Agricultural Transformation in Ethiopia
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Agricultural Transformation in Ethiopia

State Policy and Smallholder Farming

Atakilte Beyene, Atakilte Beyene

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eBook - ePub

Agricultural Transformation in Ethiopia

State Policy and Smallholder Farming

Atakilte Beyene, Atakilte Beyene

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About This Book

For thousands of years, Ethiopia has depended on its smallholding farmers to provide the bulk of its food needs. But now, such farmers find themselves under threat from environmental degradation, climate change and declining productivity. As a result, smallholder agriculture has increasingly become subsistence-oriented, with many of these farmers trapped in a cycle of poverty. Smallholders have long been marginalised by mainstream development policies, and only more recently has their crucial importance been recognised for addressing rural poverty through agricultural reform. This collection, written by leading Ethiopian scholars, explores the scope and impact of Ethiopia's policy reforms over the past two decades on the smallholder sector. Focusing on the Lake Tana basin in northwestern Ethiopia, an area with untapped potential for growth, the contributors argue that any effective policy will need to go beyond agriculture to consider the role of health, nutrition and local food customs, as well as including increased safeguards for smallholder's land rights. They in turn show that smallholders represent a vitally overlooked component of development strategy, not only in Ethiopia but across the global South.

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Publisher
Zed Books
Year
2018
ISBN
9781786992215
1 | Agricultural input supply and output marketing systems
Fentahun Tesafa
Introduction
Studies indicate that the competitive advantages of smallholder farms over large commercial farms lie principally in their use of family labour at much lower transaction costs and their intensive indigenous knowledge (Hazell et al. 2007; Poulton et al. 2005). On the other hand, smallholders face high unit-of-transaction costs in almost all non-labour transactions, including purchased inputs, credit services and output markets (Dorward 1999; Kydd and Poulton 2000; Lipton 2005). Since the process of intensification requires increased use of purchased inputs and services, it increases the challenge to smallholders in the process. This chapter explores the priorities and challenges in agricultural input supply and output marketing systems of smallholder farmers in the crop and livestock sectors of Ethiopia. The discussion begins by examining the main input and output marketing needs of smallholder farmers for intensification of agriculture (crop and livestock), the capacity of both the state and markets to meet these needs, and the major constraints to and opportunities for meeting these needs. Finally, the chapter indicates policy and strategic considerations needed in the areas of agricultural input supply, output marketing and institutional support services development in order to stimulate a more rapid and sustained commercialization and growth of smallholder agriculture.
Agricultural input use and supply systems of smallholder farmers
Agricultural inputs like improved seeds, fertilizers and agro-chemicals are important in improving soil fertility and reducing negative effects of weeds, pests and diseases. As a result crop productivity improves. Intensification of agriculture with these inputs requires both availability of input, rural finance and competitive marketing systems. Intensification, therefore, involves the development of supply chains around smallholder farmers, with simultaneous and complementary investments in all links in the supply chain. The institutional support services of credit, input supply and extension are important in order to make these agricultural inputs easily available to smallholders and improve the technical skills and knowledge of farmers in properly using and managing these inputs. Studies indicate that differences in access to these services have significant effects on intensity of input use and overall crop and livestock productivity. Smallholders who have access to credit for input purchase and supply systems have used fertilizer and chemicals more intensively and attained higher crop productivity per hectare of land (EEA/EEPRI 2006; Spielman et al. 2011; Fentahun and Merkuz 2014). For example, smallholder farmers who accessed credit for improved seed purchase achieved approximately a 13 per cent yield increase compared to those who didn’t have access (Berhanu et al. 2009). The research results of the Amhara Regional Agricultural Research Institute also indicated that farmers could achieve a yield advantage of 17–41 per cent in sorghum, 110–113 per cent in barley and 19–32 per cent in teff production through use of improved seeds over the current national average yield of 23.69, 19.65 and 15.75 quintals per hectare (q/ha) respectively (CSA 2015a).
The intensity of seed use is less affected by access to credit and input supply services as compared to the intensity of fertilizer and chemical use. This may be why most smallholders (96 per cent) use their own saved seed, instead of relying on the market (CSA 2011). They also procure seed from their neighbourhood farmers or traders in the nearby local markets. However, the quality of seed obtained through these traditional seed supply systems, as well as its potential impact on overall crop productivity, may need further investigation.
The rural areas in Ethiopia are characterized by low total and monetary incomes. Most people have limited consumption and savings; hence the monetary economy base is narrow and the markets (for agricultural inputs, outputs, finance, consumer goods and services, etc.) thin. The volumes traded are small and prone to large seasonal variability in demand and supply. These conditions normally coexist with poor road facilities and telecommunications, poor information (particularly in agriculture on prices, new technologies and potential contracting partners), difficulties in enforcing contracts, and widespread rent-seeking behaviour. Such conditions pose particular problems for the supply-chain development needed for agricultural intensification, and these are exacerbated by the fact that such development may require significant simultaneous and complementary investments by a number of market participants.
