International Food Policy Research Institute (IFPRI) and Ethiopian Development Research Institute (EDRI) Seminar Series. March 19, 2013. EDRI Meeting Room

2. ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
Ethiopia’s value chains on the move:
The case of teff (work in progress)
Bart Minten, Seneshaw Tamiru, Ermias Engeda,
and Tadesse Kuma
IFPRI-ESSP-EDRI
March 19th, 2013
EDRI, Addis Ababa
2

3. 3
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.

4. 4
2. Background Teff in Ethiopia
• Teff (Eragrostis tef) is major staple food in Ethiopia.
• Research on improved teff varieties since the mid-50s,
only a small number of improved varieties have been
released (20 in total)
• Teff used to prepare enjera; also valued for its fine straw,
used for animal feed, as well as mixed with mud for
building purposes.
• Quality in teff market mostly related to the color of the
grain: magna, white, mixed, and red.
• Other factors matter as well such as origin. However, more
difficult to measure objectively.

5. 5
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)
- Given relatively low yields, total national production (3.5
million tons) in quantity is lower than maize and sorghum.
- 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)

6. 6
2. Background Teff in Ethiopia
• Consumption of teff in Ethiopia:
- Urban areas: 61 kgs per capita
- Rural areas: 20 kgs per capita
- Income elasticity of teff 1.1 for urban areas and 1.2 for
rural areas; teff is an economically superior good
- Teff has prices on average double the price of the cheapest
cereal (maize)

7. • 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

8. • 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

9. • Changes in production factors (few changes)
4. Teff upstream in the value chain
Unit Number of 10 years Now
observations ago
Traditional production
factors
Number of tillings number 1200 4.1 4.5
Seed use:
Magna kgs/ha 91 45.5 44.9
White kgs/ha 593 44.9 44.5
Mixed kgs/ha 141 40.5 43.2
Red/Black kgs/ha 380 46.1 50.2
Number of weedings number 1199 1.5 1.3

10. • 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

11. • 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

12. • 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

13. • Quick adoption of modern inputs
• Rapid take-off of quncho (DZ-Cr-387)
- 32% of teff producres ever used quncho; 24% used it in
the Meher of 2011/2012
- Number of years since household uses quncho is 2
- For users, 84% of white teff area is allocated to quncho
• Mentioned advantages of quncho: a. Higher yields;
b. Lower seed rates needed; c. Better price; d. More
fodder; e. Less lodging
4. Teff upstream in the value chain

14. • 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

15. 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

16. • Quncho only started in 2010; in 2013, 32% farmers used it
Take-off of quncho
0
10
20
30
40
50
60
70
80
90
100
2010 2011 2012
%ofqunchoadopters
Year of adoption of quncho

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

18. • Multi-regression framework where we control for
characteristics of the plot as well as characteristics of the
household; calculate APE (Average Partial Effect of
distances):
1. Doubling of the transport costs to Addis: a. Reduction of
fertilizer use of 38 kg per ha; b. Share of area planted with
quncho declines by 17%
2. Doubling of distance to cooperative unions: a. Reduction
of fertilizer use of 13 kg per ha; b. Share of area planted with
quncho declines by 3%
Results double-hurdle regressions

19. • Cobb-Douglas production function; use fixed and random
effect models (control for household specific effects):
1. Chemical fertilizer: Additional kg of DAP increases teff
production by 2 kgs; additional kg of urea increases teff
production by 2-5 kgs. Value-cost ratios (VCRs) are
between 2.2 and 4.5.
2. Quncho seeds: Quncho seeds have 10% higher production
than traditional seeds or other improved seeds.
Modern inputs and teff productivity

20. • 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

21. 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

22. 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

23. • About 26% of teff procured by retailers in rural areas;
bypassing wholesale markets
4. Teff downstream in the value chain
10 years
ago Now Now
Unit (weighted)
Procurement (share)
In Addis % 82 83 74
Outside Addis on temporary markets % 12 7 6
Outside Addis not on temporary
markets % 6 9 20

