Ethiopia – Agricultural Sector – TheEthiopianTimes.com

Agriculture is one of the best prospect sectors for growth in Ethiopia. Please see below for the market overview and trade data.

The Government of Ethiopia (GOE) has embarked on a ten-year economic development plan (2021-2030) where agriculture is on the top of priority sectors. The agriculture sector is projected to grow at 6.2% per annum over the next ten years. Ethiopia’s development plan has laid out enhancing agricultural production and productivity as one of the major strategic pillars. In addition, the ten-year development plan aims at boosting agricultural export revenues and substituting imports by reducing production costs. To achieve this, the GOE seeks to leverage on developing huge unutilized arable land, modernizing production systems, and improving uptake of technology. Furthermore, the ten-year plan envisages to build a climate resilient green economy. In this regard, Ethiopia is looking to expand development efforts to fight land degradation and to reduce pollution; reduce Green House Gas (GHG) emissions; increase forest protection and development; increase production of electricity from renewable sources for domestic use and for export; and focus on modern and energy saving technologies.

Overview

Ethiopia is endowed with abundant agricultural resources and has diverse agro-ecological zones. Agriculture is the mainstay of the economy. The Government of Ethiopia (GOE) has identified key priority intervention areas to increase productivity of smallholder farms and expand large-scale commercial farms. Under the current administration, the GOE has renewed its emphasis to develop the agriculture sector, ensure food security, and achieve import substition. Among the top priorities identified by the GOE include: small and large-scale irrigation development, financing agricultural inputs, increasing productivity of crops and livestock, improving agricultural production methods using mechanization, post-harvest loss reduction, developing a research-based food security system, and natural resource management. In addition, the GOE is looking to the agro-processing sector (also a best prospect sector detailed below) as one engine to spur future economic growth. With respect to increasing productivity, the GOE, alongside its international partners, has made a number of interventions to support the development of the agriculture sector. These activities have contributed to higher yields and increased production of both crops and livestock. At the same time, to accelerate the country’s agricultural development, the government established the Agricultural Transformation Institute (ATI) to address systemic bottlenecks in the agriculture sector by supporting and enhancing the capability of the Ministry of Agriculture (MOA) and other public, private, and non-governmental implementing partners.

To promote commercial-scale farming, the Ministry of Agriculture (MOA) created the Ethiopian Agricultural Land and Investment Administration Agency dedicated to overseeing any new large-scale commercial farm deals. The directorate’s goal is to increase productivity, employment, technology transfer, and foreign exchange reserves by attracting investors with incentives and favorable land lease terms. Some of the land targeted for commercial development is considered marginal, prone to conflict, and/or has limited access to water. Land ownership is also a complicating factor. Therefore, investment in commercial farming requires considerable due diligence. The MOA is supporting the development of the country’s livestock sector, which is one of the largest in Africa.

With the support of the IMF, the Ethiopian government has developed an ambitious Homegrown Economic Reform Plan to propel the country’s economic progress. The Homegrown economic reform plan identified structural and institutional bottlenecks affecting the agricultural sector in Ethiopia. The major binding constraints of the sector are insufficient yields due to inefficient provision of inputs and services, unclear land lease rights, limited investment in R&D and irrigation, marketing and logistics related problems, and lack of agriculture-specific financial services. The economic plan prescribes the following comprehensive measures to overcome the challenges facing the agricultural sector:

Develop a legal framework that will allow farmers to lease land and to become shareholders in large commercial farms;
Modernize livestock production through improving veterinary infrastructure, research and innovation, and establishing linkages with other industries;
Establish effective linkages between agriculture producers and commodity markets as well as the commercial value chain;
Encourage private sector investment in agricultural R&D and exploring PPPs to expand medium and large-scale irrigation infrastructure; and
Develop a legal framework for agriculture-specific financial services such as micro-lending, crop insurance and forward contracts.

Overall, the economic reform plan sets out required strategic interventions to increase agricultural productivity and modernization of agriculture in the next 10 years.

The reform’s success in supporting Ethiopia’s economic growth in part depends on the development of the agro-processing sector (e.g. processed food, beverages, and livestock products – meat, milk, and eggs), as well as the textile/apparel and leather industries. Some of these products, especially the textiles, apparel, leather goods, and finished meat products are targeted for export markets in order to generate foreign exchange. Agro-processed products, such as chicken, cheese, butter, eggs, biscuits, bread, juice, etc. will supply the domestic market. In the case of the textile and apparel sector, a shortage of locally-produced cotton suggests a need for cotton imports, including from the United States. In addition, the GOE continues to invest heavily in the expansion of the sugar industry, which is slated to be privatized in the near future with the aim of become one of the top ten sugar producers in the world over the next decade.

