International Food Policy Research Institute (IFPRI) and Ethiopian Development Research Institute (EDRI) in collaboration with Ethiopian Economics Association (EEA). Eleventh International Conference on Ethiopian Economy. July 18-20, 2013

1. ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
Ethiopia’s value chains on the move:
The case of teff
Bart Minten, Seneshaw Tamiru, Ermias
Engeda, and Tadesse Kuma
IFPRI ESSP-II EDRI
Ethiopian Economic Association Conference
July 19, 2013
Addis Ababa
1

2. 2
1. Introduction
• Major changes happening in food markets worldwide and
especially in developing countries:
- Supermarket revolution
- Share of high-value crops increasing
- Quality demands on the rise
- Food safety requirement export countries
- Vertical integration
- Up-scaling, dis-intermediation, and branding
• No clear to what extent value chains are transforming in
Africa and/or Ethiopia, often because of a lack of good
primary data. This is the purpose of the analysis.

3. 3
2. Background Teff in Ethiopia
• Teff is a major crop in Ethiopia:
- 20% of all cultivated area, covering 2.7 million hectares
and grown by 6.3 million farmers (second most important
crop is maize with 15% of cultivated area)
- Value of production in 2011/12 was 1.6 billion USD, the
most important crop in the country.
- Value of commercial surplus (CS) 2011/12: 464 million
USD, as important as sorghum, maize, and wheat
combined; one-quarter less than coffee (600 million USD)

4. • Purpose of the study is to understand major value chains
from rural producers in major production zones to Addis,
the major city in the country.
• Organization of surveys: 1/ Interviews with key informants
September – October 2012; 2/ Fielding of surveys in
November – December 2012.
• Surveys with producers and communities upstream; rural
and urban wholesalers and truckers midstream; cereal
shops, mills, and cooperative retail downstream
3. Data and methodology

5. • Stratified random samples at each level:
1. Upstream: 1,200 farmers in five major teff production
zones. These five zones represent 38% of national teff area
and 42% of the commercial surplus.
2. Midstream: 200 rural wholesalers (that ship teff to Addis);
75 urban wholesalers (2/3th on Ashwa Meda; 1/3rd on Ehil
Beranda); 90 truck drivers
3. Downstream: 282 retail outlets (83% mills; 10% cereal
shops; 7% consumer cooperatives)
3. Data and methodology

6. • Increasing adoption of modern input use over time
4. Teff upstream in the value chain
Unit Number of 10 years Now
observations ago
Modern inputs
Adoption of improved seed share (%) 1199 7.3 35.8
Use of chemical fertilizer:
DAP kgs/ha 1128 50 91
urea kgs/ha 1121 34 64
Adoption of herbicides share (%) 1197 31.9 65.3
Adoption of pesticides share (%) 1197 4.3 13.1

7. • Type of teff: rapid decline of red teff; increase of
white/magna
4. Teff upstream in the value chain
Unit Number of 10 years Now
observations ago
Type of teff
Farmers' interviews:
Red teff share (%) 1200 36.2 19.9
Mixed teff share (%) 1200 17.6 11.7
White teff share (%) 1200 40.7 54.2
Magna teff share (%) 1200 5.4 14.1
Community focus group interviews:
Red teff share (%) 60 32.7 14.4
Mixed teff share (%) 60 31.8 21.6
White teff share (%) 60 26.5 40.2
Magna teff share (%) 60 7.7 24.3

8. • Reasons for the decline of red teff:
1. Lower prices of red teff compared to white teff. Higher
prices of white teff driven by: a. lower conversion ratios
of red teff to enjeras; b. longer shelf life for white enjeras;
c. preference of consumers
2. Higher productivity of white teff now because of
availability of improved varieties; traditionally red teff
would do better compared to white teff
4. Teff upstream in the value chain

9. • 93% of teff farmers use chemical fertilizer; 34% uses
improved seeds
• Stated reasons for not using or for not using enough
modern inputs:
1. Chemical fertilizer: Lack of money at the time of need
2. Improved teff seeds: Unable to find them or unable to
find more
4. Teff upstream in the value chain

10. Dynamics in adoption of fertilizer
0
.5
1
1.5
0 50 100 150
Transport costs to Addis (Birr/quintal)
DAP now DAP 10 years ago
urea now urea 10 years ago

