequence of high mo’
content and insect damage.
Prior to 2007. there was  a fairly  stable relationship among prices  of main cereals, with teff having the highest unit price, followed by  wheat, sorghum and barley  and then by maize with the lowest price (Figure 9.5).
Figure 9.5: The mean wholesale price trend for selected commodities in Addis Ababa (2000 - June 2009)
Figure 9.5 The mean wholesale price trend for selected commodities in Addis Ababa (2000 -June 2009)
left Mixed ♦ l eft While                                  —p Wheat White
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While the general price levels  remained stable with minimum deviation from the mean during 2000 - 2005, price levels  rose sharply  during the subsequent years. For example, the wholesale price rises for teff and wheat was relatively smaller in the preceding years  (Figure 9.6). Nevertheless, starting from 2006 there was  a sharp increase in the prices  of these products  that tend to show similar trends overtime.
Figure 9.6: Monthly wholesale prices of Teff & Wheat in Addis Ababa (2000 - 2006) Figure 9.6 Monthly wholesale prices of Teff & Wheat in Addis Ababa (2000 - 2006)
Wheat White —♦—Teff White      Teff Mixed
Although the price level for barley, sorghum and maize is  much lower, the magnitude of price increase was  relatively  smaller until 2005. During this  period, the general trend in the prices of barley and sorghum is nearly steady while there was  a slight difference in the pattern of maize price which tends  to be more unstable. Figure 9.7 below depicts  the trends  in the price pattern of the three commodities during 2000 - 2006.
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igure 9.7. Monthly wholesale prices of Barley, Maize & Sorghum in Addis Ababa
(2000 - 2006)
Vigutr Q.7 Monthly wholesale price, ol Bailee. Maize & Sorghum in Addis Alinlm (21)00 - 2006)
Obviously, increases  in the prices  of all the five commodities  are more evident during the last three consecutive years  especially  beginning from the last months of 2006 and the beginning of 2007 up until 2009. When comparing prices  of the five major cereal commodities, it is  evident that the expected “typical” pattern has not strictly  pertained during the last three years  from 2007 to 2009. Based on EGTE data, wholesale prices  of teff, wheat and barley  have shown a steady upward trend during this  period. By  the end of 2006, monthly  wholesale prices  of all the major commodities  registered record levels  in the Addis  Ababa market, with an increase of between 30 and 20 percent above the previous  year’s  prices  at the same time. A much higher rate of price increase which was  double in the case of teff was  registered during 2008. It was  only  in 2009 that a slight decline was observed in the prices  of the major cereals. The monthly  wholesale price trend for teff and wheat in Addis  Ababa market during 2007 to 2009 generally  depicted distorted prices  as  the pattern of price development for these commodities  depicts (Figure 9.8)
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Figure 9.8: Monthly Wholesale Prices of Teff & Wheat in Addis Ababa (2007 - 2009)
—Teff Mixed               Teff White           Wheat White
Similar to teff and wheat price trends  during 2007 - 2009, there was  also a sharp rise in the prices  of barley, sorghum and maize during the same period. During this  period, the price of sorghum was  more than double as  compared to the average prices  in the preceding years. It was  only  the price of mixed barley  that tended to rise gradually  reaching its  peak  in September 2008 and then started to decline steadily. Nevertheless, apart from the sharp rise in the prices  of white barley, white sorghum and maize, which is  almost double as  compared to price levels  in the previous  years, the high price level also pertained during 2008 with a slight decline in 2009 (Figure 9.9).
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9              Monthly Wholesale Prices of Barley, Maize & Sorghum in Addis Ababa (2007 - June 2009)
Barely Mixed Barely White Sorghum White Maize
As  stated already, for long-cycle cereals  particularly  sorghum, the trend in monthly wholesale prices  reached a maximum in March 2008 and the high price was maintained for the rest of the months  despite sharp fall for a brief period in April, August and December. As  shown on the above graphs, the wholesale cereal prices  in Addis  Ababa market have reached record levels  between August and September 2008. In particular, between April and August 2008, retail prices increased by  almost 60 percent in the case of wheat, some 80 percent for teff and sorghum and more than 90 percent for maize (FAO/WFP, 2009).
In general, in comparison with the price level prior to 2006, the wholesale prices  of all cereal commodities  in Addis  Ababa market remained at high level until June 2009. With regard to the reason for the sharp rise in the prices  of cereal commodities  and other farm produces, there are diverse opinions  and views  that hinge to domestic  factors  like scarcity  of production, increases  in per capita consumption, etc  while the export of grain and the decrease in the exchange rate of Birr to hard currencies  particularly  the US Dollar are among the external factors that are believed to have contributed to domestic price rises.
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10. MARKETING AND PRICES OF FARM PRODUCES IN
BALE GADULA
This  section  deals  with  the  findings  el  the  faun  pioducl  maiketing  system  carried out in the areas of Balo Gadula irrigation project I ho srudy findings arc based on the  data  and  infoiniation  collected  through  the  interviews  and  discussions  with individuals  and  groups  of  people  particularly  the  sector  office  staffs  in  Gore woreda, farmers, traders and other key informants who are residents of the town and  kebeles  within  the  vicinity  of  the  project.  In  addition,  primary  and  secondary data and information relevant for the marketing study collected from sector offices of  the  woreda  and  other  sources  wore  analyzed  to  supplement  the  findings  from interviews  and  discussions  conducted  with  producers,  local  market  traders  and other  key  informants  who  have  deep  knowledge  about  the  agricultural  production and marketing system.
10.1 MARKET AND PRICES OF FARM PRODUCES IN THE STUDY AREAS
10.1.1 Market Infrastructure in the study areas
10.1.1.1 Road network and accessibility
Even though the woreda has  enormous  agricultural production potential, the existing market infrastructure and the level of its development is still at a low level. This  is  particularly  the case for the road and transport infrastructure because except the main road that connects Goro with Ginir and Robe, there is a lack of adequate all weather road network  that connects  kebeles  and villages  with the main market in Goro.
There is very poor road network in Goro woreda including the roads that connect kebeles  and villages  with the main markets  of the woreda. Also, the major road that crosses  Goro with the zonal capital, Robe town has  been severely deteriorated and is  particularly  difficult to pass  for heavy  tracks  that are loaded Even though Goro and Sinana areas  are among the high potential areas  that produce and supply  a large volume of commercially  important commodities  that include major cereals, pulses, oilseeds  and spices, the main road that connects these woredas with the regional market like Awassa and Shashemanne is one of the major bottlenecks  During the field work, the study  team has  observed numerous tracks that have been trapped in the mad and sometimes they get
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ken and hence forced to stay at the spot carrying full load of the produce,
hus, unless the existing road is rehabilitated, the efficient delivery of farm
produces to the market would be impossible and hence commercial vehicles can t
Provide transport services.
The problem of road access  is  not limited to the Goro —  Robe road as  the main road that connects  Robe with the central market in Addis  is  also in a very  poor condition. Even though the problem existed long ago, the condition of this  road has  worsened because of the very  rough and bumpiness  of the temporary  roads used as  substitute for the new asphalt road under construction which is  still far from completion. In its  entirety, the road from Kofele to Robe is  nearly  impassable because on top of the difficult topography, motor vehicles  encounter enormous difficulties  to pass  on the uneven surface, ditches, gullies, etc  crossed while driving through the substitute road all the way  from Adaba to Dinsho. Thus, in its present condition the accessibility  of road would remain a major bottleneck  for every  motor vehicle including commercial transport service providers. Nevertheless, if proper repair and maintenance is  done, the Goro - Robe road which also connects  the project site with Robe could be passable for any  motor vehicle including heavy tracks.
10.1.1.2   Storage Facility in the study area
The lack  of storage facility  causes  product quality  deterioration which is  one of the handling problems  of farm products  destined for market. This  is  particularly  the problem of small producers  whose poor storage causes  the deterioration of product quality. However, since small producers  supply  their product to market soon after harvest, the duration of storage in the traditional storage is  relatively shorter. Thus, products  that are marketed soon after harvest like wheat and spice that farmers  in Bale Gadula supply  to market are mostly  stored for quite short duration and hence one will not observe significant quality deterioration.
Storage facilities that local traders use do not meet the standards and hence the o or storage condition will contribute to product quality deterioration. It was 
observed during the visit to local traders in Goro and the nearby market of Meniyu Lt the walls and roofs of almost all the storages used by local traders are made
of legated iron sheet except the floor which is madejrf concrete. Traders use
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orages  to  provide  shelter  for  the  products  until  they  supply  them  to ale buyers. These storages of temporary nature whose walls and roofs are
de of corrugated iron sheet are used by all local wheat and spice traders in each of the Kebeles of Bale Gadula. Farmers supply their products directly to the storages of local traders that assemble the product for delivery to regional and/or central market traders. As the products are stored for short duration, treatments that help to eliminate insects and pests from the storage are not that common in all the facilities observed.
10.2AGRICULTURAL MARKETING CHANNEL, SUPPLY CHAIN AND
FARM PRODUCT PRICE TRENDS IN BALE GADULA AREAS
10.2.1 Agricultural marketing channel and supply chain
This  assessment was  carried out taking specific  farm produces  which the envisaged irrigation project would more likely produce and supply to the market. Two most important agricultural commodities  which have high commercial value namely  wheat and various  spices  which are the most important traded commodities produced in Bale Gadula have been treated as describes below.
Wheat: Bale zone in general and in particular Bale Gadula and the neighboring woredas like Sinana are among the major wheat belts of the country that produce and supply a large volume of wheat to the domestic market. Wheat producers in these areas  supply  their produces  either directly  to local market traders  and/or through brokers or commission agents that assemble the product and deliver it to wholesalers that in turn supply to the central market and/or food factories. Thus, in the marketing channel and the supply chain of wheat, the product passes from the producer to local traders  and/or brokers/commission agents  that assemble at the level of local market. Then, the product is  delivered to the wholesale buyers  and the wholesalers  transport the product for destination to 1) central and/or regional market that redistribute it to retailers  and consumers; 2) to food factories  that purchase it to further process  and produce wheat floors. In the case of durum wheat, pasta and macaroni factories undertake bulk purchases for use as an input in their food processing factories. Therefore, in this  case, the supply  chain involves  numerous  market participants  like producers, brokers/commission agents, wholesale buyers and food factories (floor mills and pasta and macaroni
