Ethiopia Bellmon Analysis 2019/20 October 2019 This publication was produced at the request of the United States Agency for International Development. It was prepared independently by PM Consulting Group and George Gray, under the Innovative Design Services contract (#7200AA18C00078). ii Ethiopia: Bellmon Analysis - 2019/20 Table of Contents Acknowledgements iv Table of Acronyms iv Executive Summary v 1. Introduction 9 Methodology 11 2. Context 12 Socio - Economic Background 12 Population 12 Internal Displacement 12 Economic Growth 12 Balance of Trade and Exchange Rate 13 Inflation 14 Employment 15 Poverty 15 Poverty Alleviation Initiatives 16 Agriculture Sector Overview 16 Agricultural inputs 17 Production 18 Agricultural Market Structures and Stakeholders 20 Other stakeholders 20 Access to Credit 21 Transport 21 Government Policies Affecting the Agricultural Secto 21 Inputs 21 Commodity Marketing 22 Other Interventions 23 3. Food Supply 2018/20 23 Carryover stocks 23 Belg Production 2019 25 Meher Production 2018/19 28 Imports 31 Balance Sheet 32 Pulses and Edible Oils 35 iii Ethiopia: Bellmon Analysis - 2019/20 Prognosis for 2019/20 37 Summary 38 4. Market Trends 40 General 40 Recent Sales and Purchase Activities 40 Cereals 43 Pulses 52 Oilseeds/Edible Oils 55 5. Food Security 58 Wage Labor 59 Consumption 61 Access to Markets 64 Summary 66 6. Impact of DFSA (PSNP) and Humanitarian Interventions 67 Self-Monetization 71 Food/Cash Preferences 73 Market Variability 74 Summary 75 7. Logistics of Food Aid Distribution 76 Port Capacity 76 Inland Transport 78 Storage 80 8. Bellmon Considerations 81 Annex A: Study Areas 84 Annex B: Questionnaires 93 Annex C: Graphical Analysis of Cumulative Rainfall Estimate Data 125 Annex D: References for Crop Nitrogen Use Efficiency 133 Annex E: Port Capacities 137 DISCLAIMER The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. iv Ethiopia: Bellmon Analysis - 2019/20 Acknowledgements The author would like to acknowledge the kind assistance of the Disaster Risk Management and Food Security Sector in facilitating this exercise. The staff of Save The Children, Relief Society of Tigray, Food for the Hungry, and the Catholic Relief Services also provided essential information and the benefit of their experience. The staff of WFP kindly assisted with the provision of Import Data and staff of Sian Trans Express facilitated access to Port facilities and stakeholders in Djibouti. This report would not have been possible without the considerable efforts made by the Ethiopian Survey team to collect the Rapid Rural Appraisal data under uncertain conditions and from remote woredas. The results themselves reflect the patience of farmers and traders as well as other interviewees who kindly accepted to provide their time and to share the experiences that this report attempts to reflect. Table of Acronyms Abbr Description Abbr Description CPI Consumer Price Index MEWIT Merchandise Wholesale and Import Trading Enterprise CRS Catholic Relief Services MoALR Ministry of Agriculture and Livestock Resources CSA Central Statistical Agency MT Metric Ton DFSA Development Food Security Activity NDRMC National Disaster Risk Management Commission DMP Doraleh Multipurpose Port NGO Non-Governmental Organization ECX Ethiopian Commodity Exchange NMA National Meteorological Agency EGTE Ethiopian Grain Trade Enterprise NPS Nitrogen Phosphate Sulfur EIIDE Ethiopian Industrial Inputs Development PSNP Productive Safety Net Program Enterprise, ETB Ethiopian Birr REST Relief Society of Tigray ETBC Ethiopian Trading Businesses Corporation RFE Rainfall Estimate FEWS Famine Early Warning System RRA Rapid Rural Assessment FH Food for the Hungry SFR Strategic Food Reserve GDP Gross Domestic Product SFRA Strategic Food Reserve Agency GoE Government of Ethiopia SNNPR Southern Nations, Nationalities and Peoples’ Region HICE Household Income Consumption and USAID United States Agency for International Expenditure Development HRP Humanitarian Response Plan USDA United States Department of Agriculture IDP Internally Displaced Person VAT Value Added Tax JEOP Joint Emergency Operations Program WFP World Food Program. v Ethiopia: Bellmon Analysis - 2019/20 Executive Summary Objective. This study provides the information necessary for USAID to make an accurate Bellmon determination for an anticipated volume of 325,000 MT of Food Aid for distribution in Ethiopia in FY 2020 through Development Food Security Activities (DFSA programs), the Joint Emergency Operations Program (JEOP) and related distribution programs undertaken by the World Food Program (WFP). In order to do so, it describes relevant developments in the Ethiopian economy and provides an overview of the agricultural