Can The Momentum be Sustained? An Economic Analysis of the Ministry of Agriculture/Sasakawa Global 2000's Experiment with Improved Cereals Technology in Ethiopia A Joint Research Activity of: Grain Marketing Research Project/Michigan State University Sasakawa Global 2000 Ministry of Agriculture Department of Extension and Cooperatives Ethiopian Agricultural Research Organization September 1998 Funding for this research was provided by the Food Security II Cooperative Agreement (AEP- 5459-A-00-2041-00) between Michigan State University and the United States Agency for International Development, through USAID/Ethiopia and Africa Bureau's Office of Sustainable Development, Productive Sector Growth and Environment Division (AFR/SD/PSGE). CONTRIBUTORS TO THE STUDY The authors of this report are: Julie Howard*, Mulat Demeke**, Valerie Kelly*, Mywish Maredia*, and Julie Stepanek* * Department of Agricultural Economics, Michigan State University ** Department of Economics, University of Addis Ababa Others contributing to the research are: Survey Coordinator: Ali Said Survey Supervisors: Demeke Abate Mengistu Buta Selamyihun Kidane Interviewers: Negusie Belete Tsige Alemu Yemiserach Gebeyehu Jemal A/Faji Tamrat Yigezu Masresha Getachew Afework Dubero Kebede Negusie Belayneh A/Mariam Elfnesh Dubero Aytenew Shibru Biruk Seifu Zewdu Damenu Bullo Edossa Dabeta Eticha Birbo Bissa Befekadu Tesfaye Danil Tesfaye Duresso Chimsa Sebsibe Gemechu Derbe Gudissa Muluneh Kebede Girma Mulugeta Kumelcha Bulto Aynalem Mekuria Tesfaye Midikssa Warkaye Bekele Mame Kebede Bekele Wakjira Raya Kebede Nigatu Bekele Data Entry Clerks: Abebech Demissies Senait Hundie Data Cleaning Supervisors: Margaret Beaver Tesfaye Zegeye Mulat Demeke Drivers: Asrat Gebre Workeneh Molla i ACKNOWLEDGEMENTS The research team wishes to thank the participating farmers, the Ministry of Agriculture Department of Extension and Cooperatives staff in Addis Ababa, East Shoa, West Shoa, and Jimma, and the staff of SG2000 in Ethiopia for their generous assistance during the course of the survey. GMRP staff members were also extremely helpful: Thanks go to Alemu Asfaw for his assitance with price data, to Samson Dejene for assistance with data entry and analysis, to Tigist Tesfaye for secretarial support. The researchers with the GMRP and the MSU Food Security II Project who provided encouragement and willingly shared their ideas with us on numerous survey and analysis issues are too numerous to mention individually, but Aklu Girgre, Thom Jayne, and Mike Weber deserve special mention. We would also like to thank Don Beaver for assistance in the design of plot measurement procedures and software; Rick Ward and Urs Schulthess for help in designing data collection procedures and interpreting results for the yield determinants parts of the research; and Scott Swinton and Eric Crawford for their assistance in designing the data analysis procedures and interpreting the results. ii TABLE OF CONTENTS CONTRIBUTORS TO THE STUDY............................................ i ACKNOWLEDGMENTS.....................................................ii LIST OF TABLES ..........................................................v LIST OF FIGURES..........................................................v LIST OF APPENDICES......................................................v LIST OF ACRONYMS ...................................................... vi Section Page 1. INTRODUCTION .....................................................1 1.1. Objectives .....................................................1 1.2. Methods.......................................................2 1.2.1. Sample Selection...........................................2 1.2.2. Questionnaire Design and Data Collection........................5 2. CHARACTERISTICS OF PROGRAM PARTICIPANTS COMPARED TO THOSE OF TYPICAL AGRICULTURAL HOUSEHOLDS ............................... 7 3. YIELD RESULTS AND FINANCIAL ANALYSIS ..........................10 3.1. Yield Results .................................................. 10 3.1.1. Maize..................................................10 3.1.2. Tef....................................................11 3.2. Financial Analysis...............................................12 3.2.1. Data and Methods Used....................................12 3.2.2. Improved Technology is Profitable for both Maize and Tef, Even if Output Prices Decline by 25% or 50% ...............................13 3.2.3. Gains from Storage and Use of Storage Insecticide................13 3.2.4. Improved Seed and Fertilizer Costs Represent 50-80% of Total Costs . 