Such investments carry high risks of transaction failure and hence high transaction costs incurred in obtaining protection against such risks. According to Poulton et al. (2006), these transaction risks have three main components: coordination, opportunism and rent-seeking risks. Coordination risks refer to the risk of an investment failing owing to the absence of complementary investments by other players in a supply chain. Opportunism risks arise when a contracting party with monopolistic control over a complementary investment/service removes or threatens to remove it from the supply chain after a player has made an investment that depends upon it. Rent-seeking risks arise when powerful government, political, criminal or other agents not party to a transaction see associated investments and/or revenue as an opportunity to expropriate or threaten to expropriate income or assets from the investor. Coordination, opportunism and rent risks and costs are closely related; where these are high as compared with potential returns on investment, the investments required for the development of an agricultural intensification supply chain may be too risky to be worthwhile, and thus the supply chain may not develop even if it is otherwise potentially profitable.
Input use and supply systems in the crop sector From the 1990s, the government introduced a range of economic reforms that sought to boost agricultural production. A hallmark of this strategy was the introduction of several large-scale programmes designed to intensify cereal production with improved seeds, chemical fertilizers and credit. The intensification campaign focused on cereals in the moisture-reliant highlands, where 60 per cent of the rural population live and where the strategy had the best chance of success. Results indicate that crop technology packages could make a huge difference in productivity. Maize yield, for example, can be increased from current farmers’ yields of 3.4 (CSA 2015a) to 12 tons per hectare (MoA 2014) if farmers use the right type and quantity of improved seed and fertilizers with proper management practices.
The government introduced the Participatory Demonstration and Training Extension System (PADETES) in 1994/95 to carry out the intensification programme. This was later supported by a large-scale demonstration programme led by Sasakawa Global 2000. The programme followed a technology-based supply-driven intensification strategy consisting of enhanced supply and promotion of improved seeds and fertilizers, on-farm demonstration of improved farm practices and technologies, improved credit services for input purchase, and close supervision of farmers’ extension plots. Over a ten-year period, PADETES reached about 40 per cent of the roughly ten million farm households in Ethiopia. Data from millions of demonstrations carried out through PADETES (3.6 million in 1999) indicated that the adoption of seed-fertilizer technologies could more than double cereal yields and would be profitable to farmers in moisture-reliant areas (Crawford et al. 2003). Cereal-producing farmers’ participation in the extension programme reached 3.5 million in 2014 from 2.4 million in 2000, during which time cereal yields increased from 1.12 to 2.33 tons per hectare (FAOSTAT 2017), a little over twofold.
A key feature of PADETES and its predecessors such as the National Agricultural Extension Intervention Programme (NAEIP) was the primary role played by the state. Improved seed was developed, multiplied and distributed by public organizations and agencies, fertilizer was distributed (primarily) through public channels, credit was disbursed through state-guaranteed credit institutions, and extension services were provided by the public sector (bureaus of agriculture at district, zone and regional levels). A decade after PADETES, and in the midst of another state-led cereal intensification programme, the Ethiopian economy has changed. While the extent and depth of this change are a matter of some debate, there are concerns that these programmes are not consistently generating the desired impacts (Byerlee et al. 2007; DSA 2006; EEA/EEPRI 2006). Yet agricultural input markets, extension services and agricultural education and training have changed relatively little in spite of this. The state continues to play a dominant role, and the effectiveness of its interventions is now coming under increasing scrutiny.
The recent smallholder intensification programme has drawn prominent attention to the role of chemical fertilizer, seed and credit. According to CSA reports, between 2011 and 2015 use of fertilizer and improved seeds increased by 78 per cent and 154 per cent respectively. Similarly, farm credit increased from 8.1 to 150.2 million birr and the number of farmers participating in the extension programme rose from 2.57 million to 3.64 million during the same period. Pesticide use grew by 197 per cent in 2010 from 1,390.2 tons of pesticides in 2005 (FAOSTAT 2017).
Farmers are innovating around the simple extension packages provided, but the flexibility to do so is constrained by the programme. For instance, in Wolayta in southern Ethiopia farmers were very keen to make use of fertilizers in their dry-land outfields, but not at the rates recommended. They observed that applying such amounts when rainfall is low and management limited because of other labour demands is potentially damaging to the crop and certainly uneconomical. Farmers are instead keen to make use of lower amounts of fertilizer through focused application, which maximizes nutrient uptake to individual plants through spot application, requiring a lesser overall amount (and so lower cost) than blanket application, as recommended in the government package. Such local-level patterns of farming practices do not appear in the generic, national-level assessments so often quoted. However, recognizing patterns of farmer innovation (and the wider conditions under which technology adoption is facilitated) needs to be taken more seriously in the design and implementation of technology-led, agricultural intensification programmes.
