1. Ethiopia’s
Agri-Food System
Past Trends, Present Challenges,
and Future Scenarios
Paul Dorosh and Bart Minten (eds.)
IFPRI Webinar
September 22, 2020
Funding for this work and the overall
Ethiopian Strategy Support Program
(ESSP) was provided by USAID, the
European Union, and DFID.

2. Plan of Presentation
 Production, Markets and Consumption
 Poverty and Safety Nets
 Land Constraints, Public Investment and Implications
for Development Strategy

3. Production, Markets,
and Consumption
Bart Minten
Senior Research Fellow
Former Program Leader Ethiopia Strategy Support
Program (ESSP)
International Food Policy Research Institute (IFPRI)

4. Source: Calculated from CSA data.
Rapid growth but contribution of area expansion smaller over time
-2
0
2
4
6
8
10
2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
%
grain area yield Linear (grain area) Linear (yield)
1. Agricultural Production

5. 1. Agricultural Production
Rapid growth in chemical fertilizer use
0
0.2
0.4
0.6
0.8
1
1.2
1.4
08/09
09/10
10/11
11/12
12/13
13/14
14/15
15/16
16/17
17/18
18/19
Milliontons
CSA farmer reports
Import
Source: Calculated from CSA data.

6. 2. Agricultural Markets
Market access improving – large impacts on productivity

7. 2. Agricultural Markets
Marketing margins declining
Source: Calculated from CSA data.
-200
-100
0
100
200
300
400
2001
2006
2011
Real2011Birr/quintal
Addis
Mekelle
Linear (Addis)
Maize markets price differences
(Addis Ababa and Mekelle compared with surplus area Nekemte)

8. 2. Agricultural Markets
Despite large food imports, Ethiopia a net agricultural
exporter in most years
Source: Calculated from CSA data.
(2.0)
(1.5)
(1.0)
(0.5)
-
0.5
1.0
1.5
2.0
2.5
3.0BillionUSD
ag. imports
ag. exports
net exports

9. 3. Food Consumption
Increasing diet diversity – but still low
Source: Calculated from CSA data.
0
10
20
30
40
50
60
70
80
2000 2005 2011 2016
Shareinfoodexpenditures(%)
Cereals Non-cereals
0
2
4
6
8
10
12
14
16
2000 2005 2011 2016
%foodexpenditures
Animal source foods Oil & fat Vegetables & fruits

10. 3. Food Consumption
Prices of nutritious foods on the rise
Source: Calculated from CSA data.
-60 -40 -20 0 20 40 60 80
Grains, roots and tubers
Legumes and nuts
Dairy products
Eggs
Flesh foods and others/small animal protein
Vitamin A dark green leafy vegetables
Other Vitamin A rich vegetables and fruits
Other fruits and vegetables
Oils and fats
Sugar and honey
%
Price changes (2018 compared to 2005, %)

11. Poverty and Safety Nets
Alemayehu Seyoum Taffesse
Senior Research Fellow
Program Leader Ethiopia Strategy Support Program
(ESSP)
International Food Policy Research Institute (IFPRI)

12.  Ethiopian households, particularly rural ones, are subject to a variety of
shocks – drought, flooding, pests, human and animal health, economic;
 Drought is the most common and recurrent
 Examples – 1984/85, 2002/03, 2015/16;
 Shocks can and do the onset/persistence of poverty through transitory
and/or long-term impact – case of drought
 a third of surveyed households during (2008-2016) report Loss of income and
reduced consumption
 12-36 months old children affected by the 1984/85 drought/famine are
significantly shorter, by at least 5 cm, as adults (20 years later);
Shocks

13. The PSNP – Features
 Focus – Rural PSNP, recent urban one introduced
 The PSNP – Objectives and Components
• Aims to smooth consumption (protect assets) through transfers in
chronically food insecure communities (targeting)
• Has two components: Public Works (PWs) and Direct Support (DS);
• Builds community assets – soil and water conservation (SWC),
irrigation, roads, schools, clinics… – through PWs projects
 The PSNP – Duration, Size
• Multi-year, multi-donor – coordination between GoE and donors;
• Large – up to 8 million beneficiaries; Budget ~US$0.5 billion/year
 The PSNP – M&E
• Independent and collaborative monitoring and evaluation in the
design;

14. The PSNP – Impact Summary
 Food security
• Improved food gap – 0.2 months per 100 Birr of transfers,
particularly in the highlands;
• Improved household level (calorie) availability and dietary diversity at
the household level.
 Enhanced resilience (see chart on subsequent slide)
 Economy-wide effects - the benefits of PSNP significantly exceed
the cost of PSNP transfers due to multipliers via local and national
markets (see next slide)

15. The PSNP – Impact Summary
 PSNP transfers reduce vulnerability and improve resilience (2006-2014)
 Local Economy Impact: PSNP generated income multipliers ranging
from 1 to 2.4 ETB per ETB transferred depending on the kebele (eight
LEWIE models);

16. PSNP - Challenges
 Improvements were not seen at the child level.
• Little change in child nutritional outcomes due to PSNP;
• Child diet quality remains poor.
 Livelihoods and asset creation (OFSP, HABP…) – mixed evidence;
• Targeting – geographic and community, proved problematic in the lowlands;
• Graduation – difficult, less understood;
• The PSNP4 (the current phase of PSNP) attempts to address some of these
through nutrition sensitive interventions, livelihoods component (with a livelihoods
transfer ‘scale-up’), other innovations (TDS, Social workers, …);
 Considerable food security and vulnerability remains – even with PSNP;