24. • Mixing is on the increase
Mixing of teff with other cereals
10 years ago Now
Unit No. of Value No. of Value
obs. obs.
% of teff consumers that mix
teff with
Sorghum % 101 22 271 26
Rice % 101 8 271 20
Wheat % 101 1 271 0
Maize % 102 8 271 12
Other cereals % 102 2 271 2

25. • The poor and enjera sellers behave differently
Mixing of teff with other cereals
Consumers Enjera sellers
Poorest Middle Richest
With
fixed
Without
fixed
income shops shop
Number of observations 275 274 251 79 86
Type of teff bought (%)
Red 23 5 3 3 2
Mix 64 35 5 46 70
White 11 50 35 44 25
Magna 2 9 57 7 2
Total 100 100 100 100 100
Share of customers that mix teff
with other cereals(%) 60 43 15 79 71

26. • The poor and enjera sellers behave differently
Mixing of teff with other cereals
Consumers Enjera sellers
Poorest Middle Richest
With
fixed
Without
fixed
income shops shop
Typical composition of flour bought
(%)
Teff 75 83 94 75 77
Sorghum 15 5 0 11 13
Rice 1 9 5 10 6
Maize 7 2 0 4 3
Wheat 1 0 0 0 0
Other 1 0 1 0 0
Total 100 100 100 100 100

27. • About 20% of teff sold in Addis as prepared enjera
Foodservice industry
10 years Now Now
Unit ago (weighted)
Type of customers for retailers (share)
Consumers % 80.4 87.0 82.1
Enjera wholesalers % 0.8 1.1 2.1
Enjera wholesale companies % 0.3 0.1 0.1
Enjera retailers with fixed shops % 4.7 3.1 4.3
Enjera retailers without shops % 8.7 5.6 5.5
Institutions % 0.7 0.3 0.3
Restaurants % 1.9 1.2 4.2
Supermarkets % 0.0 0.2 0.8
Others % 0.1 0.1 0.2
Total % 100.0 100.0 100.0

28. • Use prices of:
1. CSA at producer level (focus on the five main production
regions)
2. CSA for milling (Addis)
3. EGTE for the wholesale level (Addis)
4. CSA for the retail level (Addis)
6. Marketing margins

29. • Milling margins dropped by half in last ten years
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

30. • Trend line: drop in urban distribution margins from 13-
15% in 2001 to 7-11% in 2011
Share of 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)

31. • 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)

32. 1. Public sector:
- Less complaints about fertilizer delivery
- Investment in R&D. Limited in the teff sector
- However, large investments in extension system
7. Drivers for change

33. 7. Drivers for change
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
Farmers is aware of:
- broadcasting at lower seed rates share 92
- row planting of teff share 77
- transplanting of teff share 40
- zero tillage of teff soils share 11

34. 2. Important improvements in road and communication
infrastructure
7. 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

35. 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
7. Drivers for change

36. 36
8. 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

37. 37
8. 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

38. 38
8. Implications
1. Despite quncho take-off, major room for improved seed
development:
a. lodging resistant varieties, more attention to taste
preferences (quncho suffers from drying out disadvantage),
disease and pest resistant varieties.
b. More sophisticated techniques of breeding
2. 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

39. 39
8. Implications
3. Overall, investments for R&D not at appropriate levels
given importance of teff (e.g. total budget ag. R&D 70 million
USD in 2008). For example, rate of return to quncho
development enormous:
Assumptions
- 10 % higher yield 160million USD per year
- 50% of teff farmers adopt 80million USD per year
Scenario 1
Investment in
millions USD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
-50 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80
Internal rate of
return 160%
Scenario 2
Investment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
-200 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80
Internal rate of
return 40%

40. 40
8. Implications
4. Further investments in roads and communication (still one
of the lowest in Africa)
5. Urbanization motor for rural transformation (urbanization
also one of lowest in Africa)