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factories) that play an important role in the marketing channel to facilitate product delivery to its final destination, i. e., consumers and/or food factories.
Spices, the most important spices  that have commercial importance are cumin black, fenugreek and ginger. Over the past four years particularly since 2004, the volume of supply of these spices has been increasing in response to rapid growth in prices. As  these spices  have good demand both in the domestic  market and internationally, production has  been increasing significantly. The spices  produced in the study  areas  are assembled by  local traders  who sell them to wholesale buyers  that come to the region. A large number of local traders, commission agents  and/or brokers  that represent wholesale traders  play  an important role in the marketing channel and supply  chain of spices. At the local market, local traders, commission agents  and/or brokers  will buy  the produces  from farmers and assemble it for the wholesale buyers. Then, they  deliver the product to the wholesale buyers  from the central market that in turn distribute the products locally  and/or clean and export them abroad. Thus, the marketing chain for the product starts  from the origin i. e., the producers  and then passes  through local traders, brokers  and commission agents  that assemble the product at the level of the local market. Then, it will be delivered to the wholesale buyers  who would distribute it to retailers  and/or undertake the cleaning and packaging for export to the international market.
Pulses: major pulses produced in the woreda and the project site includes lentils, field peas, horse beans and chick peas. Farmers directly sell their produce to local traders  or  assemblers  that  come  to  their  villages  and/or  to  retail  traders,  brokers and   commission   agents   who   assemble   the   produce   in   the   main   markets particularly   Goro   and   Meniyu   market.   Since   wholesale   traders   can’t   directly purchase  the  product  from  farmers,  it  is  through  the  retail  traders,  brokers  and commission   agents   that   produce   is   delivered   to   wholesale   traders.   Then,   the wholesale    buyers    transport    the    products    through    the    following    marketing channels;
o Supply to wholesale traders in the major regional markets like Awassa and Shashamanne that redistribute to retail traders and consumers in towns and small markets;
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° To central and/or regional market wholesale traders  that supply  the products  to wholesale traders  in other regions  or to local food processing factories; and
o  To  export  traders  that  do  the  cleaning,  sorting  and  packaging  for  supply  to export market.
Each of the above supply  chains  involves  numerous  market intermediaries  that provide specialized services. Thus, starting from the point of production to its  final destination (consumers), the product passes  through all the major players  that operate at stage in the marketing chain.
10.2.2 Farm product price trends in the study area
In   order   to   understand   price   development   in   the   local   market,   the   local   market price   data   which   were   available   during   the   field   work   have   been   collected   and analyzed.   For   Bale   Gardula   irrigation   project,   the   market   and   prices   of   farm products  in  Goro  woreda  has  been  used  because  it  is  more  relevant  since  Goro market   is   in   close   proximity   to   the   project   location.   Based   on   the   price   data available  for  the  period  2000  -  2006,  the  general  prices  trend  of  five  major  cereals namely  wheat,  teff,  sorghum,  maize  and  barley  produced  in  the  woreda  have  been analyzed   (Figure   10.1).   As   evident   from   the   graph,   prices   of   all   products   depict similar  trend  as  the  change  in  the  price  of  one  products  pushes  the  price  of  its close  substitute  like  the  prices  of  white  and  mixed  teff  and  also  that  of  maize  and sorghum.  It  is  also  important  to  note  that  average  price  of  each  of  these  produces was   stable   prior   to   2004   while   the   price   rise   was   more   significant   during   the following years.
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Figure 10.1: Average Prices of Major Cereals in Goro Woreda (2000 - 2006) Figure 10.1 Average prices of major cereals in Goro woreda (2000-2006)
~Wheat —Teff White Teff Mixed Sorghum ~Maize —• Barley^
The trend in the local market prices  of pulses  for Goro woreda during 2000 - 2006 is  shown below (Figure 10.2). As  evident from the graph, the average price of lentils  is  much higher than the prices  of the three other pulses  namely horse bean, chick and field peas. Generally, pulse prices remained relatively stable prior to
2004  and  then  after,  a  steady  rise  in  prices  took  place  during  the  subsequent years.
Figure 10.2: Average Prices of Pulses in Goro Woreda (2000 - 2006)
Goro  woreda  has  also  an  enormous  potential  for  the  production  of  commercially 
important  spices  like  Cummins,  fenugreek  and  also  ginger.  Even  though  these
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P
P
pi
spices  are produced by  small scale farmers  in the woreda, there are also good prospects  for the growth of production since the products  fetches  higher prices and diverse market outlets  especially  the export markets. Analysis  of the available price data also indicate that spice production and marketing is  one of the available opportunities  for the envisaged irrigation project. As  shown on the graph below, black  Cummins  and fenugreek  are the two major spices  that fetch higher prices. The increase in the price of black  Cummins  was  more significant during the past four years while the average price of Fenugreek showed sharp rise starting from
2005 (Figure 10.3).
Figure 10.3: Average Price of Spices in Goro Woreda (2003 - 2006) Figure 10.3 Average price of spices in Goro woreda (2003-2006)
Pi
p
p p p p
—Fenugreek Cummin Bl
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for farm produces
^ XP0RT market potential and opportunities
11.1 export market potential for farm produces
There is  a tremendous  export market potential for most of the agricultural products produced in Ethiopia. Nevertheless, access  to export market depends  on the level of competitiveness, the responsiveness  of domestic  production to developments taking place in the export market and also the general condition of agriculture and food security  of a given country. Thus, in order to be successful in the export market, products  exported should be competitive in price and quality  and this competitiveness  should be sustained through ensuring from time to time that the supply  responses  are based on the signals  transmitted by  the development in the export market. In other words, product supply  to export market should not be interrupted due to the factors  that disrupt domestic  production and cause product shortage in the domestic  market. This  is  also an important factor that affects  the sustainability of Ethiopia’s farm product supply to the export market.
Even though Ethiopia has  the potential to produce and supply  numerous  farm products  to the export market, farm production is  affected due to the frequency  of drought and crop failure causing shortages  of food grain that lead to domestic price increase. Particularly  during the years  when there are production shortfalls, exports will further increase domestic prices. Thus, the export of grains will have a direct link  with the country’s  grain balance sheet which is  presumably  based on national food security. As  a result, official exports  of cereals  were minimal and, since the beginning of 2006, the government imposed on the export of cereals  in order to avoid further increases  in domestic  prices. In 2005/06, before the imposition of the ban, teff exports  have increased substantially. However, despite the government’s  ban, several market analysts  suspect that significant informal exports  are taking place, especially  to Kenya, Sudan, Eritrea and Somalia (FAO/WFP 2007) On the contrary, official exports  of pulses  have increased substantially  in the previous  years, especially  due to the significant demand for green beans in Europe, for chickpeas in India and Pakistan and for horse beans in Kenya Total official exports of pulses in 2005/06 have been estimated by the
Custom Authority at about 110 000 loos.
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Despite  the  ban  on  the  export  of  grain  starting  from  the  beginning  of  2006,  the country  s  exports  of  farm  produces  particularly  the  non  -  traditional  commodities continue to take a large share of the total export. Thus, next to coffee which is the traditional   export   commodity,   oil   seeds   and   pulses   arc   the   two   major   farm products  exported  during  2005/06  -  2007/08.  As  shown  on  Table  11.1  below,  the export  price  of  oilseeds  increased  significantly  during  this  period  while  the  volume of oilseed exported declined. Comparison of the 2005/06 and 2007/08 price which was  respectively  796  USD4   and  USD  1,440  per  ton  shows  nearly  80%  increase. Nevertheless,   the   2005/06   volume   of   oilseed   export   amounting   265,700   tons declined to 152,100 tons in 2007/08 and the decrease was more than 40 percent.
Table 11.1 Ethiopia’s Exports of Major Agricultural Commodities during 2005/06 - 2007/08;
Agricultural Commodities Exported
Export value in million USD & volume in ‘000 tons 
by year
2005/06
2006/07
2007/08
Coffee
Value
Volume
354.3
147.7
424.2
176.4
524.2
170.7
Oilseeds
Value
Volume
211.4
265.7
187.4
235.0
219.0
152.1
Pulses
Value
Volume
37.0
110.4
70.3
158.8
144.5
233.0
Chat
Value
Volume
22.3
89.1
92.8
22.7
108.2
22.4
Leather & leather products Value
Volume
75.0
15.4
89.6
15.8 |
99.2
14.9
Source: National Bank of Ethiopia & Ethiopian Customs Authority
Apart from the major export commodities  indicated on the above table, the other commodities that Ethiopia exports include cut flowers and foliage, live animals and meat, fresh vegetables, herbs  and spices. Nevertheless, except cut flowers  and foliage, live animals  and meat, the quantity  of particularly  herbs  and spices exported every  year is  quite small despite the enormous  export market potential for these products  especially  in the EU market. The most important export commodities in which the country has advantage including the herbs and spices
4 Cnmnuted by dividing the exportj^lueb)Hhewluj2£2££^^
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that  have  market  potential  and  the  major  importing  countries  of  these  products have been assessed and discussed with detail in the following.
11.2 MAJOR EXPORT COMMODITIES AND POTENTIAL MARKETS
11.2.1 Grains
According  to  the  findings  of  the  CBI  EU  market  survey  (2004),  grains  are  mostly used  in  the  processing  industry  (bread  and  bakery  products,  muesli,  rice  cakes and  cereal-based  drinks).  Besides,  grains  are  used  as  consumer  packs  for  retail sale  and  for  animal  feed.  The  USA  and  Canada  dominate  the  market  for  both conventional   and   organic   commodity   grain   products   (e.g.   wheat,   maize   and barley).   Nevertheless,   opportunities   for   exporters   in   developing   countries   are limited  and  therefore,  the  export  of  grains  would  be  more  likely  unrealistic  at  this stage when the country’s faces food insecurity.
11.2.2 Pulses
