International Food Policy Research Institute/ Ethiopia Strategy Support Program (IFPRI/ ESSP)and Ethiopian Development Research Institute (EDRI) Coordinated a conference with Agriculutral Transformation Agency (ATA) and Ministry of Agriculutrue (MoA) on Teff Value Chain at Hilton Hotel Addis Ababa on October 10, 2013.

1. The supply chain of teff to Addis Ababa
Bart Minten, Seneshaw Tamiru, Ermias Engeda,
and Tadesse Kuma
IFPRI ESSP-II EDRI
Conference on “Improved evidence towards
better policies for the teff value chain”
10 October 2013
Addis Ababa
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ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE

2. 2
1. Introduction
• Importance of cities rapidly growing world-wide: In 1950:
30% living in cities; In 2010: 50%
• In Africa: projected to have 60% in cities in 2050; Rapidly
growing rural-urban agricultural market flows, with
important implications on urban and rural food security
• Increasing dependence of African cities on imported food,
blamed on uncompetitive local value chains
• However, few scientific studies that look rural-urban food
value chains;
• This leads often to a badly informed debate

3. 3
Three conventional wisdoms on food value
chains
• Perception 1: “Farmers obtain small share of final retail
price” (The Economist: “… too few subsistence farmers get
a chance to sell their produce (and usually get less than
20% of the market price)” March 2nd-8th, 2013, p.9, in
Leaders)
• Perception 2: “Value chains are long and there are many
layers, causing inefficiency”
• Perception 3: “Sales are driven by distress immediately
after harvest when prices are low”
Our contribution: Test validity of these perceptions in the case
of Ethiopia for teff

4. • Purpose of the study is to understand major value chains
of teff (the most important crop in Ethiopia) from rural
producers in major production zones to Addis, the major
city in the country.
• Surveys with producers and communities upstream; rural
and urban wholesalers and truckers midstream; cereal
shops, mills, and cooperative retail downstream
2. 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)
2. Data and methodology

6. • Most common value chain is one with three
intermediaries between producer and consumer:
Producer
Regional trader Urban broker/trader Urban retailer
Consumer
- Sometimes shorter, e.g. 32% of teff sold by urban retailers
directly obtained in rural areas
- Sometime longer, e.g. 13% of procurement of rural traders
from rural assemblers or farmer-traders
3. Structure of the value chain

7. • Farmers asked teff price at the time of the survey
(October- November 2012) for their most common place
of sale
• All value chain participants asked prices for the different
teff qualities at the time of the survey (rural traders:
October-November; urban traders and retailers:
December)
• Use all these prices to get at average price composition
4. Price formation

8. 4. Price formation in value chain
(October 2012)
0.0
200.0
400.0
600.0
800.0
1000.0
1200.0
1400.0
1600.0
1800.0
Magna White Mix Red
Birr/quintal
Milling and
cleaning
Urban retail
Urban wholesale
Rural market/town
Farmgate

9. • Farmers obtain between 78% (red) to 86% (magna) of the
final urban retail grain price
• Average composition of margin between producer and
consumers:
1/ Farmgate – rural markets: 15%
2/ Rural market – urban wholesale: 54%
3/ Urban wholesale – urban retail: 19%
4/ Milling and cleaning: 13%
• Gives us average picture at time of survey; in rest of
presentation look at spatial and temporal variation
4. Price formation in the value chain

10. • Strong price – transportation cost relationship
• In case of white teff (most traded), producer share drops
from 90% close by to 80% for most remote
5. Variation over space100011001200130014001500
0 50 100 150
Transport costs to Addis (Birr/quintal)
Magna White
Mix Red

11. • Storage: release smooth over the year
6. Temporal variation
0
100
200
300
400
500
600
700
800
900
N-D D-J J-F F-M M-A A-M M-J J-J J-A A-S S-O O-N
kg
storage

12. • Two measures of distress sales:
1. “Would you have sold the teff at this time if the price
would have been 10% lower?”: 19% of transactions
(“distress”)
2. “Would you have sold the teff at this time if the price
would have been 50% lower?”: 10% of transactions
(“extreme distress”)
• In 71% of the cases, farmers would not have accepted
lower price
6. Temporal variation in sales

13. • Multinomal model (0=normal; 1=distress; 2=extreme
distress):
1. Strong effect of the month of sales: More distress sales in
months immediately after harvest
2. Extreme distress sales characterized by smaller quantities
sold (seemingly only done to cover immediate needs)
3. Off-farm income leads to less distress and extreme distress
sales
4. More remote households have more distress sales (poorer
in general and play less the market)
Associates of distress sales

14. • Milling margins dropped by half in last ten years
7. Changes in margins
Ratio of milling margins over teff price
0
0.01
0.02
0.03
0.04
0.05
0.06
200107
200202
200209
200305
200312
200407
200502
200509
200604
200611
200706
200801
200808
200903
200910
201005
201012
201107
201202

15. • Trend line: share of producers has increased from 74%-
78% in 2001 to 76-86% in 2011
Share of 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)

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7. Conclusions
1. We find most common value chain to be rather
short, with on average 3 intermediaries between farmers
and consumers
2. The share of the farmer in final retail price is about 80
%, using different methodologies (price at time of survey;
price from transactions and taking seasonality of sales into
consideration); share drops when farmers live further
3. Distress sales: 19% of transactions; Extreme distress: 10%
of transactions; smooth storage release
These are seemingly all signs of well-functioning markets

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7. Conclusions
Why in contradiction with perceptions?
1. Few surveys; mostly case studies; problems of
representativity;
2. Important changes (roads; communication) have
happened that people are not aware of
3. Teff unsophisticated value chain (little value addition by
value chain agents)
4. Results different for perishable crops; root crops; or thin
markets
5. Teff high price; e.g. maize different
6. Traders easy to blame; their importance overstated

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8. Implications
1. As market assessment hard, careful at benefits and costs
before interventions (such as cooperative
marketing, modern commodity exchanges; warehouse
receipt systems; price controls)
2. Lower transportation costs lead to higher prices for
producers; Better qualities have higher producer share
3. If objective of policy makers is to reduce consumer
prices, focus on costs at the farm level (i.e. improved
technologies); there is seemingly very little potential at
the market level