17. COVID-19 and the PSNP
 COVID-19 - Incidence
 Partial lock down in response to the pandemic and the supportive measures
by the government have negative and positive economic consequences,
respectively;
 Significant income losses reported in both rural and urban areas;
 Both the rural and urban PSNP are helping in mitigating the negative
impact on incomes and food security.
Updated on September 20, 2020
Total cases
Cases per
1 million
population
Total
deaths
Deaths per
1 million
population
Total tests
Tests per 1
million
population
68,131 590 1089 9 1,194,795 10339

18. Land Constraints,
Public Investment and
Implications for
Development Strategy
Paul Dorosh
Division Director
Development Strategy and Governance Division
International Food Policy Research Institute (IFPRI)

19. Will Further Agricultural Growth Promote
Poverty Reduction Given Structural Change?
Key factors
 Growth of agricultural supply relative to demand (price effects
on agricultural incomes)
 Structural change in economy: Number of farmers (and
agricultural workers) declines as a share of total population.
 Changing structure of demand: share of agricultural/food
products in total demand falls as incomes rise.

20. Ethiopia: Sources of Foreign Exchange
 Total imports of goods averaged US$
15.4 billion between 2015/16 and
2019/20, more than double 2010/11
levels.
 Foreign exchange earnings from
merchandise exports were on
average only 20 percent of the
value of imports.
 Foreign capital inflows, private
transfers and FDI together averaged
US$11 bn in 2015/16-19/20 (71% of
merchandise imports).
Source: IMF (various years).
Ethiopia: Balance of Payments, 2004/05-2019/20
0
2
4
6
8
10
12
14
16
18
2004/05 2006/07 2008/09 2010/11 2012/13 2014/15 2016/17 2018/19
billionUS$
Foreign Capital Inflows Foreign Direct Investment Public Transfers
Net Servs + Priv Transfers Exports
Imports

21.  Satellite data of groundcover over time were used to estimate how various factors
(elevation, terrain, precipitation, access to markets) affect the change in the
proportion of area in cropland.
 In 2010-13, in the highlands 40.5% of land was cropland compared with only
15.9% in the lowlands.
 There is little potential for cropland expansion in the highlands,
though lowland cropland could potentially expand to 34.5% of area.
Source: Schmidt and Thomas (2020) using MODIS Land Cover type product.
Major Land Constraints in the Highlands
Average share of area cropped, 2010–2013 Cropped area expansion potential in Ethiopia

22. Model Simulations:
Drivers of Agricultural and Economic Growth
 Land (varies by region / agroecology):
• 0.6% annual growth in most scenarios (1.8% in moisture-sufficient
lowlands; 0.7% in moisture-sufficient highlands)
 Labor (and rates of urbanization)
• Historical population growth rates 2007-15: urban 4.6%, rural 2.1%,
overall 2.5%
 Capital (and rates of investment by sector)
• Determined by domestic and foreign savings
• Private and public investment choices
 Technical change (changes in TFP)

23.  Agricultural growth is likely to decelerate
• Growing land constraints are only partly offset by cultivating more of
the moisture-sufficient lowlands
• Urbanization slows rural labor force growth (but rural population is
still growing)
 With rapid growth in the non-agricultural economy, demand
for agricultural products will continue to rise.
• Increased agricultural production can prevent an increase in real
food prices that would harm the poor.
 The share of downstream activities in the broader
agri-food system is likely to grow over time
Transformation of the Agri-Food System

24. Public Investments and Poverty Reduction
 Model simulations indicate that urban investments
generate faster economic growth and structural
transformation
 But, in spite of rapid urbanization and structural
transformation, the bulk of the poor will likely be living in
rural areas with livelihoods dependent on agriculture and
the rural non-farm economy.
 As a result, agricultural and rural non-farm
investments will likely remain most effective at
reducing poverty at least through the mid-2020’s.

25. Poverty* Impacts of Investments (2016-40)
Source: Ethiopia CGE model results
* Defining poor households as the lowest 40% in the income distribution.
-1.5
-1.0
-0.5
0.0
0.5
1.0
2016 2020 2024 2028 2032 2036 2040
(%-pointdeviationfrombaseline)
Urban investments Agricultural investment Rural nonfarm investment
Agriculture invt more pro-poor
than urban invt through 2023-
24
Annual per capita consumption growth for poor households
(%-point deviation from baseline)

26. Poverty* Impacts of Investments (2016-40)
Source: Ethiopia CGE model results
* Defining poor households as the lowest 40% in the income distribution.
Annual per capita consumption growth for poor households
(%-point deviation from baseline)
-1.5
-1.0
-0.5
0.0
0.5
1.0
2016 2020 2024 2028 2032 2036 2040
(%-pointdeviationfrombaseline)
Urban investments Agricultural investment Rural nonfarm investment
Agriculture invt more pro-poor
than urban invt through 2023-
24
Rural non-farm invt is more pro-poor
than urban invt through 2025-26

27. Although agro-ecologies differ, the basic ingredients for
Ethiopia’s success are applicable to other African countries.
 Sustained commitment to the agriculture sector through
public investments in agricultural research, extension, rural
roads, and ensuring wide access to fertilizer and improved
seeds.
 Avoidance of market distortions such as imposition of official
market prices and large-scale imports, which have taxed
producers in many other African countries.
 Safety nets that effectively target food-insecure households.
 Policies and programs to promote macroeconomic and
political stability.
Implications for Policy in Other Countries

28. Thank you
አመሰግናለሁ!