Pulses  are  mainly  used  for  consumer  packing  for  the  retail  trade,  but  also  for bread   spreads   and   convenience   foods.   Soy   has   numerous   uses   in   virtually   all food  sectors;  e.g.  drinks,  desserts,  tofu  and  vegetable  burgers.  In  2001,  all  EU countries   together   consumed   about   5.6   million   tons   of   pulses.   France   is   the leading   consumer   accounting   for   24   percent   of   EU   consumption,   followed   by Spain  (18%).  About  27  percent  of  the  total  world  imports  of  pulses  in  2001  were destined for the European Union.
The   most   interesting   product   group   for   exporters   in   developing   countries   is specialty   beans.   People   are   looking   for   non-animal   foods   that   can   provide   the necessary  proteins.  Soybean  is  often  used  as  a  protein  provider  in  the  preparation of  other  food  products,  but  kidney  beans  and  lima  beans  and  chickpeas  can  also serve  as  meat  replacement.  Often  the  beans  are  sold  in  cans.  However,  they  are also used in ready chilli and Tex Mix meals and by the feed and pet food industry. On  the  basis  of  the  import  data  for  2000  -  2002,  Italy  and  the  United  Kingdom  are the   leading   markets   for   specialty   beans.   Organic   traders   and   wholesalers   offer beans such as azuki beans, lentils, mung beans, pinto beans, and red kidney
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beans. The consumption of pulses in EU member States is shown on Table 11.2 below
Table 11.2 Consumption of pulses by EU member states (tons), 2000 - 2002
iCountry
2000
2001
2002
| Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
The Netherlands
Portugal
Spain
Sweden
United Kingdom
EU-15
EU-25
71,479
476,508
158,388
10,338
1,406,440
577,121
74,285
55,381
547,096
264,328
66,735
1,221,392
72,771
701,108
5,705,495
6,217,451
106,558
324,111
85,891
10,333
1,388,937
695,882
69,053
43,906
535,585
195,441
68,303
1,047,105
82,641
958,806
5,615,808
6,100,325
114,559
202,579
146,142
10,334
1,171,479
462,596
75,552
28,406
542,337
150,813
68,950
895,450
89,663
786,370
4,747,978
5,132,482
Source: CBI 2004 EU Market Study
11.2.3 Seeds
Seeds  are supplied to, and further processed by, the food industry. Sometimes seeds  are used for consumer snack  foods. As  the trade in these products  is business-to-business  trade, there are no direct consumption figures  available for
them.  According  to  FAO ,
5
in  the  EU-25,  consumption  of  sunflower  seeds  in  2002
amounted to 4.8 million tons  and that of sesame seeds  amounted to 77 thousand tons  (CBI, 2004). France and Spain are the leading consumers  of sunflower seeds. In 2002, consumption of sunflower seeds  in Spain and France both amounted to 1.2 million tons. Greece, Germany  and The Netherlands  are the leading consumers  of sesame seeds. Nevertheless, the share of the new accession countries was comparatively small.
The kernels  of sunflower seeds  are appreciated for their nutritional value and their flavor. They  are used in the manufacture of a large number of food products, including meals, desserts, cereals, confectionery, ice creams, salad toppings  and
5  Consumption figures are taken from FAO which estimated based on production + imports - exports + stock changes. 
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'  acxs  Da t
r
o*  the  production  of  confectionery  sunflower  seeds  is  used  as  bird
re- S-~ ower sees o s widely used for commercial as well as home cooking.
cs.  a  sunflower  seed  oil  is  used  for  margarine  making,  as  salad  oil,  or  for ~g  purposes  Defatted  sesame  meal  is  almost  entirely  used  in  compounding
ca a°ceo 'ooastu*fs  Since 1999 total sunflower seeds  imports  into the EU are oecneased by  more than 50%. The market for the imports  of peeled seeds, used " ‘ooo a’xj snacks, might have a better potential since this  may  be cheaper than -rxrtmg the seeds  and peeling them in Europe. Table 11.3 below depicts  the
t'end  n  the  consumption  of  sunflower  seed  by  EU  member  states  during  2000  - z u «z
'able 113 Consumption of sunflower seeds by EU member states, 2000 - 2002 in
million tons
Country
2000
2001
2002
France
•a /
’.et^ehands
Germany
Portugal
A jstria
Be gium
Greece
United Kingdom
Sweden
F nland
Denmark
Ireland
Accession countries
EEUU--2255 J
1,337
1,549
683
651
399
293
124
105
109
20
13
10
72
0
658
6,025
1,406
1,545
676
621
376
199
108
76
90
27
15
13
35
1
845
6,034
1,215
1,202
455
367
251
171
107
77
70
39
16
16
1
1
816
4,816
Source OBI 2004 EU Market Study
Sesame seeds  are traded much less  than sunflower seeds, but the product is important for some developing countries  and its  import into the EU is  climbing rapidly  Since 1995, the import of sesame seeds  has  grown by  56 percent. Sesame seeds  are supplied to markets  in North America, Europe, and East Asia by  countries  iri Africa, I atm America, and South Asia. Cooking oil can be extracted from sesame seeds, and this  is  their main use, especially  in Asia. In North America and I uropu, raw sesame seeds  are generally  used for toppings  on breads  such as  hamburger buns, bagels, broad sticks, and other baked goods Restaurants arid natural food store customers purchase sesame seeds for use in
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ethnic  dishes. Middle Eastern countries  use sesame seeds  for tahini paste and halvah, as  well as  for oil. Table 11.4 below shows  the consumption of sesame seeds by EU member states.
Table 11.4 Consumption of sesame by EU member states, 2000 - 2002 in tons
Country
2000
2001
2002
Greece
The Netherlands
Germany
United Kingdom
Italy
France
Spain
Sweden
Austria
Denmark
Belgium
Finland
I Ireland
Portugal
Accession countries EU   25
-
Source: CBI 2004 EU
18,434
15,819
14,761
6,106
4,816
3,924
1,935
1,705
1,642
1,317
1,299
373
211
50
11,011
83,420
17,851
14,685
16,022
6,343
5,090
5,383
1,825
1,982
2,002
1,374
1,360
301
212
60
12,997
87,509
20,456
3,901
15,473
5,619
6,776
4,766
1,334
2,405
1,971
1,199
1,214
368
263
62
11,696
77,521
Market Study
11 2 4 Spices and Herbs
Spices and herbs consumption of the EU increased to 252 thousand ton .n 2002.
The leading consuming countries  in the EU-15 are Germany, the UK. The Netherlands  and France together accounting for 50 percent of EU consumption. Hungary  has  the highest consumption of the new member states  and ,s  one of the largest consumers  in the entire EU as  well. Table 11.5 below shows  the consumption of spices by EU member states during 2000 - 2002.
M
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Table 11.5 Consumption of spices by EU member states, 2000 — 2002
(tons)
Country
EU - 25
Accession countries*
Hungary
Germany
Unites Kingdom
The Netherlands
France
Spain
Belgium
Italy
Greece
Sweden
Ireland
Portugal
Austria
Finland
Denmark
2000
2001
2002
220,348
18,779
39,992
44,174
34,605
22,990
13,612
9,855
6,618
4,859
5,013
4,873
2,325
2,132
5,434
1,502
3,295
239,188
19,116
60,141
45,039
37,825
12,490
12,891
15,935
6,204
5,943
4,488
4,794
2,495
2,201
4,382
1,239
3,677
252,405 18,833
57.016
48,321
36,368
22,803
18,911
13,723
10,041
6.950
6,194
5,020
2,775
2,348
1,450
787
519
* excluding Hungary
Source: CBI EU market survey of 2004 (computed based on FAO data)
The leading spices  consumed are peppers  and all spice (pimento), while leading nerbs  include thyme and oregano. The principal end users  of spices  and herbs  in all EU markets  can be divided into three end user segments. In almost all EU countries, the largest proportion, being 55-60 percent of the total usage of spices and herbs, was  consumed by  the industrial sector. The retail sector consumed 35- 40 percent and the catering sector 10-15 percent. In most markets, the ratio is moving towards  higher relative usage by  the industrial sector, reflecting the growing popularity of ready-to-use spice mixtures.
Another reason is  the increasing consumption of processed foods, which often rely  on spices  and herbs  to retain and enhance the food flavor. According to manufacturers, a growing awareness  of diverse cultural cuisine is  helping to drive spice sales  People arc  starting to experiment with spices  at home, for example, a Thai curry, which they  have tried in restaurants. Salos  of individual ethnic  spices and ethnic  blends  are increasing across  the board. Individually, there has  been a strong upswing in sales of organic cardamom and cloves.
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11.3 MARKET OPPORTUNITIES FOR SPICES AND HERBS EXPORTED
FROM DEVELOPING COUNTRIES
Theie is  a large potential for herbs  and spices  for which developing countries occupy  a dominant position. Based on the CBI (2004) market survey, these spices, herbs and other plants include:
e    Species    sensitive    to    environmental    factors,    such    as    tropical    plants (spices,   ginger,   cananga,   vetiver),   even   if   the   climate   is   not   a   real protection against competition.
o  Trees  in  the  wild,  which  can  abundantly  be  found  in  developing  countries (cinnamon, camphor, sandalwood).
c   Wild   plants   that   could   be   easily   cultivated   in   industrialized   countries,   but for   which   wild   harvesting   remains   more   profitable   than   the   cultivation (Artemisia sp., rosemary).
o    Crops    for    which    the    cultivation    and    harvest    is    more    profitable    in developing countries (jasmine, tuberose, basil, Mentha arvensis).
11.4 FARM PRODUCT PRICES AND THE COMPETITION AMONG MAJOR EXPORTERS
From the trends  in the export prices  of farm produces, it can be said that almost all organic  products  command a higher price than conventional products. This  is mainly  due to more labor-intensive production and expensive materials. In some countries, insufficient supply  and additional distribution costs  also push up the price. Premiums  between conventional and organic  products  generally  range between 15 and 25 percent, depending on the type and quality  of product and the current market situation.
The price differential between conventional and organic  products, however, has decreased during recent years  and competition in the organic  sector is  increasing. The import price of sugar, for example, has  halved in recent years  from USS 800 to around USS 400 Increasing trade and competition has  also forced processors and distributors  to cut down costs  of handling. Trade in bigger quantities  for some products  (e g. palm oil and sugar) has  led to economies  of scale in shipping, and in processing and distribution systems.
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Importers   mostly   trade   on   annual   contract   terms   in   which   prices   are   fixed. Importers   are   generally   interested   in   a   long-term   stable   relation   with   a   supplier. However,    price    pressure    in    the    organic    market    has    increased.    Due    to    this pressure,  importers  are  more  easily  inclined  to  change  to  other  cheaper  suppliers at  the  end  of  a  contract  period  For  some  agricultural  products,  for  example  coffee and   cocoa,   the   producer   prices   are   linked   either   to   conventional   prices   plus   a premium  fixed  in  absolute  value  or  in  percentage.  For  other  products,  for  example grains,  most  of  the  production  is  contracted  in  advance  at  an  agreed  price.  In  such cases  it  is  quite  possible  that  at  certain  periods  of  the  year  the  value  of  organic products  is  cheaper  than  conventional  ones.  Generally,  the  price  difference  is  less for   processed   products.   As   shown   in   the   box   below,   price   differential   between organic and conventional products vary among EU member states.
Box 1
Germany
The price premiums for organic products (in  comparison  with  conventional products) vary considerably between  18%-142%.  The average price premium in  Germany is above the European average.  varying  between  60%-70%.  The high  price differences are a  result of the small supply of organic products, high logistic costs because of the small volumes and very high depreciation of the retail chains. The price premium is one of the main barriers to buy organic products. Studies show that most consumers only accept a price premium up to 20%.
France
The  average  premium  retail  price  for  organic  products  is  20-30  percent  above  that  of  conventional foods While retail prices differ from one outlet to another, organic
Specialized food stores price their items up to 50 percent more than supermarkets do.
