Transforming Agri-food Systems in Ethiopia: Evidence from the Downstream and Midstream Segment of the Dairy Value Chain

1. Photo Credit Goes Here
Transforming Agri-food Systems in Ethiopia:
Evidence from the Downstream and Midstream
Segment of the Dairy Value Chain
Bart Minten (IFPRI/ESSP) with Yetimwork Habte (EDRI/ESSP), Seneshaw
Tamru (EDRI/KULeuven) and Agajie Tesfaye (EIAR)
July 18, 2019
17th International Conference on the Ethiopian Economy
EEA, Addis Ababa

2. Quick transformation in
Ethiopia
• Rapid poverty reduction
• Rapid decline in stunting
• However, stunting levels
still very high
• Monotonous diets an
important issue
0
20
40
60
80
2000 2005 2011 2016
%
Stunting Poverty head count
INTRODUCTION

3. Increasing diversification in
the food consumption basket
• Share of cereals in
expenditures on the
decline
0
10
20
30
40
50
60
70
80
2000 2005 2011 2016
Shareinfoodexpenditures
(%)
Cereals
Non-cereals
INTRODUCTION

4. 0
2
4
6
8
10
12
14
2000 2006 2011 2016Shareinfoodexpenditures(%)
Animal source foods
Fruits & vegetables
Increasing expenditures on
high-value and nutritious
crops
1/ Animal source foods (dairy
most important)
2/ Fruits and vegetables
(cabbage, onions, tomato,
green pepper most
important)
INTRODUCTION

5. INTRODUCTION
• Look here at dairy development
• Interesting sector as:
1/ High income elasticities
2/ Important for nutrition
• However, good data on the dairy sector functioning and
transformation are lacking
• Focus on understanding the transformation pattern in
the dairy sector supplying Addis, the most dynamic part
of the country

6. DATA
• Secondary data:
(1) Meat and Dairy Industry Development Institute;
(2) Household Consumption and Expenditure Survey
(HCES)

7. DATA
• Primary data:
- Survey fielded in January – February 2018
- 97 farms in Addis; 256 farms in suburban areas; 602
farms in rural areas (North and West Shewa)
- Stratified by distance to Addis
- 13 large farms (more than 25 cows)

8. DATA
Households Large farms
Unit Rural Sub-urban Urban (≥ 25 cows)
Overall information
Share of households with cows % 0.52 0.34 0.001
Share of farms with more than 2 cows % 0.17 0.25 0.69
Average number of cows per farm number 1.8 2.0 5.3 44.5
Number of cows total 1,030,963 357,039 28,672 4,981
Sample
Number of observations number 600 248 94 13
Medium farms (3 cows or more) number 247 136 67
Small farms (1 - 2 cows) number 353 112 27
Assets
Total value of cattle USD 1,897 3,180 10,496 117,439
Total value of cows USD 682 1,574 7,523 80,172
Total value of livestock assets (non-livestock) USD 134 740 7,917 246,701
Share assets/value cows % 20 47 105 308

9. DOWNSTREAM AND MIDSTREAM
- DAIRY PROCESSING SECTOR
- CONSUMPTION PATTERNS ADDIS
- PRICES
- COMMERCIAL FARMS

10. DAIRY PROCESSING COMPANIES
0
5
10
15
20
25
30
35
Totalnumberofdairy
processingcompanies
- 100 200 300 400
Capacity
Actual
Liter/dayShola
Family milk
Sebeta agro-industry/Mama
Elemtu
Holland dairy plc
Etete
Ada cooperative

11. DAIRY CONSUMPTION ADDIS
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Poorest
quintile
quintile
2
quintile
3
quintile
4
Richest
quintile
USD/capita
Liquid milk expenditures (2016)
-
1.0
2.0
3.0
4.0
5.0
6.0
2005 2011 2016
USD/capita
Dairy consumption per capita

12. DAIRY CONSUMPTION ADDIS

13. MILK SUPPLY ADDIS ABABA
37%
32%
31%
Supply liquid milk
Rural Sub-urban Urban
44
28
11
16
Supply pasteurized milk (%)
Rural Sub-urban Urban Large farms