11. Adoption of quncho (new variety)
0
10203040
0 50 100 150
Transport costs to Addis (Birr/quintal)

12. • Teff retailing in Addis: 61% mills; 29% cereal shops; and
8% consumer cooperatives
• Traditionally (as seen in other towns or rural areas), mills
only did milling and household typically would:
a/ buy teff on market/cereal shop;
b/ clean teff at home;
c/ take teff to mill;
d/ prepare enjera at home
4. Teff downstream in the value chain

13. 4. Teff downstream in the value chain
10 years ago Now
Unit No. of Value No. of Value
obs. obs.
Technology and services
Number of milling machines number 100 3.05 256 2.96
Number of crops sold in outlet number 106 6.16 280 7.61
Share of customers that get
home delivery % 102 59 271 61
Share of customers that clean at
home % 96 30 254 21
Share of customers that only
come for milling % 93 30 250 24

14. 4. Teff downstream in the value chain
10 years ago Now
Unit No. of Value No. Value
obs. of obs.
Competition
Number of mills in in the
kebele number 92 6.11 250 9.30
Number of cereal shops in the
kebele number 75 2.86 202 4.10
Often queuing of consumers % 102 30 276 12

15. • Trend line: drop in urban distribution margins from 13-
15% in 2001 to 7-11% in 2011
5. Margins: Share wholesale in retail price
0.75
0.8
0.85
0.9
0.95
1
200201
200206
200211
200304
200309
200402
200407
200412
200505
200510
200603
200608
200701
200706
200711
200804
200809
200902
200907
200912
201005
201010
201103
201108
white wholesale mix wholesale
red wholesale Linear (white wholesale)
Linear (mix wholesale) Linear (red wholesale)

16. • Trend line: share of producers has increased from 74%-
78% in 2001 to 76-86% in 2011
5. Margins: Share producer in retail price
0.5
0.6
0.7
0.8
0.9
1
200201
200207
200301
200307
200401
200407
200501
200507
200601
200607
200701
200707
200801
200807
200901
200907
201001
201007
201101
201107
Shareinretailprice
white producer mix producer
red producer Linear (white producer)
Linear (mix producer) Linear (red producer)

17. 6. Drivers for change
Public sector: Large investments in agricultural extension system
Unit Mean/
Percent
Contact extension agents:
Received a visit of an agricultural extension agent in the last 2
years share 74
In last 12 months:
Number of times that farmer talked individually with
extension agent on teff issues number 2.32
Number of times that farmer participated in a community
meeting to discuss teff issues number 2.28
Farmer visited a demonstration plot of teff share 37
Farmer visited a government office of agriculture and
discussed teff issues share 27
Farmer awareness of technologies:
Farmer knows the recommended fertilizer use on teff plots share 51

18. 2. Important improvements in road and communication
infrastructure
6. Drivers for change
Unit Farmers Rural Urban Urban
traders traders retailers
Owners of a phone
share
(%) 28 100 100 98
Year since they own a phone year - 2006 2007 2008
Used mobile phone in the last marketing
transaction
share
(%) 12 - 97 56
If yes, agreed on a price with the trader
by phone in the last transaction
share
(%) 74 - 52 32

19. 3. Urbanization (1.2 million more people in Addis), income
growth and economic superior characteristics of teff
(doubling of income, 110% increase in teff consumption
expenditure); these factors combined might have led to
doubling of commercial surplus into Addis in last 10 years
4. Higher opportunity costs of time, especially of women;
further impetus for foodservice industry as well as for
development of a different retail sector
6. Drivers for change

20. 20
7. Conclusions
Important changes in the teff value chain:
1. Modern inputs increasingly adopted, especially by these
farmers living close to urban areas
2. Quality demands are on the rise, important shifts from
cheap red varieties to more expensive white ones
3. Increasing willingness to pay for convenience in urban
areas, as illustrated by the emergence of one-stop shops
as well as by a sizable foodservice sector
4. The share of rural-urban marketing, urban
distribution, and milling margins is declining, indicating
improved marketing efficiency

21. 21
7. Conclusions
Despite changes, still in early stage of agricultural
transformation:
1. Upstream:
a/ Adoption of improved varieties still low
b/ Fertilizer used is below recommended level
c/ Mechanization absent
d/ Vertical integration and coordination absent
2. Downstream:
a/ Little evidence of up-scaling
b/ Small share of modern retail
c/ Almost no branding

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7. Implications
1.Major room for improved seed development; Better
knowledge on other technologies to improve teff productivity
needed, i.e. row planting, transplanting, response to fertilizers
that contain zinc and copper, minimal tillage
2. Further investments in roads and communication (still one
of the lowest in Africa)
3. Urbanization motor for rural transformation (urbanization
also one of lowest in Africa)