Italy
The price premium on  organic products is 25% in  supermarkets and  30% in  specialized  organic stores The prices paid for organic fruit and vegetables though varies according to the season and is at times comparable to the conventional one. A little less than half of the Italians are willing to pay more for organic products compared to conventional ones but the limit is often 20%.
11.5  MAJOR  PRODUCTS  AND  COMPETITORS  IN  CONVENTIONAL  TRADE Among   the   EU   member   states.   The   Netherlands.   Germany,   UK.   France.   Spain and   Italy   are   the   major   importers   of   non-organic   products.   The   box   below   which was  taken   from   the   CL3I  survey  (2004)  indicates  an  overview  of  leading  importers of   selected   product   groups.   However,   it   should   be   noted   that   these   data   include imports   of   both   conventional   and   organic   products   comprising   a   very   small   share of total trade.
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Box 2
Leading EU importers of selected food products (conventional and organic), 2003 share in EU imports in terms of value
Product group
Leading importers and share in total imports
Coffee
f ranco (24%), Germany (12%), UK (12%), The Netherlands (11%)
Pulses
of which
Kidney beans o Black & green
Italy (23%), UK (19%), Prance (12%), Spain (13%) Italy (24%), (JK (18%), Spain (14%), France (13%) UK (33%), France (24%), The Netherlands (16%), Belgium (6%)
Seeds
( of which
Sunflower
Sesame
the Netherlands (24%), Germany (17%), Spain (14%), France (11%) The Netherlands (23%), Spain (16%), Germany (16%), France (12%) The Netherlands (31%), Greece (20%), Germany (18%), UK (7%)
Edible nuts
of which
Peanuts
Cashew nuts
Pistachios
The Netherlands (27%), Germany (19%), UK (13%), Spain (10%) The Netherlands (37%), UK (17%), Germany (17%), Italy (7%) The Netherlands (39%), UK (17%), Germany (15%), France (7%) Germany (24%), Spain (19%), Italy (12%), France (12%)
Spices & herbs
Germany (22%), France (17%), The Netherlands (12%), Spain (12%)
Source: Eurostat (2004)
In order to make comparison with imports, the box  below provides  an overview of the leading suppliers  of selected product groups. Similar to imports, products shown in the box  include imports  of both conventional and organic  products. An important point that should also be noted is  that European suppliers  are often engaged in re-export trading.
Box 3
Leading suppliers of selected food products (conventional and organic) to the EU, 2003 Share in EU imports in terms of value
Product group
Leading suppliers & share in total supply
Coffee
Germany (31%), Italy (22%), Belgium (15%), Switzerland (9%)
Pulses 
of which:
o Kidney beans >   Black & green
Seeds
of which
Sunflower
>   Sesame
Canada (23%), China (17%), Argentina (15%), USA (15%) Canada (25%), Argentina (16%), China (16%), USA (14%), The
Netherlands (7%)
China (36%), USA (20%), The Netherlands (9%), India (9%)
Hungary (17%), Ukraine (13%), France (9%), Romania (7%), USA
(7%)
Hungary (22%), Ukraine (14%), France (11%), Romania (8%), India (33%), Sudan (20%), The Netherlands (13%), Ethiopia (8%), Guatemala (6%)
Edible nuts 
of which:
Peanuts
o Cashew nuts o Pistachios
USA (14%), Iran (14%), China (12%) The Netherlands (12%). India
(12%)
China (29%), Argentina (25%), The Netherlands (15%), USA (15%) India (43%), Vietnam (23%), The Netherlands (13%), UK (6%),
Brazil (4%)
Iran (41%), USA (24%), Germany (14%), The Netherlands (7%), Spain (3%)
Spices & herbs
Iran (14%), Germany (12%), the Netherlands (9%), USA (8%),
Madagascar (6%)
Source: Eurostat (2004)
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11.6 MAJOR PRODUCTS AND COMPETITORS IN ORGANIC TRADE
To be able to export products  as  “organic" to the European Union, certification is required. When a producer or a group of producers  applies  for certification, several inspection missions  follow in which the production system is  judged and recommendations  are made for improvement. Currently, certification for export from developing countries  is  mostly  carried out by  the certification bodies  of the importing countries. Initially, inspectors  usually  come from Europe or the USA However, international certification bodies  now hire local inspectors, which have reduced costs.
With regard to the supply  of organic  products  by  developing countries, the dominant and leading producers  include Argentina, China, Mexico and South Africa. The off-season supply  of fruits  and vegetables  is  dominated by  Egypt and Morocco, which profit from their close geographic  location to the EU. These countries  have developed the infrastructure to deal with the requirements  for the supply  of organic  products  and the increasingly  complex  and stringent regulations on food products.
There are numerous  types  of organic  products  supplied to the EU market, Spices and herbs among these products which contain a very wide group of products and the sales  of individual ethnic  spices  and ethnic  blends  are increasing across  the board. Individually, there has  been a strong upswing in sales  of organic cardamom and cloves. Organic  importers  are always  on the look  out for new reliable suppliers  of certified organic  spices  and herbs. African, Latin American and Asian countries  are supplying organic  spices  and herbs  to the European Union.
While Egypt is  a leading supplier, substantial production also takes  place in Tanzania, Malawi, Sri Lanka, Peru, Ecuador, Argentina, Brazil and India. There are many  other developing countries  producing spices  and herbs. Carmine, curcuma / turmeric, marigold and henna are spices  produced in most African countries  and which have good market opportunities  in EU market (CBI, EU Market Survey, 2004). The main EU markets for essential oils are France, the
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United Kingdom, and Germany. Interesting companies include Alban Muller International and C Melchers Essential Oils.
11.7 farm product imports by eu member states
The  leading  EU  importers  for  ingredients  for  food  products  are  Germany,  France, the  United  Kingdom.  The  Netherlands,  Italy  and  Spain.  At  the  level  of  product groups,  however,  there  can  be  other  countries,  which  are  important  markets. Portugal,  for  example,  represents  the  second  leading  EU  importer  of  sugars  while Greece is an important market for oil seeds. If we look at the shares of developing countries  in  EU  imports,  developing  countries  were  particularly  strong  in  sugars, oil  seeds,  spices  &  herbs  and  honey.  In  2003,  developing  countries  supplied  over 50 percent of the imports (in value) by EU member countries of these products as shown  on  Table  11.6  below.  China,  Indonesia,  India,  Argentina,  Iran,  and  Turkey are  among  the  leading  developing  countries  supplying  the  EU  with  ingredients  for food products.
Table 11. 6 Imports by EU member countries of food ingredients, 2003, € million /
thousand tons
Food Ingredients
Total EU Imports
Of which from DC’s
Value
Volume
Value
Volume
Vegetable oils & fats Dried fruit & edible nuts Spices & herbs
Essential oils & oleoresins Pulses
Dried vegetables
Natural colors & flavors Vegetable saps & extracts Oil seeds
5,246
3,597
788
579
495
418
265
163
89
6,770
2,013
298
64
1,096
193
34
28
123
2,281
1,519
432
221
201
134
82
36
67
4,500
1,088
181
32
376
62
11
14
98
DCs: developing countries
Source: Eurostat (2004)
Germany is by far the largest importer in Europe and it imports a wide assortment of  organic  products.  According  to  CBI  survey  (2004),  imports  account  for  an estimated 38 percent of the value of raw materials for the German organic market, equivalent to about € 156 million, or about 10 percent of total sales at retail level (ITC)   The   Netherlands   is   a   major   importer   of   organic   food   products.   Dutch companies play an important role in import/export trade and large quantities (up to 80%)  are  re-exported,  mostly  to  other  European  countries.  The  Netherlands  is  a sizeable  importer  of  organic  fresh  fruits  and  vegetables,  grains,  cereals,  dried
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fruits, nuts and seeds, coffee, tea, spices and herbs. All types of fresh fruits and a wide range of off-season vegetables  are imported. Supplies  of organic  produce from many developing countries, especially in Asia and Latin America, are making an increasing impact. Most imports  are delivered in bulk  for packing and/or processing in The Netherlands or other European countries.
Data on organic trade are scarce and, as they are always estimates, they must be interpreted and used with extreme caution. Table 11.7 gives  an overview of imports of selected organic food by a number of EU countries.
Table 11.7 Imports of selected organic food products by selected EU countries in Tons
Country
Cereals
Oil
seeds
Potatoes
Vegetable
Fruits 
(incl.nuts)
Milk 
(products)
Wine
Germany
100,000
8,000
6,000
50,000
30,000
15,000
120,000
Denmark
20,000
2,000
1,772
3,000
-
3,000
France
112,225
18,200
6,000
30,000
25,000
25,000
20,000
Italy
200,000
Na
-
4,280
12,484
120,000
-
Netherlands
48,000
30,000
7,500
80,000
2,000
2,500
-
UK
160,000
Very
small
20,000
74,000
30,000
22,000
22,000
Source: CBI EU Organic Market Survey 2004
Imports of selected farm products by EU member countries during 2001 - 2003 in both value terms  and volume have been estimated on the basis  of the 2004 EU market survey. In terms  of volume, imports  remained fairly  stable during the 2002
-  2003  amounting  to  almost  300  thousand  tons  in  2003.  For  example,  as  from 2001 the import value of spices and herbs by EU member countries decreased by 3  percent,  amounting  to  €  788  million  in  2003  (Table  11.8).  It  is  also  easy  to understand  the  international  price  trends  for  farm  products  based  on  a  simple comparison of  the volume  of  imports and the  value  of  imported products indicated on the table.
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Imports of spices and herbs by EU member countries, by EU importer and by country of origin, 2001-2003, € 1,000 / tons
Food Ingredients
Total
Intra-EU
Extra-EU
Developing countries
Top 5 EU importers
Germany
France
The Netherlands United Kingdom
Spain
Top 5 suppliers
Germany
The Netherlands Madagascar
Indonesia
France
Developing
countries
Brazil
India
China
Iran
Vietnam
Comoros
Papua New Guinea Turkey
Peru
Thailand
Source: CBI EU Organic
2001
Value          Volume 813,956       293,883 296,824         99,013 517,132       194,870 467,746       171,103
181,106 63,081 111,095 24,051 141,660 65,452 105,847 45,323
90,230         36,298
73,997 20,971 95,750 32,434 57,926 2,373
83,515         31,247
38,749           6,322
40,305         20,953
46,533         24,718
21,903         15,107
27,507           1,351
19,549           8,939
17,931               530 1,196                65
15,847 6,907 14,968 7,873 10,304 7,243
2002
2003
Value          Volume          Value           Volume 794,871        299,715        788.064          298.114 302,631          92,119        304,385            90.463 492,239       207,596        483,679          207.65 -
442,215       180,861        431,947          181,323
180,547         68,141        170,894            70.354
128,372         30,457        152,022            28,405
121,638          62,375       111,871            58.157
96,270         43,456         89,151            46,846
73,873         34,134          69,767            31,897
78,396 20,634 85,821 23,833 85,130 32,989 75,100 29,316 68,533 1,931 65,704 2,504 65,408 26,910 60,615 24,353 45,403 7,019 51,443 7,559
39,079 21,240 42,813 26,170 41,553 27,801 38,265 25,571 25,383 19,034 27,677 23,391 24,022 505 24,690 1,048 23,546 14,470 20,852 13,507
14,462 610 16,090
2,971 136 15,402
15,658 7,566 13,436 7,481
12,538 9,500 12,814 9,611
10,643 7,475 10,348 8,404
583
128
In 2003, Germany was the leading importer, accounting for 22 percent of the total imported value by  EU member countries. Hamburg (Germany) is  the world’s leading trade centre for spices. Other leading EU importers  of spices  and herbs are The Netherlands (19%), France (14%), the UK (11%) and Spain (9%).