In addition, some of Ethiopia’s cash crops show potential for growth and offer possible investment opportunities in areas such as coffee, oilseeds, pulses, fruits and vegetables, honey, cut flowers, tea, and spices. Most of these crops are exported to generate foreign exchange. In the future, the government intends to work with the private sector to develop capacity to process some of these commodities, like fruits and vegetables, in order to add value and capture higher export prices.

To meet its agro-processing objectives, the GOE is building Integrated Agro-Industrial Parks (IAIP) in four pilot areas: Amhara, Oromia, SNNP, and Tigray regional states. The pilot areas selected for establishment of the Agro-Industrial Parks are mainly based on the potential of existing agricultural resources and allied sectors, infrastructure, and facilities. Total required investment costs for the IAIPs stand at U.S. $870 million and initial investment costs are estimated at U.S. $266 million. Except in Tigray region, the pilot agro-industrial parks have launched operations.

As the economy grows and the population expands, consumer demand for certain types of foods is expected to increase. In particular, demand for cooking oil, sugar, meat, eggs, dairy products, wheat-based products, such as pasta and bread, alcoholic and non-alcoholic beverages, are forecast to climb upward. The increased production coming from existing and anticipated investments in the local agro-processing sector, as well as imports, are expected to help satisfy this growing demand.

The expected growth from these agriculture-related industries offers numerous opportunities for agricultural input sales, such as tractors and harvesters, farm trucks, fertilizer, irrigation equipment, grain handling systems, food and livestock processing equipment, as well as cold storage facilities. There are also expanding opportunities for grocery sales to retail and wholesale outlets that are starting to spring up all over Addis Ababa.

In order to address the ongoing drought, the GOE is renewing its emphasis on developing the country’s irrigation systems and water-harvesting methodologies. There is considerable room for investment when considering that about 95 percent of Ethiopia’s crop production is rain fed. Growing demand for water supply and drainage systems, pumps, and drilling equipment is expected.

Please see below a summary of agricultural focus areas and objectives laid out in Ethiopia’s ten-year economic development plan (2021-2030).

Agriculture Focus Areas	Objectives
Free agriculture from rain dependence Agricultural mechanization services Contract farming, cluster approach and land consolidation Livestock, animal feed and animal health Horticulture (irrigation and urban farming) Private sector participation Institutional implementation capacity Climate resilient sustainable agricultural development	Improve income and livelihood options for farming and pastoral communities through increased productivity and competitiveness Raise export of agricultural output and substitute imports Make agriculture a viable and profitable enterprise through value addition Create rural employment opportunities Enhance livestock health access and quality Preserve animal genetic resources and increase pastoral research Improve the development of animal feed and access to markets Develop livestock specific extension package for each livestock type

Agriculture Focus Areas

Objectives

Free agriculture from rain dependence
Agricultural mechanization services
Contract farming, cluster approach and land consolidation
Livestock, animal feed and animal health
Horticulture (irrigation and urban farming)
Private sector participation
Institutional implementation capacity
Climate resilient sustainable agricultural development

Improve income and livelihood options for farming and pastoral communities through increased productivity and competitiveness
Raise export of agricultural output and substitute imports
Make agriculture a viable and profitable enterprise through value addition
Create rural employment opportunities
Enhance livestock health access and quality
Preserve animal genetic resources and increase pastoral research
Improve the development of animal feed and access to markets
Develop livestock specific extension package for each livestock type

Best Prospect Commodities, Market Size, and Trade Data

Wheat and Soybeans

This is a best prospect for Ethiopia. Please see below for the market overview and trade data.

Overview

Grain production is one of the most important sub-sectors in the country’s agriculture-based economy. It accounts for nearly 80% of the land under cultivation and employs 60% of the rural workforce, most of which work on less than one hectare of land. Grain yields are relatively low due to the country’s rugged topography, poor land management, small-scale landholdings, irregular rainfall, limited mechanization, and insufficient supplies of fertilizer and improved seed. The government and the international community are working together to address many of these challenges.

Grain is an essential part of the Ethiopian diet. In fact, over 50% of the daily caloric intake of an average household is from wheat, sorghum, and corn. Households spend an average of 40% of their total food budget on cereals. Grain consumption, especially for wheat and wheat-based products like bread and pasta, continues to climb as incomes rise and more people move to urban centers. The GOE has an ambitious plan to attain wheat self-sufficiency and halt importations. Furthermore, the GOE vowed to begin exporting wheat to neibhouring countries by 2023 by tapping into the huge production potential due to its various favorable agro-ecologies and through expansion of wheat production area under irrigation to achieve self-sufficiency and reduce wheat imports. With support from the African Development Bank’s agricultural Technologies for African Agricultural Transformation program,

The GOE imposes an export ban on cereal grain and local prices are often higher than what they are on the international market. Some informal trade is most likely occurring in production areas located along borders. Grain imports are almost exclusively limited to wheat, nearly all of which the GOE’s state-trading arm (i.e., Ethiopian Trading Business Corporation) purchases off the international market and later distributes in the local market at a subsidized price. With the GOE looking to partially liberalize the wheat import market, local millers are beginning to explore opportunities to import wheat directly. For this to happen, the government will need to guarantee sufficient allocations of foreign exchange. Recently, the GOE has permitted imports of basic food commodities using franco-valuta scheme to narrow supply and demand gap and reduce rising inflation in the country. Private companies are allowed to import food commodities including wheat, rice, sugar, powder milk, and cooking oils.

