VALUE CHAIN ANALYSIS AND DEVELOPMENT OF INTERVENTION PLAN IN THREE WOREDAS OF THE ARSI ZONE CONVENIO AECID 18-CO1-1170 SEPTEMBER 2020 External consultants: TENTAM Development Training and Consulting Services PLC Financed by: Organized by: CONTENTS CONTENTS i List of Tables iv List of Figures v ACRONYMS vi ACKNOWLEGMENTS vii EXECUTIVE SUMMARY viii Major Findings ix Barley and wheat value chains ix Sheep/Cattle Value Chains x Recommendations xii PART ONE: INTRODUCTION 1 Description of the Project Area 1 Objective of the Value Chain (VC) analysis 2 Methodologies and approaches of the value chain analysis 3 Approach 3 Stage 1: Identification of Value Chains/subsectors 3 Stage 2: Value Chains/subsectors mapping 5 Stage 3: Value chain analysis 6 Identification 7 PART TWO: MAJOR FINDINGS 11 Barley Value Chain Analysis 11 Barley Value Chain Map, Actors and their Relations 11 Barley Value chain Map 11 Input Suppliers 11 Barley Production and Producers 12 Traders/Local collectors 17 Primary Cooperatives (PC) 18 Cooperative Union 19 Wholesalers 19 Retailers 20 Barley Processors 20 Malt Barley Processors 20 Food Barley Processors 21 Consumers 21 CONTENTS i Report of Value Chain Analysis and Development of intervention plan in three Woredas of Arsi Zone Barley Marketing 21 Marketable Surplus 21 Barley Marketing Channel 24 Food Barley Market Channels 24 Malt Barley Market Channels 24 Barley Marketing Routes in the area of the study 24 Barley Marketing Margin 25 Barley Value Chain Supporters 28 Opportunities Identified In the Barley and Wheat Value Chain 29 Unmet Demand for Malt and Entry of New Malt Factories in the sector 29 WHEAT VALUE CHAIN ANALYSIS 32 Wheat Value Chain Map, Actors and their Relations 32 Value Chain Economic Actors 32 Input Suppliers 32 Farmers/Producers 33 Wheat Production 33 Primary Cooperatives 35 Cooperative Union 36 Wholesalers 36 Retailers 36 Commission Agents 36 Millers/Processors 37 Consumers 37 Wheat Marketing 37 Marketable surplus 37 Wheat Marketing Channel 38 Wheat Market Margin 39 Marketing Route 41 Demand and Supply Analysis 41 Service provider analysis 42 Value chain governance 42 Challenges/Constraints Identified in the Wheat and Barley Value Chain 43 In efficient input (seed and fertilizer) supply system 43 Lack of access to agricultural machinery 44 Crop pests and diseases 44 Weak institutional capacity of cooperatives 45 ii CONTENTS Report of Value Chain Analysis and Development of intervention plan in three Woredas of Arsi Zone Shortage of Capital and Lack of Credit Access 45 Low Participation of Members in Cooperative Activities 45 Lack of Managerial Skill 46 Producers sell a negligible amount of grain through primary cooperatives 46 Farmers sell immediately after the harvest to meet their financial obligations, which are usually due then 47 Cheating is a common phenomenon in the maize and Wheat marketing chain 47 Service provision 48 SHEEP REARING AND FATTENING VC ANALYSIS 51 Sheep rearing and fattening value chain map 51 Input provision and suppliers 51 Sheep Production and producers 56 Marketing Channels and actors 58 Distribution of costs and margins 63 CATTLE REARING AND FATTENING 67 Cattle Fattening Value Chain Map 67 Livestock Input provision and suppliers 67 Production and producer 67 Marketing and actors 69 Processing and processors 74 Consumption and consumers 75 Participation of women in sheep and cattle fattening 75 Gender and the livestock Value chain 76 Opportunities and challenges in live animal VC 76 Opportunities 76 Challenges 77 CONCLUSION AND RECOMMENDATIONS 81 Conclusion 81 Wheat and Barley subsector value chains 81 Livestock: Sheep and cattle value chains 82 Recommendations 84 ANNEXES 87 Annex 1: possible interventions in the value chain 88 Annex 1.1. For the Wheat and Barley Value chains 88 Annex 1.2. Intervention in the live animal value chain 91 Annex 2: list of items/descriptions to be included in the VC intervention (Table 52 above and Table 53) 93 CONTENTS iii Report of Value Chain Analysis and Development of intervention plan in three Woredas of Arsi Zone Annex 3: Contacted Organizations and Individuals for AeAE Value Chain Study in the Arsi Zone 94 Annex 4: Comparison of Value Chain commodities 95 Annex 5a: A business model for a producer/breeder Sheep Value Chain / (three sale rounds per year) 98 Annex 5b: A business model for a fattener Sheep Value Chain / (three sale rounds per year) 99 BIBLIOGRAPHY 100 List of Tables Table 1: Criteria to compare and select best fitting crop and livestock commodities 4 Table 2: Comparison of crop commodities - Arsi Robe Woreda 8 Table 3: Pairwise ranking for crop commodities - Arsi Robe Woreda 8 Table 4: comparison of livestock commodities - Tena Woreda 9 Table 5: Summary of average results and ranks of comparisons by Woredas and commodities 9 Table 6: Barley production, productivity and yield in project Woredas 14 Table 7: average annual area cultivated, production, productivity of barley in