The  leading  imported  product  among  spices  &  herbs  was  pepper,  accounting  for 21  percent  of  the  total  spice  and  herb  import  value  in  2003.  Other  important products  were  vanilla  (19%),  paprika  (17%),  mixtures  (8%),  nutmeg  (4%),  saffron (4%) and ginger (3%). Vanilla imports increased by 60 percent between 2001 and 2003. Spices & herbs were mainly supplied by non-EU countries. In 2003, more
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than 60 percent of imports  by  EU member states  was  supplied by  non-EU countries, of which 90 percent originated in developing countries. Germany, The Netherlands  and Indonesia wore the loading supplying countries, together accounting for 30 percent of the total imported value in 2003. Please note, however, that the reason why  The Netherlands  and Germany  are high on the supplier list is  that they  re-export large amounts  of their imports, which are in fact originally from developing countries.
Similarly, imports  of pulses  decreased by  16 percent as  compared to 2001 and in terms  of value this  was  € 495 million in 2003. In terms  of volume, total imports  of pulses  by  EU member countries  showed a peak  in 2002, but decreased again in the subsequent year, amounting to 1.1 million tons  in 2003 (Table 11.9). In 2003, Italy  was  the leading EU importer of pulses, accounting for a quarter of the total imported value and is  followed by  Spain (20%), the UK (15%) and The Netherlands  (10%). All the leading EU pulse importers  decreased their import values during 2001 -2003.
Although   the   imports   of   kidney   beans   by   EU   member   states   decreased   by   17
percent between 2002 and 2003, it remained the leading product group, accounting for almost half of the total import value of pulses. Other major pulse groups are lentils (16%), chickpeas (14%) and broad & horse beans (10%). In
2003,  the  EU  member  states  supplied  only  21  percent  of  the  total  imported  value of pulses, while the remaining part (79%) was supplied from countries outside the
EU, mainly represented by North American countries.
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Table 11. 9 Imports of pulses by EU member countries, by EU importer and by country of
origin, 2001-2003, € 1,000 /tons
Food Ingredients
2002
2003
Value
Volume         Value         Volume
Total
Intra-EU
Extra-EU Developing countries
Top 5 EU importers
I Italy
Spain
United Kingdom
I France
! The Netherlands
| Top 5 suppliers
Canada
USA
China
Argentina
Mexico
Developing
countries
Turkey
Peru
Chile
Egypt
i Tanzania
Madagascar
India
Myanmar
Rnlivia
Ethiopia
2001
Value         Volume 588,004    1.088.014 106,168       305.932 418,836       782,082 245,932       356,716
131,755 320,618 138,345 248,045
90,606 151,262 67,940 103,055 38,877 67,603
135,758 263,472 78,935 123,797 59,299 103,332 57,454 84,915 69,094 82,736
24,306 33,530
3,198           4,147
3,974           2,708
2,004           2,989
3,034 3,312 3,368 5.924 5,722 7,009 3,071 4,615
536              247 4,724         11,750
570,731 108,371 462,360
223,085
128,862
113,943
90,431 66,548 49,304
131,871 61,285 62,473 54,242 46,814
21,012
5,558
1,830
2,320
4,207
2,956
2,677
3,779
748
6,559
1.328.793       494.798    1 .096.358 325.619       106.216          340.719
1,003.173       388.582         Z55.639 355.788       200.627          375.904
339,225 121.799 349 272 221.415 100.844 228,913 153,158 74,294 1 58.829 106,709 60.498 1 12.058 313,156 30.315 56.508
249,806       104.184        238.001
86,531          59.787           96.220
106,690         55.184         121.492
93,416         43,303           85.922
62,212         37,713          61,OB*
31,914         26.002          47.374
6.898           5,986            9,402
1,314           4.394            2.883
3,529 4.086 6.444 4,971 4,030 4,549 5.872 3,048 5.372 4,148 2.618 4.872 7,517 2.218 5.782
369           2,179            1.153 15,337           2,133            6.757
Source: CBI EU Organic Market Survey 2004
Several developing countries, primarily  those on the African continent, benent from the oil seed sector and exports Ethiopia is among the countries that benefit from exports  of sesame seed and cotton seed. However, for strategic  reasons  or because of existent constraints, the developing countries like Ethiopia may not be the leading exporters of the crops mentioned.
As  shown on Table 1110 below, between 2001 and 2003, imports  in terms  of value of oil seeds  by  EU member countries  fluctuated somewhat, amounting to € 89 million in 2003. In terms  of volume, imports  fluctuated considerably, amounting to 123 thousand tons in 2003. This fluctuation in import volumes was mainly
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caused by  the substantial variability  in the imports  of palm nuts  & kernels. Compared to sesame seed, the imports  of palm nuts  and kernels  are relatively small In 2003. The Netherlands  was  the leading EU importer of oil seeds, accounting for 30 percent of the import value, followed by  Greece (14%), Germany  (17%). the UK (11%) and France (7%). The fluctuation in imports between 2001 and 2003 was visible in all EU member countries.
Table 11.10 Imports of oil seeds by EU member countries, by EU importer and by country of origin, 2001-2003, € 1,000 / tons
Food Ingredients
Total
Intra-EU
Extra-EU
Developing countries
Top 5 EU importers
Italy
Spain
United Kingdom France
The Netherlands
Top 5 suppliers
Canada
USA
China Argentina Mexico
Developing
countries
Turkey Peru
Chile
Egypt Tanzania Madagascar India Myanmar Bolivia
2001
2002
2003
Value
Volume
Value
Volume
Value           Volume
Ethiopia Source OBI EU
813,956 293,883 296,824 99,013 517,132 194,870 467,746 171,103
131,755 320,618 138,345 248,045
90.606 151,262 67.940 103,055 38,877 67,603
135,758 263,472 78,935 123,797 59,299 103,332 57,454 84,915 69,094 82,736
24,306         33,530
3,198           4,147
3,974            2,708
2,004           2,989
3,034 3,312 3,368 5,924 5,722 7,009 3,071 4,615
536              247 4,724          11,750
794,871 302,631 492,239
442,215
128,862
113,943
90,431 66,548 49,304
131,871 61,285 62,473 54,242 46,814
21,012
5,558
1,830
2,320
4,207
2,956
2,677
3,779
748
6,559
299,715
92,119
207,596
180,861
339,225 221,415 153,158 106,709 313,156
249,806 86,531
106,690 93,416 62,212
31,914
6,898
1,314
3,529
4,971
5,872
4,148
7,517
369
15,337
788,064          298,114
304,385            90,463
483,679         207.651
431.947          181.323
121,799 349,272 100,844 228,913
74,294 158.829 60,498 1 12.058 30,315 56,508
104,184         238,001
59,787           96.220
55,184         121.492
43,303           85.922
37,713           61,084
26,002           47,374
5,986             9,402
4,394             2,883
4,086             6,444 4,030             4,549 3,048             5,372 2,618             4,872 j 2,218             5,782 | 2,179             1,168 2,133             6,75?
Organic Market Survey 2004
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11.8  OPPORTUNITIES  AND  THREATS  FACING  DEVELOPING  COUNTRIES
The available opportunities, constraints  and threats  faced by  developing countries that export farm products  to EU are discussed with respect to specific commodities. Generally, on the basis  of the EU market potential and imports  of member states, developing countries  have opportunities  in the export of organic products. The reason is that,
o Germany and the United Kingdom are the biggest importing countries of
organic products in the EU. The Netherlands is also a major importer and plays a role in the re-export of (processed) organic food products,
o Coffee, tea, sunflower seeds and Soya oil are important organic products 
that are imported in the EU while protective measures for grains imported
in the EU restrict their imports except basmati rice.
o  Organic  products  are  imported  from  developing  countries  from  all  over  the world.  The  wide  range  of  products,  the  use  of  local  structures  and  the relatively  easy  way  of  conversion  give  Africa  opportunities  in  exports  of organic products.
o Developing countries have enormous market opportunities for the export of
spices and herbs particularly in the most important spices and herbs that
EU member states import including pepper, vanilla, paprika, mixtures, nutmeg (4%), saffron and ginger.
In general however, food products  (including grains  and pulses) destined for the end-user have to comply  with the requirements  of the Council Directive 89/395/EEC (amending Directive 79/112/EEC) and any  subsequent legislation concerning the labeling, description and advertising. This  legislation is, however, more relevant for importers  than for exporters  of grains  and pulses, as  these produces  are generally  traded in bulk  and are not directly  exported to the end users.
11.8.1 Product Quality Standards
Product quality  standards  which exporters  should be able to meet in order to be competitive in the EU market are briefly discussed below with respect to the major export commodities relevant to the Ethiopian producers.
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The  EU  member  countries  import  relatively  minor  commodities,  such  as  sesame hemp   seeds,   for   further   processing.   Sesame   seeds   (Sesamum
indicum), also known as  benniseed, gingelly, sim sim, and til, are supplied to markets in  North  America, Europe, and East Asia by  countries  in Africa, Latin America, and South Asia. Cooking oil can be extracted from sesame seeds, and this  is  their main use, especially  in Asia. In North America and Europe, raw sesame seeds  are generally  used for toppings  on breads  such as  hamburger buns, bagels, bread sticks, and other baked goods. Restaurants  and natural food store customers  purchase sesame seeds  for use in ethnic  dishes. Middle Eastern countries use sesame seeds for tahini paste and halvah, as well as for oil.
There are different types and qualities of sesame seeds. White seeds are a white- to golden color and receive a higher market price than mixed seeds, which range from yellow to dark brown. White seeds are used primarily in raw form because of their aesthetic  value, whereas mixed seeds  are generally  crushed to oil. The value of sesame seeds  depends  on their purity, expressed as  a percentage, and oil content, which should exceed 50 percent. Hulling seeds, or removing their thin husk, increases  their value as  does  bleaching hulled seeds. Moisture content and free fatty  acid content are also important in assessing value. The highest-quality sesame seeds  are found in Central America, primarily  in Guatemala. Other oil seeds  covered within this  market survey  are palm nuts  & kernels  and shea nuts (karite nuts).
There are no fixed EU quality  standards  for the oil seeds. In practice, importers have defined their own quality  standards, and are willing to pay  more for better quality. Shipments  will usually  be subject to FOSFA (Federation of Oils, Seeds and Fat Associations  rules. These cover items  such as  sampling and analysis, insurance and claims  arbitration. FOSFA is  the major association in the oil seeds trade. It draws  up contract terms  for most of the oil seed commodities  and these are periodically revised in order to ensure that they fully meet trade requirements.
FOSFA contracts attempt to reflect the interests of the buyer and seller equally
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The   arbitration   clause   is   an   important   aspect   of   the   FOSFA requirements for pesticide residues are laid down for oilseeds.
11.8.1.2 Pulses
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contracts. Legal
Wrthin this  product group, the focus  will be on specialty  beans  like kidney  beans, chickpeas  and broad & horse beans. Although the trade in the mentioned groups is  small, they  are important for exporters  from several developing countries, as they are important suppliers for the EU market.
So far, there are no specific  quality  standards  for pulses. Currently, there is  a lack of agreement on nomenclature, or what to call various  types  and market classes of pulses. Moreover there is  no common approach for measuring quality. Both these issues  create trade difficulties. The International Pulse Quality  Committee is now trying to develop common, international standards  for identification and testing of such pulse crops  as  peas, beans, lentils  and chickpeas. Quality parameters  include color, size and shape, dehulling efficiency  and cooking and canning quality. Representatives, however, only include western stakeholders.