14. PRICES AND MARGINS
0
5
10
15
20
25
30
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Birr/l
Raw_milk_Shewa Raw_milk_Addis Pasteurized_milk_Addis

15. MILK PRICES ADDIS – SURVEY 02/2018
0
.05
.1
.15
.2
.25
Density
15 20 25 30
ETB/liter
Fresh/non-pasteurized milk pasteurized milk

16. DAIRY RETAIL SHOPS ADDIS
Variables/Description Unit Milk type
Unpasteurized Pasteurized
Price of milk/liter Mean 28.2 27.4
median 26 28
Main Supplier
Delivered by in independent distributor % 2.0 52.8
Delivered by dairy processing company % 0.0 17.0
Delivered by independent trader/milk collector % 0.0 30.2
Collector collects in rural area and owns this shop % 24.5 0.0
Obtained from my own farm % 12.2 0.0
Dairy farmer/producer % 61.2 0.0
Total % 100.0 100.0
Origin of Milk
Addis % 40.4
Sub-urban % 51.1
North shewa % 6.4
East shewa % 2.1

17. DAIRY MARKETING FARMERS
Households Large farms
Unit Rural Sub-urban Urban (≥ 25 cows)
Main buyer
Consumer % 11.2 21.0 66.9 15.4
(Agent of) processing company % 22.1 20.0 18.2 23.1
(Agent of) cooperative % 0.6 4.4 2.6 7.7
Independent trader % 65.7 52.9 0.7 23.1
Retailer shop % 0.1 0.8 1.4 15.4
Other % 0.3 0.9 10.2 15.4
Total % 100.0 100.0 100.0 100.0
Quality rewards
Farmer gets no premium if he sells better quality
milk % 61.5 59.0 49.3 69.2

18. DAIRY MARKETING FARMERS
Households Large farms
Unit Rural Sub-urban Urban (≥ 25 cows)
Of the total liquid milk produced:
Share of own consumption
% 21.2 24.5 11.1 1.4
Share sales liquid milk
% 11.0 16.8 82.6 95.2
Share for processing companies
% 67.1 57.7 4.9 2.7
Share given out
% 0.7 1.0 1.4 0.7
Share spoiled
% 0.1 0.0 0.1 0.0
Total
% 100.0 100.0 100.0 100.0
Average share of sales of butter produced
% 42.0 34.9 0.0 0.0

19. DAIRY MARKETING FARMERS

20. MILK MARKETING FARMERS

21. DAIRY MARKETING FARMERS
Households
Large
farms
Unit Time period Rural Sub-urban Urban (≥ 25 cows)
Type of product sold:
The dairy farm sells liquid milk % survey time 13.3 19.2 95.6 100.0
% 10 years earlier 7.5 14.2 93.0 100.0
Destination: Dairy product is mostly sold to…
… Addis % survey time 77.9 86.2 89.9 84.6
% 10 years earlier 67.3 67.7 89.9 84.6
Choice in dairy traders to sell to:
No choice % survey time 7.8 4.4 5.9 7.7
% 10 years earlier 23.9 8.9 14.3 7.7
Services provided by buyers: Main buyer…
… provides training/advice on dairy-related
activities
% survey time 12.4 7.7 16.9 23.1
% 10 years earlier 3.1 6.0 11.0 38.5
… supplies equipment/feed % survey time 3.6 1.3 4.5 0.0
% 10 years earlier 1.1 0.4 4.6 0.0
… provides loans/credit % survey time 2.1 1.3 2.8 0.0
% 10 years earlier 0.4 2.0 2.9 0.0

22. EMERGENCE COMMERCIAL FARMS
0
1
2
3
4
5
6
Rural Suburban
Farms with more than 25 cows (per woreda)
2007 2017

23. LABOR PRODUCTIVITY
0
5
10
15
20
25
30
35
40
rural suburban urban large farm
l/hourworked

24. CONCLUSIONS
• Large changes in the dairy sector in Ethiopia
• Midstream and downstream:
(1) Increased dairy expenditures (growth city and income)
(2) More competition
(3) More dairy processing companies
(4) Emergence of larger commercial farms