Agri-Gauge:Grain prices cropped

As is common at this time of year, during the Meher harvest season, the price of numerous crops has been reduced across the country. This has provided respite to many who have been struggling with escalating food prices. Although the news of the increased production of cereal has been celebrated in government offices, the amount of arable land in use is still static, leading some to question the figures, reports BINYAM ALEMAYEHU, FORTUNE STFF WRITER.

When a quintal of teff cost between 1,400 Br to 1,650 Br, three months back, depending on its colour – black or red teff being the cheapest – it was far from affordable for the family of Tamene Tesfaw, 47, a worker in a carpenter’s workshop. At that time, sorghum cost 1,000 Br when sold in quintals.

Tamene, who earns a monthly net salary of 1,470 Br at the workshop where he has been employed for the past 21years, was thrilled with the news that grain prices tend to slump at this time of the year, weather permitting. It means he is able to better provide for his wife and two children.

Wheat, sorghum, barely, maize and cereals are among the crops that have significantly fallen in price, beginning late November. According to the price index by the Central Statistical Agency (CSA), food prices dropped from a two percent increase in October 2013, to -2.2pc in November and -1.6pc in December, respectively.

On a hot afternoon, on Thursday, January 16, 2014, Tamene headed to the Ehil Berenda, located in the vicinity of Merkato’s Autobus Terra, while the place was bustling with sellers and buyers. That morning, trucks laden with cereals were unloaded.

Tamene checked a few retail shops to learn the price before negotiating. It did not take him long to realise that the negotiation skills, which he had to employ to withstand his steadily increasing food expenses, were not needed this time.

“Because the prices have fallenunbelievably,” he told Fortune, as his face lit up in delight. “Why should I burn in the blazing afternoon sun?”

Tamene, thus, decided to purchase a quintal of teff from Aminat Endris, the owner of the third in a row of about five shops he visited on that day. Teff sold for 1,250Br.The price displayed a 200 Br difference with what he paid two months back.

“The prices have fallen, as is usually the case at this time of the year,” says Aminat, whose luck since the start of the afternoon turned only when Tamene visited her.

Although the situation must have been encouraging for buyers, many retailers complain of the dwindling numbers of buyers.

The dwindling, they believe, has to do with millhouses, which have started selling grains at the same time. Rahmeto and Shewamola were two of the millhouses visited by Fortune. Indeed, the sale of grains has encouraged buyers to abandon the retail shops.

“Because we save on transport costs,” says Zuriashworq Gessesse, who bought two kilos of teff at Rahmeto to have it milled there. “It is like killing two birds with one stone.”

But, for all the buyers approached by Fortune, the drop in price is not reliable, since they expect increases after February.

“Food is available for a relatively cheaper price, but only for a time,” Zuriashworq contends. “Buyers do not enjoy this at other times of the year.”

The results of the 2012/13 Meher Season Post-Harvest Crop Production Survey,

published by the CSA, indicates that a total land area of about 12.3 million hectares are covered by grain crops, which are cereals, pulses and oilseeds. Out of this, a total volume of over 231 million quintals of grains are obtained from private peasant holdings.

Out of the total grain crop area, 78.2pc, which is 9.6 million hectares, was under cereals. Teff, maize, sorghum and wheat took up 22.2pc, 16.4pc, 13.9pc and 13.2pc of the grain crop area, respectively. Cereals contributed 84.9pc of the grain production. Maize, teff, wheat and sorghum made up 26.6pc16.3pc, 14.8pc and 15.6pc of the grain production, in that order.

The Post-Harvest Agricultural Sample Survey also indicates that both the largest grain cropped land area and the highest volume of production obtained in the current Meher season is reported for Oromia, Amhara,the South, Tigray and Benshangul-Gumuz regions. Accordingly, except for a slight decrease of 0.70 for South Region, the total grain cropped area reported for Oromia, Amhara,Tigray and Benshangul-Gumuz regions has increased by about 1.9pc, 1.8pc, 1.5pc and1.08pc over last year’spost-harvest estimate,respectively.

Out of the 2013/14 private holdings’ total cultivated cropland area and expected volume of grain production, 10.2 million hectares are accounted for cereals (82.7pc).From this, about 227.7 million quintals, or 89pc, are expected to be produced during this year’s Meher harvest season.

The Meher, or main crop season, is any temporary crop harvested between the months of September and February.