11.8.1.3 Spices and Herbs
The European Spice Association (ESA), representing spice associations  in EU countries, has  developed an “ESA Contract” which indicates  minimum quality standards  for imported spices, methods  of arbitration and enforcement procedures. The ESA specifications  of quality  minima for spices  and herbs  are the proposed legal minimum standards  for selling into the EU. Nevertheless, it must be emphasized that the quality  requirements  of traders  in major northern European markets  (Germany, The Netherlands, United Kingdom and France) are generally much stricter.
As  of April 5, 2002, EU-wide maximum levels  apply  to aflatoxin in the following spices: Capsicum spp, Piper spp, nutmeg, ginger and turmeric. The maximum levels for aflatoxin are listed in the Commission Regulation 472 (16 March 2002).
The harmonized sampling plan for aflatoxins was published in Commission Directive 98/53/EC. Sampling methods for aflatoxin in spices, to be applied as
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from February  28, 2003 onwards, were added to Commission Directive 2002/27/EC. The EU wide maximum levels set are 5 jjg/kg for aflatoxin B1 and 10 pg/kg for total aflatoxins. The European Commission will review the maximum limits  for aflatoxins  by  the end of 2003 and, if appropriate, reduce them to take account of the progress  of scientific  and technological knowledge. It is  important to bear in mind that most European importers at this moment refuse to accept any traces  of aflatoxin in organically  produced products. Further, tumigation and irradiation is  not allowed in organic  products; alternatives  are: deep freezing, steaming or pressurizing in autoclaves.
11.8.2 Trade-related Measures that Restrict Entry to EU Market
As  compared to product quality  standard, trade related regulations  such as healthy  and safety, environmental as  well as  other aspects  of EU market regulations  have become obligatory  for suppliers  that export products  to EU market. Environmental aspects  of products  have become a major issue in Europe in recent periods. Depending on the product group in question, environmental aspects  can play  a vital role in preparing for exports  to the European market. Besides  governmental actions  (legislation and regulation), a strong consumer movement is  noticeable especially  in the northern parts  of the EU (Scandinavia, Germany, The Netherlands  and the United Kingdom). “The environment" is  more than a trend. It is  a lasting issue seen for all products  and nowadays  even services. Therefore, growers  and manufacturers  have to view their products  and production processes  not just by  looking at traditional aspects  like price, quality, customer demands and standards, but also at the environmental aspects. It is the objective of this  section to briefly  highlight several aspects  that currently  play  a major role in the EU. Exporters  must be aware of these considerations  of European customers  and governments  and try  to satisfy  their needs  by  offering products, which comply with both legislative and market requirements.
11.8.2.1Sustainable Development for Businesses
The concept of sustainable development, adopted by  nearly  all the countries  in the world  which participated in the 1992 Rio de Janeiro Conference, represents the philosophy that economic development should automatically take into account
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of the environment, recognizing the fact that polluting activities now will 9 eat (negative) impacts on the way future generations can live. In this 
pect all parties, including the general public but also growers, are asked to
cept their social responsibility and minimize the environmental impact of their
activities.
11.8.2.2  Ecolabels
The hallmarks  for environmentally  sound products  are normally  referred to as Ecolabels. Such a hallmark  indicates  that the product (including its  full production process) has  a reduced impact on the environment, compared to similar products. Ecolabels  have been developed at various  levels. Labels, referring to the organic production of food could also be considered ecolabels. Organic  production is  the strictest of the environmentally  sound agricultural practices. As  a consequence, if your product is  already  labeled for organic  production, (other) labels  with less strict requirements  will in most cases  be less  interesting when marketing the product in the European market.
11.8.2.3  Environmental Standards
The ecolabelling procedures are purely aimed at the products (not at the
manufacturing process) and indicate that the product with a label has a reduced
impact on the environment. If a manufacturer wants to indicate to external parties 
that he is manufacturing in an environmentally sound way, then he can comply 
voluntarily with the following standards:
• ISO 14001
• EMAS.
Both standards  are based on the ISO 9000 series  of standards  for quality management. The relevance of the ISO 14001 standard for the future can be
clearly seen by following the development and use of the ISO 9001 and ISO 9002
quality  standard.  Although  voluntary,  customer  pressure  is  resulting  in  the  ISO 9001   and   ISO   9002   quality   standard   becoming   increasingly   necessary   to   do business  around  the  world.  Similarly,  the  ISO  14001  environmental  management standard  may  become  a  de  facto  requirement  for  being  able  to  compete  in  many regions of the global marketplace.
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11.8.2.4  Health and Hygiene Issues: haccp
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The  Hazard  Analysis  Critical  Control  Point  (HACCP)  system  applies  to  the  food processing   industry   in   the   EU   The   EU   Directive   on   Hygiene   for   Foodstuffs (93/43/EC),   which   became   effective   in   January   1996,   stipulates   that:   'foodstuff companies shall identify each aspect of their activities which has a bearing on the safety   of   foodstuffs   and   shall   ensure   that   suitable   safety   procedures   are established, applied, maintained and revised on the basis of the HACCP system’. All  food  processors  in  the  EU  are  legally  bound  to  have  an  HACCP  system  in place  or  they  must  be  working  on  implementing  an  HACCP  system.  The  HACCP system  is  applicable  to  companies  which  process,  treat,  pack,  transport,  distribute or  trade  foodstuffs.  These  companies  are  forced  to  understand  (and  act  against) the  possible  hazards  associated  with  food  production  at  all  stages,  from  growth, processing,   manufacture   and   distribution,   until   the   point   of   consumption.   This includes   macro-biological   (vermin),   micro-biological   (viruses,   bacteria,   moulds), toxicological  (chemical  contamination  with  pesticides),  or  physical  (wood,  metal, glass, plastic or fabric) risks.
The HACCP regulation is  of importance to exporters, because importers  of food products in the EU will be legally held responsible for any negative consequences. Therefore, the food industry  in the EU will be reluctant to do business  with food processing companies  in developing countries  that do not have an HACCP system in place. Companies sourcing processed food products or food ingredients will insist on HACCP implementation by  their suppliers. Companies  can seek  the assistance of accredited organizations to help them with the implementation of an HACCP system and to become HACCP certified.
11.8.2.5 Fair Trade and Social Responsibility
In most Western countries, more and more attention is  paid to the social conditions of the producers of the goods that are imported. The goal is to assist small producers  to gain direct access  to the export markets  and to guarantee decent working conditions  on plantations  and in factories. A uniform European logo for these products was introduced in the beginning of 2003. Social issues
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a   so  c  ay   a  major  role  within  the  organic  movement  This  has  resulted  in  the aoopuon of a separate chapter on social justice in IFOAM s Basic Standards
11.8.2.6  Packaging, Marking and Labeling
Aoart from the safety  aspects  and the protection against damage the focus  of packaging is  definitely  on environmentally  friendly  transport - as  well as  sales- promotion packaging. This  means, among other things  that it should be corsdered whether recyclable systems  could be used on a much greater scale than before. The basic  requirements  for the oackaging and labeling of organic 
foods  a e
r
laid  down  in  EU  Regulation  2092/91.  Besides,  exporters  must  always 
check   the   specific   requirements   of   national   organic   symbol   schemes   in   the country to which they are selling.
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12. CONCLUSION AND RECOMMENDATION 12.1 CONCLUSION
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It is well acknowledged that irrigated agriculture would be one of the best options that would enhance the productivity  and production of the Ethiopian agriculture sector Through the development and expanded use of irrigation, the dependence of agriculture on rainfall and also the incidences of crop failures resulting from rain shortages  could be minimized. Moreover, the growth of irrigated farming would also ensure the achievement of the country’s  agriculture and rural development strategy and stimulate the entire economic development of the nation. In addition, irrigation would also enhance the growth of food production and thereby  ensure the achievement of long - term food security.
Even though irrigation would have a significant contribution to enhancing food production and ensuring food security, the marketability  and market standing of the products  produced and supplied by  an irrigation project would determine the viability of the project. It is also important for the project to identify potential market for its  products  and also devise an effective marketing strategy  in order to be a good competitor in the market. As a first step towards the identification of the most suitable market, the project needs to research the important potential markets and understand the ongoing developments  that shape the product market structure. This  should be done by  means  of systematic  market research, involving a preliminary  screening of potential markets  followed by  a more detailed assessment of the targeted markets.
This  agricultural  marketing  study  is  therefore  conducted  with  the  aim  to  generate market  data  and  information,  to  assess  the  potential  market  and  thereby  identify target market for the products produced by the project and to draw conclusion that could  serve  as  an  input  in  the  decision  to  determine  the  market  validity  of  the products and also to prove project feasibility.
Based on this  notion, the national agricultural marketing policy  and the marketing system including market infrastructure, marketing channel and supply  chain for farm produces has also been assessed thoroughly. From this analysis the study
WWDSE In Association with ICT
Final Feasibility Study Report
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agricultural marketing stiucturo has  become more complex  as  it involves  different actors  and intermediaries  that provide specialized services  in the marketing channel through which products  pass  from the producers  to final destination. Meantime, the liberalization of market increased the selling outlets  for farmers  with a simultaneous inciease of the supply sources for urban consumers.
