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Feed the Future Ethiopia Value Chain Activity Partnering with the Agricultural Growth Program October 2017

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Feed the Future Ethiopia Value Chain Activity Partnering with the Agricultural Growth Program October 2017 Value Chain Analysis: CHICKPEA Feed the Future Ethiopia Value Chain Activity Partnering with the Agricultural Growth Program October 2017 Feed the Future Ethiopia Value Chain Activity | Value Chain Analysis: CHICKPEA CONTENTS Executive Summary ...................................................................................... 1 1. Introduction & Methodology .............................................................. 2 2. Market Analysis of the Commodity ................................................... 2 2.1 Overview of the Market ................................................................................................. 2 2.2 Production ....................................................................................................................... 3 2.3 Trade ............................................................................................................................... 4 2.4 Consumption ................................................................................................................... 6 2.5 Grades & Standards ........................................................................................................ 6 3. Value Chain Actors & Margins Analysis ............................................ 7 3.1 Farmers ........................................................................................................................... 8 Cultivation, Harvest, & Postharvest ......................................................................................................................................... 8 Seeds ................................................................................................................................................................................................ 9 Marketing ....................................................................................................................................................................................... 9 Cooperatives ............................................................................................................................................................................... 10 3.2 Traders .......................................................................................................................... 10 3.3 Processors ..................................................................................................................... 11 3.4 Retailers ......................................................................................................................... 12 3.5 Exporters ....................................................................................................................... 12 3.6 Supporting Organizations ............................................................................................ 13 3.7 Value Chain Margins Summary ................................................................................... 13 4. Enabling Environment ....................................................................... 14 4.1 Accessing Inputs ........................................................................................................... 14 4.2 Accessing Finance ......................................................................................................... 14 4.3 Operating a Business .................................................................................................... 14 4.4 Linking to Markets ........................................................................................................ 15 4.5 Trading Across Borders ............................................................................................... 15 5. Recommendations ............................................................................. 16 Prepared by Fintrac Inc. Feed the Future Ethiopia Value Chain Activity | Value Chain Analysis: CHICKPEA EXECUTIVE SUMMARY Ethiopia is one of the top 10 chickpea-producing countries in the world, with nearly 500,000 tons produced in 2015/2016, and has the highest yields of those countries at 1.84 tons per hectare. Ninety- three percent of chickpeas in Ethiopia are produced in Amhara and Oromia, and 99 percent are produced by farmers with less than 2 hectares of land. Over the past five years, roughly 10 to 16 percent of Ethiopia’s chickpea production was destined for the export market. The largest importer is Pakistan, with India and the United Arab Emirates also importing significant quantities. There are two types of chickpea grown in Ethiopia: desi and kabuli. Desi chickpeas are smaller and darker, used in Ethiopian shiro and in South Asian dal. Kabuli chickpeas (garbanzo beans) are larger and lighter, and eaten whole or in hummus. The latter commands a higher price in Ethiopia but is a more recent introduction. The hardier and, some say tastier, desi variety predominates in Ethiopia with about a 75 percent market share. Chickpea is usually produced after other major cereal crops, as it thrives in their residual moisture. As a result producers are less dependent on finance than for other crops. Smallholders harvest, thresh, and clean by hand, and this process is blamed for a contamination with dirt and other debris. Chickpeas are mostly marketed through village traders, either by pickup or by bringing to the traders’ facilities and sometimes through cooperatives. Village traders sell to wholesalers, often through a broker if the distances are long. Wholesalers sell to retailers, exporters, and processors, who make baby food, hummus and shiro pre-mix. Retailers primarily sell whole seeds which are semi processed by households, with final grinding done at local grinders. This value chain analysis makes key recommendations for project interventions. 1. Support commercialization of seed producer groups. Since chickpea seeds are open pollinated, there is minimal formal private sector interest. The International Crop Research Institute for the Semi-Arid Tropics (ICRISAT) has set up seed producer groups, but to achieve scale and sustainability, they should be commercialized. 2. Document and disseminate buyer grading requirements. There is ambiguity along the value chain on what buyers need, especially with regard to cleanliness. Buyers want larger seeds but this is not a grading criterion at lower levels of the value chain. 3. Carryout value chain pesticide contamination study and address findings. Recent exports from Ethiopia were rejected because of high levels of pesticide. It is not known where in the value chain this came from nor its prevalence. More research is essential. 4. Explore feasibility of small-sized combine harvest rental services. Dirt and debris contaminate chickpeas through common manual post-harvest practices. Prepared by Fintrac Inc. 1 Feed the Future Ethiopia Value Chain Activity | Value Chain Analysis: CHICKPEA 1. INTRODUCTION & METHODOLOGY This value chain analysis aims to provide a concise description of the chickpea value chain in Ethiopia, including key constraints and opportunities. The analysis builds off rather than duplicates recent analysis of the chickpea value chain in Ethiopia. It is based on a literature review as well as 13 structured key informant interviews and two focus group discussions conducted with chickpea stakeholders over three 1 weeks of fieldwork in Ethiopia during August to September, 2017.0F Unless otherwise noted, the data presented in the following tables was drawn from Fintrac interviews. This chickpea value chain report proceeds as follows. First, a market and trade dynamics analysis provides an overview of growth opportunities for the commodity. Second, a description of the different levels of the value chain, including key players, and an analysis of how well they are functioning. Additionally, an assessment of the legal, regulatory, and institutional dynamics is provided, which can serve to incentivize or disincentive investment in the value chain. Finally, the report concludes with practical recommendations to improve the value chain. 2. MARKET ANALYSIS OF THE COMMODITY 2.1 OVERVIEW OF THE MARKET There are two main types of chickpeas: desi and kabuli. Desi are smaller, darker and rougher than kabuli and are commonly used in South Asian dal. In Ethiopia, desi chickpeas are used to make a puree called shiro.. Kabuli chickpeas, commonly known as garbanzo beans, are preferred for their size and color and fetch a higher price on the international market. They are primarily eaten unprocessed or in hummus. In Ethiopia, improved kabuli varieties are reported to be increasingly common although the exact ratio between kabuli and desi is not known. Based on interviews conducted for this analysis, about 25 to 30 percent of chickpeas produced in Ethiopia are kabuli. While global chickpea production per capita was relatively flat for several decades, between 2004 and 2014, it increased by 45 percent. India has been the primary driver of this trend. In India, chickpea production increased by more than 70 percent between 2004 and 2014 after having increased by only 20 percent over the prior two decades. At least part of this jump in chickpea production in India may be a 2 result of high chickpea yield increases compared to other pulses.1F In addition, increased demand for chickpea-based processed and snack food may explain part of this trend. Globally, chickpea trade is dominated by imports from India and exports from Australia. Over the past five seasons, Indian chickpea imports have accounted for 36 percent of the world’s chickpea imports,
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