IMPROVED SEEDS Seed is one of the important inputs for intensification of smallholder agriculture. Increasing the quality of seeds can increase the yield potential of the crop by significant amounts and is thus one of the most economical and efficient inputs to agricultural development (FAO 2006). The availability of quality seed is the foundation for food production and productivity and is a precursor to crop and food diversity and security. Efforts to improve the performance of the agricultural sector should include seed production and delivery systems. Generation and transfer of improved technologies are critical prerequisites for agricultural development, specifically for an agrarian economy like that of Ethiopia. Although a significant number of improved varieties of various crops are released by the national agricultural system, there has been limited use of improved seeds (4 per cent) by most of the farmers (CSA 2011). Thus, adoption of improved seeds in Ethiopia has generally been disappointing. Official estimates suggest that while the total quantity of improved seed supplied nationally increased over time, farmers’ use of purchased seeds in 2011 covered an average of only 5.6 per cent of cropped area, with a high of 28 per cent for maize. Most farmers still rely on farmer-to-farmer exchanges or saved seed, even for improved varieties (Belay 2004; Berhanu et al. 2009). Improved seed in this chapter refers to seed that is bred in conventional systems for particularly desired characteristics, such as drought tolerance, disease resistance, short maturing and/or more productive cropping.
The seed system in Ethiopia has two broad constituents, namely formal and informal systems. Each of the systems play a key roles in the development, multiplication, processing, storage, distribution and marketing of seeds in the country.
The formal seed system dominated by the public sector: This is mainly a government-supported system. Several public institutions are involved in it and it has a legal grounding. The main actors of the formal system include National Agricultural Research Systems (NARS), the Ministry of Agriculture (MoA) and the Ethiopian Seed Enterprise (ESE) (see Spielman et al. 2011). Recently, decentralized regional seed enterprises (RSEs) were also established as public seed enterprises (Amhara Seed Enterprise-ASE, Oromiya Seed Enterprise-OSE, and Southern Nations Nationalities and Peoples Region Seed Enterprise, SRSE). These agencies have interdependent roles in the seed system. NARS is responsible for variety development and supply of initial seeds, while ESE and RSEs are involved in mass production of improved seeds. MoA is also involved in variety release, multiplication, certification and distribution of seeds in the country. Private seed growers and other farmer organizations such as unions and cooperatives also play key roles in multiplication and distribution of different seeds. These formal systems are guided by a policy framework for agricultural research and technology generation. It describes legal procedures, such as variety release, intellectual property rights, certification programmes, seed standards, and contract laws and enforcement. These are important to formalize the seed system and determine the quantity, quality and cost of seeds passing through the seed system (Maredia et al. 2000).
So far, NARS has released 960 varieties of 114 different types of crops up until 2014 (MoA 2014). Among these, cereal, pulse and oil crops accounted for about 36, 19 and 9 per cent respectively. ESE alone was able to produce 111 different seeds of just 26 different crop varieties in 2009. Seed multiplication by ESE mainly focused on two cereal crops (wheat and maize) and annual supply of certified seed by the enterprise does not exceed 20,000 tons (Marja et al. 2008). Wheat and hybrid maize constitute about 85 per cent of the total output of the enterprise. However, the annual average seed requirement for cereals, pulses and oilseeds is estimated to be over 400,000 tons (CSA reports 2005–2015a, b).
The role of the private sector in the seed industry in Ethiopia is rather weak. Following market reforms in the mid-1990s, seed production and distribution were opened to the private sector. The public sector, including the regional extension and input supply systems, still accounts for 80 per cent of total sales of improved seeds. In 2008, eleven firms were active in seed production, although most of them were involved specifically in hybrid maize seed primarily as subcontractors of Ethiopian Seed Enterprise (ESE). Despite the lucrative potential of the hybrid maize seed market, approximately 60 per cent of maize seed supply was still managed directly by the public sector, with an additional 10 per cent of firms serving as subcontractors to the public sector. Firms operating independently of the public sector’s seed production system cover only 30 per cent of maize seed supply.
The informal seed system is the dominant system: This system is not regulated by government policies. Instead, it is implemented by farmers themselves and is highly localized. According to Cromwell et al. (1992), five key features distinguish the informal from the formal system; the informal system is traditional, semi-structured, operates at individual community level, uses a wide range of exchange mechanisms, and usually deals with the small quantities of seeds often demanded by farmers. In the context of Ethiopia, this system is extremely important for seed security, for the bulk of seed in the country is usually supplied via the informal system. About 60–70 per cent of seed used by Ethiopian smallholder farmers is saved on-farm and exchanged among farmers, and the remaining 20–30 per cent is borrowed or purchased locally (Belay 2004). The informal seed system (either self-saved or farmer-to-farmer exchange) accounts for 96 per cent of the seed used by...

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