With  regard  to  existing  marketing  infrastructure  particularly  the  availability  of  road network    and    transport    services,    the    findings    indicated    that    these    market infrastructures  are  in  poor  condition  especially  at  the  project  site  where  access road  is  unavailable.  Apart  from  the  Goro  -  Robe  road  which  is  in  very  poor condition   due   to   the   lack   of   regular   maintenance,   the   inter-regional   road   that connects  Robe  with  Addis  Ababa  is  also  nearly  impassable  especially  for  loaded tracks  since  the  asphalt  road  construction  is  far  from  completion  while  it  is  unsafe for  vehicles  and  people   that  use  the  substitute  road  which  is  too  rough  and bumpy.  In  addition  to  the  problem  of  road,  traders  and  farmers  in  the  local  market do  not  have  adequate  access  to  storage  facilities.  Only  wholesale  traders  could have  the  possibility  to  rent  the  modern  warehouses  in  Robe  which  is  under  the government  marketing  enterprise  (EGTE).  Local  traders  entirely  depend  on  sub standard   storages   constructed   from   corrugated   sheet   except   the   floor   which   is made of cement concrete.
A  major  improvement  in  the  functioning  of  the  national  agricultural  markets  is  the access   to   market   information.   Apart   from   the   CSAs   monthly   consumer   price database  of  major  commodities  in  over  200  markets  and  posted  on  its  website will) regular updates, the launch of the Ethiopian Commodity Exchange (ECX) in
2008 is a breakthrough in availing market information and access to a new market
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place    where    all    market    actors    (farmers,    traders,    processors,    exporters    and consumers) can take advantage of more transparent market information.
The marketing study  has  also collected and analyzed the national production and the marketable surplus  for major produces. Generally, cereal production is  in scarce supply  and as  a result, the government has  banned grain export since it has  direct link  with the country  s  grain balance and for reasons  of national food security  issues. Therefore, the study  emphasized on the production and supply  of internationally  traded farm produces  that have export market potential. Moreover, the production trends  as  well as  the development of farm product prices  in the domestic  market have been analyzed in order to identify  products  that have domestic  market potential and also for the selection and determination of crops which could be produced by the project
The assessment of trends  in local production potential and supply  of major crops produced by  farmers  indicated the growth in the production of cereals, pulses  and oilseeds. On the contrary, there is  food grain scarcity  in the domestic  market coupled with the rise in the prices  of almost all the farm commodities. Thus, as food grain scarcity  and the sharp rise in prices  is  a common phenomena nationwide, it is  an opportunity  for the project to use irrigation for the production of cereals  particularly  wheat which has  high demand in the domestic. In addition, farm produces  that have export market demand including oilseeds  (for example sunflower) and pulses  especially  lentils, chick  peas, etc  are products  that have export market outlets  and huge market potential. The assessment of the export market has  indicated the existence of a huge market and market outlets  for these produces  particularly  in the EU market. As  the document indicates, the agricultural marketing study  has  assessed and analyzed almost all the critical issues  of produce marketing and also drew useful conclusions. Finally, on the basis  of the findings  and the conclusion arrived at, the following recommendations  would have relevancy in making the project a success.
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12.2 RECOMMENDATION
0 be successful in the marketing of its produce and also in devising an
marketing strategy, the following recommendations would have vital
relevancy.
The project should give adequate consideration to the existing food grain scarcity  in the domestic  market and identify  commodities  which have high demand and hence fetch high prices  in order to select produces  that could be produced and supplied to the domestic  market. Especially  at the early stage when the access  to export market would require detailed market study, it is  the best option for the project to commence its  production starting with produces that have good demand in the domestic market.
b.      As    evident    from    the    study    particularly    the    reserve    stock    kept    by humanitarian   agencies,   a   large   proportion   of   the   country’s   population   has been  food  insecure  for  over  three  decades  and  the  problem  still  exists  and would   not   be   alleviated   at   least   during   the   medium   term   period.   Since humanitarian   agencies   give   priority   of   food   grain   purchase   to   domestic suppliers,   sales   to   these   agencies   should   be   considered   as   one   of   the potential markets for certain produces of the project.
c.     Oilseeds   and   pulses   are   among   important   farm   commodities   for   which there   is   huge   export   market   potential.   Ethiopia   is   already   among   the exporters   of   oilseeds   especially   sesame   and   also   pulses   like   chick   peas and   lentils.   Therefore,   while   producing   and   supplying   food   grain   to   the domestic   market,   meantime,   the   project   should   assess   the   existing   export market  outlets  and  supply  channels  in  order  to  start  production  and  export of oilseeds and pulses.
d  During  the  short  to  medium  term  period,  the  most  appropriate  export  outlet and/or   channel   could   be   the   use   of   established  export  agencies  like  the EGTE  and  other  private  export  companies  that  have  export  market  access and   major  importers  as  well  as  the  experience  and  facilities  for  produce preparation like for example produces cleaning.
e  In  the  long  -  term,  the  project  should  devise  an  effective  marketing  strategy in  order  to  be  a  competitive  exporter  of  the  products  that  it  will  produce. Thus,    conducting    of    detailed    market    research    to    identify    and    select produces that have export market potential would be an important first step
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l°ping long - term marketing strategy. Based on the findings of the research, the project should determine export commodities that it
produce and also devise production strategy that ensure a sustainable
U PP'y produces to importers who often prefer uninterrupted supply.
The study has found out the growth in the production and supply of spices particularly Cummins, Fenugreek and ginger which fetch high prices.
Based on the assessment of export market especially the EU, spices and
herbs are              among the exports of developing countries that have enormous market potential. Therefore, in order to produce and export these
commodities, detailed agronomic studies should be conducted to identify 
and select species or varieties that meet the export market quality
standards as well environmental and health safety requirements of the
products.
g.  Generally,  the  marketing  of  the  farm  produces  that  the  project  will  supply would  depend  on  the  availability  of  infrastructure  needed  for  an  efficient delivery of the produces. Thus, the road network and poor road condition in the  vicinity  of  the  project  as  well  as  the  road  that  connects  Goro  with  the central    market    should    be    upgraded    through    regular    repair    and maintenance.  Numerous  access  road  should  also  be  constructed  in  order to   link   the   project   with   the   kebeles   and   villages   that   produce   farm commodities using the irrigation project.
h  Traders  in  the  study  area  do  not  have  access  to  standard  storage  facilities and  as  a  result,  the  products  they  purchase  have  to  be  delivered  soon  in order  to  avoid  the  deterioration  of  product  quality.  Nevertheless,  since  all the  products  produced  by  large  scale  projects  can’t  be  delivered  to  market soon  after  harvest,  the  project  should  install  modern  storage  facilities  to avoid  product  quality  deterioration.  The  existence  of  own  warehouses  will also  enable   to   use   proper  marketing  strategy  which  enable  to  supply products  depending  on  market  prices  so  that  products  could  be  stored when prices fall.
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REFERENCE
1.    Amhas, W. The Structure and Functioning of the post padets grain marketing system in Ethiopia
2.     Cunningham,  1997b,  Review  of  ethno  botanical  literature  from  eastern  and southern   Africa,   in:   The   African   Ethno   botany   Network,   Bulletin   No.1, November.
3.      Eleni  Z.  Gabre-Madhin.  Market  Institutions,  Transaction  Costs,  and  Social Capital  in  the  Ethiopian  Grain  Market.  Research  Report  124,  International Food Policy Research Institute, Washington, D.C. 2001
4.      Eskola,  E.  2005.  Agricultural  Marketing  and  Supply  Chain  Management  in Tanzania: A Case Study. Working Paper Series No. 16
5.     Ethiopian  Valley  Development  Studies  Authority  1992.  Welmel  Medium  Scale Irrigation Project Feasibility Study
6.     Ethiopian  Valley  Development  Studies  Authority  1992.  Yadot  Medium  Scale Irrigation Project Feasibility Study
7.      EU   Market   Survey   2004,   Organic   Food   Products.   CBI   (Centre   for   the Promotion of Imports from developing countries),
8.     EU Market Survey 2004, Food Ingredients for industrial use. CBI (Centre for the Promotion of Imports from developing countries),
9.    EU statistics bureau Eurostat: at http://europa.eu.int/comm/eurostat
10.    Fair   Trade   market   reports   (some   including   organic   sections)   can   be downloaded from http://www.fairtrade.net.
11. FAO/WFP 2007, Crop and Food Security Assessment, Mission Report
12.  FAO/WFP 2008. Crop and Food Security Assessment. Mission Report
13.    FAO/WFP   2009.   Crop   and   Food   Security   Assessment.   Mission   Report (Phase 1)
14.   FAO/WFP  2009.  Crop  and  Food  Security  Assessment.  Mission  Report  (Full Report)
15.  FiBL,  SIPPO  and  Naturland,  The  handbook  'Organic  coffee,  cocoa  and  tea by       at       http://www.fibl.ch/buehne/publikationen/pdfs/verzeichnisse/handbook- coffee.pdf.
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16.   Frost   &   Sullivan   (2004),   Executive   summary   of   European   Markets   for   Active Ingredients in Personal Care.
17.    Gebremeskel,   D.,   T.   S.   Jayne,   and   J.   D.   Shaffer.   1998.   Market   structure, conduct,    and    performance:    Constraint    on    performance    of    Ethiopian    grain markets.    Working    Paper    No.    8.    Grain    Marketing    Research    Project,    Addis Ababa, Ethiopia.
IS.  Lirenso,  A.  1993.  Grain  marketing  reform  in  Ethiopia.  Ph  D.  diss.,  University  of East Anglia, Norwich, U.K.
19. Negassa, A. 1998. Vertical and Spatial Integration of Grain Market in Ethiopia: Implications for grain markets and food security policies. Working Paper No 9. Addis Ababa, Ethiopia
20.  Negassa, A., and T. S. Jayne. 1997. The response of Ethiopian grain markets to liberalization. Working Paper No. 6. Grain Marketing Research Project, Addis Ababa, Ethiopia.
21.  Negassa, A., T.S. Jayne and J. Myres, R. 1998. The Effect of Liberalization On Grain Prices and Marketing Margins in Ethiopia, MSU International Development Working Papers
22.  Organic Marketing Initiatives and Rural Development (OMIaRD). “Analysis of the European market for organic food”.
23.  Osbone, T. 2003. Imperfect Competition in Agricultural Markets: Evidence from Ethiopia, European University Institute
24.  SIPPO and FIBL. The Organic Market in Switzerland and the European Union’ at www.sippo.ch/cqi/news/publications.asp?mode=6#orqanic.
25.  TTC study “Organic Food and beverages: World Supply and major European markets” at http://www.intracen.org/mds/sectors/orqanic/abstract.htm.
26.  The World of Organic Agriculture, Statistics and Future Prospects". 2003 at http://www.ifoam.org/ and http://www.soel.de/inhalte/publikationen/s/s 74.pdf.
27.  USDA organic country reports at
http.7/www.fas.usda.qov/htp/orqanics/attache.htm.
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___ __

