Ethiopia - agricultural sectors

Ethiopia is endowed with abundant agricultural resources and has diverse ecological zones. Agriculture is the mainstay of the economy. The Government of Ethiopia (GOE) has identified key priority intervention areas to increase productivity of smallholder farms and expand large-scale commercial farms. 

Particularly, the GOE under the new administration has given renewed emphasis to develop the agriculture sector and ensure food security. Among the top priorities identified by the GOE include: small and large-scale irrigations development, agricultural inputs supply financing, increasing productivity of crops and livestock, improving agricultural production methods using mechanization, post-harvest loss reduction, developing research-based food security system, and natural resources management. In addition, as part of the second Growth and Transformation Plan (GTP II), the government is looking to the agro-processing sector as one engine to spur future economic growth.With respect to increasing productivity, the GOE alongside its international partners has made a number of interventions to support the development of the country’s agriculture sector. 

These activities have contributed to higher yields and increased production of both crops and livestock. At the same time, in an effort to accelerate the country’s agricultural development, the government established the Agricultural Transformation Agency (ATA) to address systemic bottlenecks in the agriculture sector by supporting and enhancing the capability of the Ministry of Agriculture and Livestock Resources (MoALR) and other public, private, and non-governmental implementing partners.

In order to promote commercial-scale farming, the MoALR created the Ethiopian Agricultural Land and Investment Administration Agency dedicated to overseeing any new large-scale commercial farm deals. The directorate's goal is to increase productivity, employment, technology transfer, and foreign exchange reserves by attracting investors with incentives and favorable land lease terms. Some of the land targeted for commercial development is considered marginal, prone to conflict, and/or has limited access to water. Land ownership is also a complicating factor. Therefore, investment in commercial farming requires considerable due diligence. MoALR is supporting the development of the country’s livestock sector, which is one of the largest in Africa.

Under GTP II, Ethiopia’s future economic growth in part depends on the development of the agro-processing sector (e.g. processed food, beverages, and livestock products – meat, milk, and eggs), as well as the textile/apparel and leather industries. Some of these products, especially the textiles, apparel, leather goods, and finished meat products are targeted for export markets in order to generate foreign exchange. Agro-processed products, which are relatively new to the local market, such as chicken, cheese, butter, eggs, biscuits, bread, juice, etc. will go to help satisfy local demand. In the case of the textile and apparel sector, a shortage of locally-produced cotton suggests a need for cotton imports, including from the United States. In addition, the GOE continues to invest heavily in the expansion of the sugar industry, which is subject to planned privatization, with the aim of become one of the top ten sugar producers in the world over the next decade.

In addition, some of Ethiopia's cash crops show potential for growth and offer possible investment opportunities in areas such as coffee, oilseeds, pulses, fruits and vegetables, honey, cut flowers, tea, and spices. Most of these crops are exported to generate foreign exchange. In the future, the government intends to work with the private sector to develop capacity to process some of these commodities, like fruits and vegetables, in order to add value and capture higher export prices.

To meet its agro-processing objectives, the GOE is building Integrated Agro-Industrial Parks (IAIP) in four pilot areas: Amhara, Oromia, SNNP, and Tigray regional states. The pilot areas selected for establishment of the Agro-Industrial Parks are mainly based on the potential of existing agricultural resources and allied sectors, infrastructure, and facilities. Total required investment costs for the IAIPs stand at U.S. $ 870 million and initial investment costs are estimated at U.S. $ 266 million. The project is expected to be implemented in three phases with the first phase kicked-off in February 2016.

As the economy grows and the population expands, consumer demand for certain types of foods is expected to increase. In particular, demand for cooking oil, sugar, meat, eggs, dairy products, wheat-based products, such as pasta and bread, alcoholic and non-alcoholic beverages, among others, are forecast to climb upward. The increased production coming from existing and anticipated investments in the local agro-processing sector, as well as imports, are expected to help satisfy this growing demand.

The expected growth from these agriculture-related industries offers numerous opportunities for agricultural input sales, such as tractors and harvesters, farm trucks, fertilizer, irrigation equipment, grain handling systems, food and livestock processing equipment, as well as cold storage facilities. There are also expanding opportunities for grocery sales to retail and wholesale outlets that are starting to spring up all over Addis Ababa.

With parts of Ethiopia entering a fourth year of drought, the GOE is renewing its emphasis on developing the country’s irrigation systems and water-harvesting methodologies. There is considerable room for investment when considering that about 95 percent of Ethiopia’s crop production is rain fed. Growing demand for water supply and drainage systems, pumps, and drilling equipment is expected.

Leading Sub-Sectors
•              Agricultural equipment and systems, such as tractors, irrigation equipment, grain handling systems, silos, cold storage facilities, etc.
•              Agro-processing, such as beverages, biscuits, bread, milk, meat, chicken, cooking oil, fruit and vegetables, etc.
•              Agro-processing equipment (e.g. extruders for soybean oil production).
•              Grocery exports.
•              Cotton exports.

Wheat and Soybeans

This is a best prospect for Ethiopia. Includes a market overview and trade data.

Overview
After livestock, grain production is the second most important sector in the country’s agriculture-based economy. It accounts for nearly 80 percent of the land under cultivation and employs 60 percent of the rural workforce, most of which work on less than one hectare of land. Grain yields are relatively low due to the country’s rugged topography, small-scale landholdings, irregular rainfall, limited mechanization, and insufficient supplies of fertilizer and improved seed. The government and the international community are working together to address many of these challenges.

Grain is an essential part of the Ethiopian diet. In fact, over 50 percent of the daily caloric intake of an average household is from wheat, sorghum, and corn. Households spend an average of 40 percent of their total food budget on cereals. Grain consumption, especially for wheat and wheat-based products like biscuits, bread and pasta, continues to climb as incomes rise and more people move to urban centers.

The GOE imposes an export ban on cereal grain and local prices are often higher than what they are on the international market. Some informal trade is probably occurring in production areas located along borders. Grain imports are almost exclusively limited to wheat, nearly all of which the GOE’s state-trading arm purchases off the international market and later distributes in the local market at a subsidized price. With the GOE looking to partially liberalize the wheat import market, local millers are beginning to explore opportunities to import wheat directly. For this to happen, the government will need to guarantee sufficient allocations of foreign exchange.

In addition to wheat, the demand for oilseeds, such as soybeans and Niger seed, is expected to grow as Ethiopia’s demand for both cooking oil and livestock feed increases. In fact, the soybean crushing and soybean oil refining industry is quickly emerging. The anticipated growth in these subsectors could open niche opportunities for sales of U.S. grain and oilseed commodities in the future, as well as processing and storage equipment, such as feed mills and soybean extruders.

Leading Sub-Sectors
•              Potential niche market for wheat and soybean exports.
•              Milling and extruding equipment.
•              Baking and food processing equipment.

Opportunities
Ethiopia’s current level of wheat and soybean production is insufficient to satisfy domestic demand. The country, therefore, is expected to import wheat and soybeans in the coming years. Depending on international market conditions and local demand factors, there may be opportunities in the future for U.S. wheat and soybean sales to Ethiopia. There may also be future opportunities for equipment and systems to process theses commodities.


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