Both the largest grain cropped land area, which is 12.4 million hectares of land comprising of 99.2pc of the total country level grain crops and the highest expected volume of production to be obtained in the coming Meher season harvest is reported in Oromia, Amhara, South, Tigray and Benishangul-Gumuz regions. The total expected volume of production to be obtained from the cropland area reported in each of these regions is estimated to be 126.4 million, 82.1 million, 21.8 million, 16.3 million and 4.7 million quintals, which accounts for 49.8pc, 32.4pc, 8.6pc, 6.4pc and 1.8pc of the total expected grain crop production, respectively.

Around 40pc of household food expenditure goes towards cereals, amounting to an estimated 30pc of the GDP, according to data from the CSA.

“The price drop in crops results from good supply,” says Mulugeta Abera, who has been a trader at the Ehil Berenda for the past 20 years. “Shortage from producers and hoarding done by traders in anticipation of price increments has subsided because of the surplus.”

One reason for the increase in production, and consequent availability of crops at more affordable prices for low-income earners like Tamene and Zuriashworq, is the amount of rainfall during the rainy season that began in June and stayed well into early September. Rainfall was normal in its amount and distribution in many parts of the country. As a result, both the country-level estimated cropped land area and expected volume of production of grain crops have shown a significant increment over the previous four consecutive years. For example, in the 2013/14 fiscal year, the estimated grain crops covered area has increased by about 7.4pc, 4.5pc, 2.3pc and 0.6pc over the 2009/10, 2010/11, 2011/12 and 2012/13 fiscal years, respectively.

Asnaqe Fikre (PhD), Crop Research Directorate director at the Ethiopian Institute of Agricultural Research (EIAR), says rainfall has indeed played a paramount role in increasing production.

“Rainfall was very good and this can be why there is an increase,” he said.

Asnaqe also sees the use of scientific methods by farmers as being a contributing factor to increased production. More product simply more income at the household level, he explains.

But the figures show a strange development in the current fiscal year. Although the government is keen to report an unprecedented growth in cereal production, the total area of arable land remains stagnant. Although there have been increases, they have only been marginal at best.

The consumer price index in Ethiopia has not been affected by the phenomenal gains in national cereal production. The market continues to entertain downward rigidity of prices in Ethiopia, industry observers have said. That is to mean once prices go up, they hardly come down. This is irrespective of an increase in production.

The situation has not been easy to explain for the macroeconomic experts Fortune has approached. Nardos Moges, one of them, says there still might be a deficiency in the supply line. Another possible explanation Nardos forwards has to do with food going away from the intended domestic market. He cites contraband sale, as well as hoarding by both merchants and peasants. What counts as an important factor in Nardos’ analysis, apart from these two, is the lengthy market chain.

The government claims that importing palm oil, wheat and sugar will help to reduce the inflation rate further.

Macroeconomists disagree with the government’s claim, however, which states that the increased production of agricultural products, coupled with the bulk supply of certain commodities, such as palm oil, flour and sugar – under government control – brought inflation down to the current 12.9pc.

“Inflation dropped, not because of supply increase in the country, but rather because more money was out of circulation,”said a macroeconomist who has been following the issue closely.”This has caused prices to increase at a slower rate for the time being.”

Much seems to depend on the extent to which the CSA forecast is credible – an issue over which macroeconomists and agricultural experts approached by Fortune remain divided

For another macroeconomic expert, it is a matter of no wonder inflation has remained unaffected by the reported increase in food production.

“If it is an exaggerated increase of food production, as is the case with that of the CSA, then we could indeed encounter such self-defeating cases,” he contends.

Some buyers, nevertheless, still have good expectations. Debritu Jembere, a mother of two, whose monthly income from daily labour work amounts to 1,200 Br, intends to buy in large quantities now and store it for later.

“Because the prices are likely to rise again February,” she says.

For Tamene, who has been coping with the rising cost of living, the current scenario has given him  respite. He spends 550 Br out of his monthly salary on house rent. To reduce expenses, he does not eat breakfast. His lunch, transportation and dinner, which he prepares at home, cost him an average of 37 Br daily.

Dinner is usually shiro wot. One kilogramme of shiro lasts him no longer than four days.

Two years ago, when he earned only 900 Br and paid only 300 Br in rent, he saved 100 Br monthly. Since then, he has spent the total of his savings to cover his increased expenses.

“I may cheer for long, provided that the weather condition allows our farmers to produce more,” he said, while heading to his home at around 5pm.


Published on January 19, 2014 [ Vol 14 ,No 716]



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