Summery

Feasibility Study and Detailed Design of Bale Gadula Irrigation Project - Agricultural Marketing

Project Overview

The document presents a feasibility study for the Bale Gadula Irrigation Project in Ethiopia, focusing on agricultural marketing aspects (Volume 7, Annex 10). Conducted in May 2010 by WWDSE in association with ICT, the study examines market potential for irrigated agricultural products.

Key Objectives

Review Ethiopia's agricultural marketing situation and policies
Identify local and export marketplaces and services
Analyze trade routes and market sectors
Investigate marketing constraints and opportunities

Methodology

The study combined primary data collection (interviews with farmers, traders, and officials) with extensive review of secondary literature and market data from CSA, EGTE, and international sources.

Historical Context

The report traces Ethiopia's agricultural marketing evolution from the restrictive Dergue regime (1974-1990) to post-1991 liberalization, highlighting the transition from state-controlled AMC to private sector participation and the establishment of EGTE.

Current Market Structure

Ethiopia's grain market involves multiple actors:

Producers (95% smallholder farmers)
Rural assemblers
Regional wholesalers
Central market brokers
Retailers
Consumers

Market Infrastructure Challenges

Roads: Poor condition limits market access, especially in Bale Gadula area
Storage: Inadequate facilities lead to post-harvest losses
Information: Improved through ECX (Ethiopian Commodity Exchange) since 2008

Production and Price Trends

The study analyzes national production data (2001-2008) showing cereal and pulses production growth. Price trends indicate:

Relative stability 2000-2005
Sharp increases 2006-2009 (especially for teff, wheat, spices)
Seasonal fluctuations in cereal prices

Export Market Potential

Key opportunities identified:

Commodity	Key Markets	Notes
Pulses (lentils, chickpeas)	EU (Italy, UK), Middle East	Growing demand for protein alternatives
Oilseeds (sesame)	EU, Asia	Ethiopia already significant exporter
Spices (cumin, fenugreek)	EU, North America	High value, growing ethnic food markets

EU Market Requirements

The study details strict EU standards for:

Product quality (aflatoxin limits, purity standards)
Processing (HACCP certification)
Packaging and labeling
Environmental and social responsibility

Recommendations

Initially focus on domestic market (wheat for food security)
Develop export strategy for pulses and oilseeds
Improve road infrastructure around project site
Invest in modern storage facilities
Conduct detailed market research for export products
Consider spice production (cumin, fenugreek) after agronomic studies

Conclusion

The Bale Gadula Irrigation Project has significant market potential both domestically (for cereals) and internationally (for pulses, oilseeds, and spices). Success will depend on addressing infrastructure constraints, meeting quality standards, and developing effective marketing strategies that consider both domestic food security needs and export opportunities.