Supporting Agricultural Transformation in Ethiopia: P4P contribution January 2013

Supporting Agricultural Transformation in Ethiopia:P4P contribution

January 2013

2

Ethiopia Growth Transformation Plan (GTP) 2010-2015

• Federal Agency created to lead problem solving and support implementation of transformative changes in agriculture

• ATA approach: holistic, collaborative and focused. Centered on systemic issues and value chains with large potential to deliver on GTP goals

Excerpts …

“Maintaining Agriculture as the major source of economic growth”

“Ensure smallholder agriculture becomes the main source of agricultural growth by scaling up interventions …”

“GTP targets, cereals productivity: increase from 1.7 tons per ha in 2010 to 2.2. tons per ha by 2015…”

Ethiopian Agricultural Transformation Agency (ATA)

Ethiopia’s Growth Transformation Plan envisions economic expansion driven by increases in smallholder productivity

Source: ATA team analysis

3

Improved research system effectively linked to extension, generating and disseminating location specific technologies to SHFs

Improved local production and/or international procurement of inputs

Improved distribution of and physical & financial access to inputs by SHFs

Increased SHF access to improved technologies & knowledge on sustainable product. practices

Improved SHF access to post harvest handling technologies and practices

Improved linkages between SHF production and major demand sources

Increased value addition and improved market demand for SHF outputs

TECH. RESEARCH & PROMOTION

INPUT PRODUCTION

INPUT DISTRIBUTION & ACCESS

ON-FARM PRODUCTION

ACCESS TO POST-HARVEST TECH.

MARKET LINKAGES

DEMAND SINKS DEVELOPMENT

Identification of the most appropriate varieties of the crops under production for specific agro-ecology

Identification most appropriate agronomic and soil conservation practices for the specific crops under production in each target agro-ecology

Identification of the most appropriate mechanization (on farm and post-harvest) for the agro-ecology and crop

Soil mapping to identify the nutrient deficiency and the fertilizer formulate necessary for crops in each target agro-ecology

Identification of an approach mix of crops by agro-ecology for soil health, markets, nutrition and overall food security

Production of sufficient quantity and quality of improved seed of the specific varieties needed for each target agro-ecology with efficient distribution channel links

Availability of sufficient amount of the specific type/ formula of fertilizer for each crop in the target agro-ecologies (either through import or local blending)

Improve input demand estimation, contractual relations and logistics to make sure that input supply meets demand on timely basis

Ensure that primary cooperatives and unions have the operating capacity to run efficient input distribution business including access to credit in order to source inputs in financial viable models

Ensure farmers have access to financial services (i.e. credit, insurance, etc. ) in order to facilitate improved input adoption

Equip FTCs to act as effective resource centers to promote improved agronomic and on-farm and post harvest practices

Train DAs with location specific information and tools to appropriately train local farmers

Create public, private or other modalities that facilitate farmer access to on-farm and post-harvest technologies and mechanization

Equip coops with the storage capacity and the output financing to properly support farmers on aggregating in order to effectively compete with traders

Create more efficient and direct link between coops and domestic and international markets

Identification of specific and reliable markets (domestic/international) able to source production from smallholder farmers

Develop domestic value addition and processing opportunities that enable smallholder farmers to access higher end market opportunities

1

2

3

4

5

6

7

8 11 14

15

16

129

10

17

13

ATA has identified 17 interventions across crop value chains that if addressed holistically can increase the productivity and income of smallholder farmers

4

ATA’s Maize value chain program focuses on 10 interventions, of which four are done in partnership with WFP - P4P

Improved research system effectively linked to extension, generating and disseminating location specific technologies to SHFs

Improved local production and/or international procurement of inputs

Improved distribution of and physical & financial access to inputs by SHFs

Increased SHF access to improved technologies & knowledge on sustainable product. practices

Improved SHF access to post harvest handling technologies and practices

Improved linkages between SHF production and major demand sources

Increased value addition and improved market demand for SHF outputs


INPUT PRODUCTION

INPUT DISTRIBUTION & ACCESS

ON-FARM PRODUCTION

ACCESS TO POST-HARVEST TECH.