In addition to wheat, the demand for oilseeds, such as soybeans and Niger seed, is expected to grow as Ethiopia’s demand for both cooking oil and livestock feed increases. In fact, the soybean crushing and soybean oil refining industry is quickly emerging. The anticipated growth in these subsectors could open niche opportunities for sales of U.S. grain and oilseed commodities in the future, as well as processing and storage equipment, such as feed mills and soybean extruders.

More details on the latest grain and oilseeds situation in Ethiopia can be found in our Grain & Feed and our Oilseeds Reports.

Unit: ‘000 Metric tons (Estimate)

Wheat	2019	2020	2021	2022	2023
Total Market Size	6,000	6,256	6,600	6,970	7,100
Total Local Production	4,500	4,600	5,100	5,520	5,700
Total Exports	0	0	0	0	0
Total Imports	1,500	1,600	1,500	1,450	1,400
Commercial Imports from the United States	0	0	0	0	0

Source: USDA/Foreign Agriculture Service, Addis Ababa

(Total market size = (total local production + imports) – exports)

Leading Sub-Sectors

Opportunities

Ethiopia’s current level of wheat and soybean production is insufficient to satisfy domestic demand. The country, therefore, is expected to import wheat and soybeans in the coming years. Depending on international market conditions and local demand factors, there may be opportunities in the future for U.S. wheat and soybean sales to Ethiopia. There may also be future opportunities for equipment and systems to process these commodities.

Resources

Foreign Agriculture Service

agaddisababa@usda.gov

Foreign Commercial service

Teddy.Tefera@trade.gov

Ministry of Agriculture (MOA)
Agricultural Transformation Agency (ATA)
Ethiopian Agricultural Research Institute (EIAR)
Ethiopian Trading Business Corporation (ETBC)

Cotton

This is a best prospect for Ethiopia. Please see below for the market overview and trade data.

Overview

Under the Homegrown Economic Reform Program, the GOE intends to make the textile and apparel industry one of the economic engines that will propel future growth. In fact, the Ethiopia Investment Commission considers the textile and garment sector as a “strategic sector.” To that end, the government has made significant investments in cotton production in order to support manufacturing, including the recent establishment of industrial zones, and has gone to great lengths to provide incentives to attract foreign manufacturers to set up operations in the country.

This government-led outreach, combined with low labor and electricity costs, has already yielded fruits with a number of Turkish, Indian, Chinese, Indonesian and other foreign firms opening businesses in Ethiopia in recent years. A couple of U.S. investors have also entered the market. Additional investment opportunities are expected in the textile and garment sector as well as cotton production. Investments in cotton production, as well as any other agricultural commodity, require considerable due diligence because of a variety of complicated issues, including landownership rights and the potential for conflict.

Ethiopia has considerable potential for producing cotton. However, production is constrained in part by outdated ginneries and limited availability of quality inputs, including seed, fertilizer, and pest control agents. For instance, in the case of seed, the current varieties are more than 20 years old and are degraded. Land tenure rights as well as natural disasters, such as floods, hamper the country’s ability to quickly expand cotton production.

One way the government is hoping to improve cotton yields is with Genetically Engineered (GE) cotton. The particular GE cotton variety of interest is a product that is resistant to cotton bollworm, which is a pest challenge many farmers struggle to manage. The GOE has approved two different varieties of Bt cottonseeds for commercial cultivation.

For the foreseeable future, the demand for cotton is expected to outstrip local supplies, making imports necessary. Ethiopia sources cotton mainly from India and other international suppliers. As the textile and apparel industry grows, there will likely be more opportunities for U.S. cotton sales.

More background information on the cotton situation in Ethiopia can be found in our cotton report from 2019/20.

Unit: ‘000 Metric tons (Estimate)

Cotton	2019	2020	2021	2022	2023
Total Market Size	59	63	55	50	57
Total Local Production	53	54	52	40	45
Total Exports	2	2	1	0	0
Total Imports	8	8	4	10	12
Imports from the United States	0.3	0	0	0	0

Source: Source: USDA/Foreign Agriculture Service, Addis Ababa

Total Market Size = (Total Local Production + Total Imports) – (Total Exports)

Leading Sub-Sectors

Cotton exports.
Agricultural inputs, seeds, machinery and equipment used in cotton production.
Textile and apparel manufacturing and equipment.