14 iii 4. FACTORS AFFECTING CROP YIELDS..................................18 4.1. Factors Affecting Maize Yields.....................................18 4.1.1. Types of Maize Technologies and Their Yields...................18 4.1.2. Econometric Analysis of Maize Yield Determinants ...............20 4.1.3. Descriptive Analysis of Factors Related to Maize Technology Choice . 23 4.1.4. Graduate Farmers’ Decisions Concerning Choice of Maize Technology 23 4.2. Factors Affecting Tef Yields.......................................26 4.2.1. Types of Tef Technologies and Their Yields.....................26 4.2.2. Econometric Analysis of Tef Yield Determinants..................29 4.2.3. Graduate Farmers’ Decisions Concerning Choice of Tef Technology . 32 5. MOVING FROM DEMONSTRATION PLOTS TO SUSTAINABLE INCREASES IN AGRICULTURAL PRODUCTIVITY .....................................34 5.1 Challenges Facing the Extension Service..............................35 5.2. Evolution of the Agricultural Input Credit System ......................35 5.3. Description of the Inputs Subsector .................................37 5.3.1. Fertilizer Market Development -- Balancing the Need for Decentralization and Competition .........................................37 5.3.2. The Seed Sector - Much Work Ahead..........................37 5.4. Key Sustainability Issues ..........................................38 6. CONCLUSIONS ....................................................40 6.1. Yield and Income Gains from the Use of Improved Technology Are High.....40 6.2. Gains from Storage Are Potentially Great, Especially If Storage Insecticide Is Used ............................................................40 6.3. Improved Seed and Fertilizer Are the Most Important Determinants of Yield ............................................................41 6.4. Key Questions: How to Sustain this Successful Program in High Surplus- producing Regions, and How to Expand it Beyond Wealthier Farmers in Better Agroecological Areas? ..........................................41 APPENDIX 1.............................................................44 APPENDIX 2.............................................................78 APPENDIX 3.............................................................89 REFERENCES............................................................96 iv LIST OF TABLES No. Title Page 1 Sample Composition ...................................................4 2 Agroecological Characteristics and Recommended Technology Packages............4 3 Selected Characteristics of Participant Households Versus the Broader Population of Agricultural Households.................................................8 4 1997 Fertilizer Use of Participants Versus the Broader Agricultural Population .......9 5 Summary of Key Yield and Profitability Results by Zone, Plot Type, and Yield Tercile ..................................................................15 6 Types of Maize Technology Represented in the Sample........................19 7 Disaggregation of Maize Technology Types by Zone .........................20 8 Regression Analysis of Factors Affecting Maize Yields in Jimma and West Shoa .....22 9 Labor Use in Maize Production by Technology Group.........................24 10 Graduate Farmers’ Response to Recommended Maize Practices..................24 11 Reasons Given by Maize Graduates in West Shoa for Not Continuing a Given Technology Component .........................................................25 12 Tef Seed and Fertilizer Use in East Shoa by Different Plot Types.................27 13 Seeding Rate and Grain Yields by Tef Seed Varieties Used in East Shoa ...........28 14 Types of Tef technology Represented in the Sample...........................29 15 Regression Analysis of Factors Affecting Tef Yields in East Shoa (Model 1). 30 16 Regression Analysis of Factors Affecting Tef Yields in East Shoa (Model 2) ........30 17 Graduate Farmers’ Response to Recommended Tef Practices, East Shoa...........32 18 The Most Common Reasons Given by Graduates in East Shoa for Not Continuing a Given Tef Technology Component.............................................32 19 Financial Budgets for Tef (East Shoa) .....................................90 20 Financial Budgets for Maize (West Shoa) ...................................92 21 Financial Budgets for Maize (Jimma) ......................................94 LIST OF FIGURES No. Title Page 1 Location of Survey Sites. .. 3 LIST OF APPENDICES No. Title Page 1 Examples of GMRP/MSU/SG2000/MOA Survey Questionnaires .................44 2 Methods for Yield Estimation and Area Measurement .........................78 3 Financial Budgets .....................................................89 v LIST OF ACRONYMS AFR/SD/PSGE Africa Bureau’s Office of Sustainable Development, Productive Sector Growth and Environment Division AISE Agricultural Input Supply Enterprise CERES Crop-Environment Resource Synthesis CSA