MARKET LINKAGES

DEMAND SINKS DEVELOPMENT

Identification of the most appropriate varieties of the crops under production for specific agro-ecology

Identification most appropriate agronomic and soil conservation practices for the specific crops under production in each target agro-ecology

Identification of the most appropriate mechanization (on farm and post-harvest) for the agro-ecology and crop

Soil mapping to identify the nutrient deficiency and the fertilizer formulate necessary for crops in each target agro-ecology

Identification of an approach mix of crops by agro-ecology for soil health, markets, nutrition and overall food security

Production of sufficient quantity and quality of improved seed of the specific varieties needed for each target agro-ecology with efficient distribution channel links

Availability of sufficient amount of the specific type/ formula of fertilizer for each crop in the target agro-ecologies (either through import or local blending)

Improve input demand estimation, contractual relations and logistics to make sure that input supply meets demand on timely basis

Ensure that primary cooperatives and unions have the operating capacity to run efficient input distribution business including access to credit in order to source inputs in financial viable models

Ensure farmers have access to financial services (i.e. credit, insurance, etc. ) in order to facilitate improved input adoption

Equip FTCs to act as effective resource centers to promote improved agronomic and on-farm and post harvest practices

Train DAs with location specific information and tools to appropriately train local farmers

Create public, private or other modalities that facilitate farmer access to on-farm and post-harvest technologies and mechanization

Equip coops with the storage capacity and the output financing to properly support farmers on aggregating in order to effectively compete with traders

Create more efficient and direct link between coops and domestic and international markets

Identification of specific and reliable markets (domestic/international) able to source production from smallholder farmers

Develop domestic value addition and processing opportunities that enable smallholder farmers to access higher end market opportunities

1

2

3

4

5

6

7

8 11 14

15

16

129

10

17

13

ATA WFP – P4P

5

ATA and WFP are partnering with Sasakawa Global 2000 to improve access to agro-processing and post-harvesting technology at cooperative union farmer organizations


INPUT PRODUCTION

INPUT DISTRIBUTION

& ACCESS

ON-FARM PRODUCTION

ACCESS TO POST-

HARVEST TECH.

MARKET LINKAGES

DEMAND SINKS

DEVELOPMENT

ACCESS TO POST-

HARVEST TECH.

Maize sheller maintenance

Maize unions received the following sheller support: basic maintenance, concave part replacement, and modification of threshing drum spikes and inlets. This maintenance activity was done in workshops, where technicians received on-the-job training on how to maintain the shellers going forward.

Grain cleaner repair Engine maintenance

Grain cleaners have been maintained at the Sidama Elito cooperative union, through collaboration between Saskawa technicians and the Selam Awassa Business Group. Activities undertaken include: repair of oscillating links, replacement of bearings and washers, and threading of shaft

Engines for maize shellers and cleaners were serviced and repaired, with attention paid to major components: spark plugs, ignition coils, fuel lines and tanks, and ignition coils. Additionally, on-the-job refresher trainings has been provided to engine operators

6Source: ATA team analysis

Farmers Large buyersEfficient aggregators

~ 100,000 maize farmers

16 unions receiving management support

WFP Forward contracts for 30,000 MT maize for local

WFP use

2012

By 2

015

> 500,000 maize farmers

Aggregation by ~ 50 unions; majority

efficient and sustainable

Forward contracts for up to 300,000 MT

cereals for local and regional WFP use

The P4P program supports agricultural transformation by providing a large and structured demand sink, and by building aggregation capacity of farmer organizations


INPUT PRODUCTION

INPUT DISTRIBUTION

& ACCESS

ON-FARM PRODUCTION

ACCESS TO POST-

HARVEST TECH.

DEMAND SINKS

DEVELOPMENT

MARKET LINKAGES


INPUT PRODUCTION

INPUT DISTRIBUTION

& ACCESS

ON-FARM PRODUCTION

ACCESS TO POST-

HARVEST TECH.