the three Woredas 15 Table 8: proportion of land allocated to different crops in that last three years 15 Table 9: Barley production and productivity among surveyed HHs 16 Table 10: % of farmers using different quality/source of barley seed 17 Table 11: Quantity of Barley Produced and Sold in 2018/19 by Woreda 22 Table 12: Producers' selling barley at different market 22 Table 13: Selling Period 23 Table 14: Respondent preference of buyers for their product (sell product to multiple buyers) 23 Table 15: Distribution of margin and value along the value chain of barley in Arsi 26 Table 16: Distribution of Margin and Value along the Value Chain of Malt Barley in the Arsi Zone 26 Table 17: Cost, selling price and gross margin of barley (Beso) 27 Table 18 Detail Cost, Selling Price and Gross Margin of Barley (Beso) 28 Table 19: Demand and capacity of Malt factories in Asela and Gondar 29 Table 20 Brewers' capacity and demand for malt 30 Table 21: Productivity and demand of barley (2017-19) 31 Table 22 Area coverage, production and productivity of wheat by Woreda 34 Table 23: Table Wheat Area planted and Quantity produced Woreda 35 Table 24: Table. Wheat Quantity Produced and Sold in 2018/19 by Woreda 38 Table 25: Distribution of Cost and Margin along the Value Chain of Bread Wheat in Arsi-Robe 40 Table 26: Bread Wheat Market Margin 40 Table 27 Supply and Demand of Wheat (2017-19) 41 iv CONTENTS Report of Value Chain Analysis and Development of intervention plan in three Woredas of Arsi Zone Table 28: % HHs reporting lack/shortage of inputs affecting production & productivity across study Woredas 43 Table 29: Demand and supply of improved seed by Woreda (2011 E.C) 44 Table 30: Demand and supply of inorganic fertilizer (2011 E.C) 44 Table 31: list of common crop diseases and pests in the study Woredas 45 Table 32: Respondents’ preference to sell their product 46 Table 33: time of sell 47 Table 34: percent of farmers who feel cheated by traders using false weighing scales 48 Table 35: Responses on Methods of Storage by Woreda 49 Table 36: Season of fibrous feed availability/utilization and purchase of concentrates 52 Table 37: Farmers’ access to animal feed from different sources (%contribution) across target Woredas 53 Table 38: Arsi Robe feed balance (2011 EC/2018/19) 55 Table 39: Sheep rearing/fattening & number of beneficiaries by sex, sales, unit price gross earning by Woreda 57 Table 40: Type, number and percentage of sheep supplied and sold in Arsi Robe market 2019/20 59 Table 41: Marketing margins for fattened sheep passing through end consumer live sheep market 64 Table 42: Marketing margins for un-fattened sheep passing through hotel market channel 65 Table 43: T productivity of breeding scheme 66 Table 44: Cattle rearing/fattening and number of beneficiaries by sex, sales, unit price and earning by Woreda 68 Table 45: Type, number and amount of cattle supplied to Arsi Robe Market (2011 EC) 69 Table 46: Estimate of total cattle supplied and sold in Arsi robe Market (2011 EC) 69 Table 47: cost of handling a single head of cattle compiled across actors participating in the cattle value chain (Ethiopian Birr) 70 Table 48: marketing margins for high class fattened oxen (grade 1) 71 Table 49: marketing margins for relatively lower class oxen (Grade below 1) 71 Table 50: Comparison ROI by actors and type of animals 72 Table 51: Nutritional value of beso 88 Table 52: Summary of livestock interventions 93 List of Figures Figure 1: Barley Value chain for the Arsi Zone, Oromia Region 12 Figure 2: trends in area, production and yield of Barley in Ethiopia 13 Figure 3: Barley marketing routes taking Arsi Robe town as Hub 25 Figure 4: Total Cost of Production in 2018/19 EC by Woreda 27 Figure 5: Wheat Value Chain in the Study Areas 32 Figure 6: Sheep Value chain 51 Figure 7: cattle value chain of the project Woredas 73 CONTENTS v Report of Value Chain Analysis and Development of intervention plan in three Woredas of Arsi Zone ACRONYMS AeA Ayuda en Acción EMA Ethiopian Millers’ Association AMF Asela Malt factory ATA Agricultural Transformation Agency CSA Central Statistical Agency CT Consulting Team DBIP Debrebrahan Industrial park EGTE Ethiopia grain Trade Enterprise EIC Ethiopian Investment Commission FAO Food and Agriculture Organization of the United Nations FGD Focal Group Discussion GoE Government of Ethiopia GTP Growth and transformation Plan HH Household IPDC Industrial Parks Development Corporation IPDC. KII Key Informant interview SSP Sample size Proportion to population WB World Bank WoA Woreda Office of Agriculture VCA Value Chain analysis vi CONTENTS Report of Value Chain Analysis and Development of intervention plan in three Woredas of Arsi Zone ACKNOWLEGMENTS Undertaking this value chain analysis and preparing this report would not have been possible without the conscientious work and strong support of a number of people in AeA and its partners and stakeholders at various levels.