sector. It provides an overview of government policies affecting food security, before assessing current levels of food production and the state of Ethiopian grain markets including recent price trends. Current and anticipated levels of food security are assessed as well as the impacts of food transfers on production and markets. Beneficiary preferences as to cash or food are discussed. The port, transport and storage capacity available for the importation of the anticipated volumes of Title II commodities are assessed against requirements. In the light of all of the above, recommendations are made to facilitate the final Bellmon determination for FY 2019/20. Methodology. The methodology adopted for this analysis has been a combination of both primary and secondary data collection. Primary data has been collected from smallholders and traders in both PSNP and non-PSNP woredas using a Rapid Rural Appraisal (RRA) methodology. Altogether 82 woredas were visited, of which 52 were PSNP and 30 were non-PSNP. Focus group discussions were held with smallholders and three or more traders were interviewed in each market. The analysis also interviewed key commercial and public sector stakeholders, as well as Non-Governmental Organizations (NGOs). Secondary data has been gathered from a number of sources including the market information system of the Ethiopian Grain Trade Enterprise (EGTE), WFP bulk shipping data, National Rainfall Estimates and reports as well as bulletins of the Central Statistical Agency and National Bank of Ethiopia. Findings. Levels of non-food inflation have been increasing driven in part by the recent devaluation of the Ethiopian Birr against the dollar. Food prices have increased faster than the non-food consumer price index, suggesting that at least in the short term, the supply of food to the market does not meet demand. In the longer term, the value of imports continues to exceed that of exports leading to a substantial balance of payments deficit. Demand for forex exceeds supply, causing distortions in export markets and limiting the private sector’s capacity to import wheat and edible oil. Nevertheless, continued economic growth is reflected in increasing rural and peri urban wage rates, to a degree that may offset some of the effects of rising food prices on poor households. Government policies affecting the food supply continue largely unchanged, including the market stabilization program to constrain bread prices, the importation of sugar and of edible oil. Nevertheless, the importation of both wheat and edible oil appear to have faltered in the last year, leading to an increase in the price of bread in some markets and the reduced availability of edible oil being reported by some smallholders. Cereal production in 2018/19 was estimated to have decreased slightly relative to the previous year, but this was not uniform and in some areas, especially the more productive zones, production increased, while in the less productive areas, the majority of respondents reported decreased production resulting in increased demand for cereals from outside those areas. Smallholders reported the carryover of considerable cereal stocks (2.4-3.4 million MT) into the 2018/19 production year. These, together with cereal production estimated at 22.1 million MT for the 2018/19 Meher season and 1.4 million MT for the 2019 Belg, and an expected 1.5 million MT of imported cereals will, after accounting for post-harvest losses, be adequate to meet estimated national consumption, seed , industrial use and stock-feed requirements, leaving a surplus of 2.9 million MT to be carried over into the 2019/20 production year. vi Ethiopia: Bellmon Analysis - 2019/20 Early assessment of the current Meher season indicates that it should be no less productive than 2018/19. In the continued absence of unpredictable pests and diseases, the well-distributed rainfall should result in an above average harvest. The production of pulses and oilseeds continues to stagnate, with areas under production being only 2% greater for pulses and 13% less for oilseeds than they were 10 years ago. This reflects the weakening export market for pulses and the impact of palm oil imports on local production. The national balance sheet for pulses records a reduced surplus for domestically consumed pulses of 79,000 MT, while the balance sheet for edible oils predicts an overall deficit. The latter is however based upon an estimate of consumer demand that is has demonstrated considerable elasticity. A (quite feasible) lower estimate could equally result in the prediction of a surplus. Market conditions have changed significantly over the last year, with a widely reported reduction in regulation,