DEMAND SINKS

DEVELOPMENT

MARKET LINKAGES

7

Institution

Regional Cooperative Promotion Agencies

• Output financingCommercial Bank of Ethiopia

• Management support TechnoServe and ACDI/VOCA

• Post-harvest handling trainingSasakawa Global 2000

Ethiopian Agricultural Transformation Agency

P4P/WFP

• Primary Government liaison• Linkages between unions and other partners

• Forward delivery contracts• Technical assistance

Both domestic and international partners are working together to ensure 30,000 MT of maize is successfully delivered – one of the largest quantity ever sourced from farmer organizations by P4P

• Audits • Monitoring, Learning & Evaluation



INPUT PRODUCTION

INPUT DISTRIBUTION

& ACCESS

ON-FARM PRODUCTION

ACCESS TO POST-

HARVEST TECH.

DEMAND SINKS

DEVELOPMENT

MARKET LINKAGES

8

CBE

Tripartite agreement

• Bank, Union and WFP agree payment modalities for deliveries against forward contracts

• Banks reassured that proceeds will flow through the designated accounts, enhancing probability of repayment

Union

Forward Delivery Contract

• Defined quantity, minimum price and delivery period• Provides confidence to banks that the unions have a secure market

Management support• TechnoServe and WFP provide management support to specific unions to help ensure delivery against contracts,

and proper management of output credit provided by banks• Third party support provides an extra layer of comfort to banks that financing provided to unions will be well

managed

For example, multiple parties convened to provide forward contracts and enable local banks to provide financing without arduous collateral requirements

Majority of the unions participating in the 2012 trial received financing from the Commercial Bank of Ethiopia, without the usual large collateral requirements



INPUT PRODUCTION

INPUT DISTRIBUTION

& ACCESS

ON-FARM PRODUCTION

ACCESS TO POST-

HARVEST TECH.

DEMAND SINKS

DEVELOPMENT

MARKET LINKAGES

9

Unions graduation pathIntegrated support to unions

• WFP forward contracts• Total 30,000 MT maize contracts to 16

unions

• Output financing from Commercial Bank of Ethiopia

• US $ 4 million total financing

• Support by TechnoServe, ACDI-VOCA

• Training and maintenance support provided by SG 2000 and WFP

• Extension support from SG 2000

Markets

Finance

Management

Storage & Post-harvest

handling

~100,000 farmers in 2012

~500,000 farmers by 2015

Extension

Basic

Intermediate

Advanced

• Direct procurement

• Intensive support

• Soft tender• Mild

support

• Competitive tender

• No support

Yr 1- 2 Yr 2- 3 Yr 3 - 5

Support to unions has been provided with sustainability in mind, with a clear exit and path to scale


10

The first year of implementation has provided several lessons and challenges

- With proper support, unions can deliver on large forward contracts- The “forward” element of these contracts is essential to unlock participation by other players

in the value chain, such as local finance providers. This relies heavily on WFP’s food purchase facility

- Zero-collateral output financing is possible, but requires significant coordination between the buyer (WFP), government agencies (ATA), banks, unions, and management service providers

- In initial phases, unions require significant amount of on-the-ground management support

- Unions still lack the physical infrastructure and managerial capabilities needed to aggregate at commercially significant levels

- Financial institutions still consider agricultural lending to be particularly risky, and they lack the capability to accurately assess this risk

- Determining and agreeing upon the final purchasing price is particularly time-consuming and inefficient, because of poor market information and general misunderstanding of forward contracts

Lessons

Challenges

11

Going forward, we see clear value for P4P engagement in developing cereal markets in Ethiopia, and with a long-term vision for Ethiopia transitioning from food aid to food assistance

P4P can be leveraged to help develop:

Structured demand• Forward contracting with producers• Collaboration with financiers to ensure timely and cost-effective aggregation• Collaboration with other value chain participants to optimize production and aggregation• Improved reliability of production, enabling a transition from food aid to food assistance

A

B

C

Transparency within the value chains • Use of WFP purchasing power to encourage transparency across the various levels of the

marketing chain, down to farm gate• Increased reliability and traceability of product going forward

Commercial-scale aggregation capability• Development of a local pool of aggregators with the ability to fulfill large commercial

contracts• These actors could fulfill large-scale demand from both public and private sector players, as

well as domestic and regional markets


Innovations to help our country grow

Documents

Supporting Agricultural Transformation in Ethiopia: P4P contribution January 2013