Opportunities

Ethiopia’s cotton production is insufficient to meet the growing demand from the textile and apparel sector. Increased production as well as imports are required to close this gap. Ethiopia has previously imported cotton from various international suppliers. Export sales of U.S. cotton are expected as demand increases. Opportunities also exist for agricultural inputs and systems used to grow and process cotton into textile and apparel.

Resources

Foreign Agriculture Service

agaddisababa@usda.gov

Foreign Commercial service

Teddy.Tefera@trade.gov

Industrial Parks Development Corporation (IPDC)
Textile Industry Development Institute (ETIDI)
Ethiopian Cotton Producer, Ginners, and Exporters Association (ECPGEA)

Estimated Volume in ‘000 Metric Tons

Cotton	2019	2020	2021	2022	2023
Total Market Size	59	63	55	50	57
Total Local Production	53	57	52	40	45
Total Exports	2	2	1	0	0
Total Imports	8	8	4	10	12
Imports from the U.S.	0	0	0	0	0

Wheat	2019	2020	2021	2022	2023
Total Market Size	6,000	6,670	6,600	6,970	7,100
Total Local Production	4,500	4,925	5,100	5,520	5,700
Total Exports	0	0	0	0	0
Total Imports	1,500	1665	1,500	1,450	1,400
Commercial Imports from the U.S.	0	0	0	0	0

Coffee	2019	2020	2021	2022	2023
Total Market Size	196	202	216	207	211
Total Local Production	435	450	456	489	495
Total Exports	240	248	240	282	284
Total Imports	0	0	0	0	0
Imports from the U.S.	0	0	0	0	0

Oilseeds	2019	2020	2021	2022	2023
Total Market Size	365	405	394	490	530
Total Local Production	835	845	705	750	800
Total Exports	470	440	311	260	270
Total Imports	0	0	0	0	0
Imports from the U.S.	0	0	0	0	0

Source: USDA/Foreign Agriculture Service, Addis Ababa

Leading Sub-Sectors

Agricultural equipment and systems, such as tractors, irrigation equipment, and grain handling Infrastructure like, silos, cold storage facilities, etc.
Agro-processing, such as beverages, biscuits, bread, milk, meat, chicken, cooking oil, fruit and vegetables, etc.
Agro-processing equipment (e.g. juice processing, milling machines, extruders for soybean oil).

Grocery exports.
Cotton exports.

Livestock

Overview

Ethiopia is home to one of the largest livestock populations in Africa. According to government statistics, there are approximately 50 million cattle, 50 million goats and sheep, plus an assortment of horses, donkeys, camels and chickens. The GOE, as part of its Livestock Master Plan (LMP), intends to transform this sector and increase production and exports of meat in order to generate foreign exchange. The LMP also calls for increases in dairy, broiler and egg production to satisfy increasing consumer demand for affordable animal proteins.

Ethiopia’s commercial red meat (beef, mutton and goat) industry has made remarkable progress to date and shows considerable growth potential for the future. The GOE encourages investments in meat processing, especially those that are focused on exporting value-added products abroad. A large chunk of this commercially produced red meat, most of which is currently mutton and goat meat is exported to the Middle East in order to generate foreign exchange. Beef exports are also growing, with additional market opportunities on the horizon.

In addition to red meat, there are emerging opportunities in chicken, egg, and dairy production and processing. At the moment, there are a few U.S. and foreign firms that have partnered with local companies in the milk business, which has considerable room for growth, as milk consumption is still very low. The chicken business also shows promising opportunities. The GOE is focusing on expanding chicken meat production in order to reduce the country’s longstanding dependence on the livestock sector, minimize the sector’s environmental footprint, and provide more affordable protein to the masses. However, even with this anticipated increase in chicken meat production, demand is expected to outstrip supply, thereby creating potential opportunities for imports. In fact, Ethiopia recently started importing chicken meat from Ukraine and Brazil.

Many of the existing and anticipated increases in livestock production, as envisioned under the LMP, are linked to the consistent availability of quality livestock feed, animal genetics, and veterinary services. As such, investment opportunities in feed, genetics and veterinary services and the supporting industries are expected to grow in the coming years.

Leading Sub-Sectors:

Milk and dairy processing, and supporting equipment and systems.
Feed manufacturing, feed ingredients and feed milling equipment.
Livestock genetics.
Cold storage facilities.
Chicken meat exports.

Opportunities

Ethiopia is home to abundant livestock resources. There are opportunities to process livestock products for both local and export markets. Local demand for meat, milk and eggs is growing as the economy and population grow. This growth is expected to create investment and trade opportunities for certain commodities and open doors for veterinary and other livestock services. Potential opportunities exist for sales of U.S. livestock genetics and chicken meat.