International Livestock Research institute Agricultural market development in Ethiopia: problems and issues Mohammad Jabbar International Livestock Research institute

Project objective and requirements To alleviate poverty through technology transfer Requirements Needs based assessment of best-bet options Innovative approaches for transfer An appropriate extension service An input supply system Appropriate marketing arrangements Finance and credit Appropriate institutions (rules, regulations, organisations)

Characteristics of Pilot Learning Sites Diversity Ecology and resource endowments Physical, financial, human and social capital Production systems and enterprises Market infrastructure and access Possibilities and constraints Participatory diagnosis for common and different market problems and possibilities

Grain marketing problems and issues Price instability Finance and credit Post production losses Transportation and communication Grades and standards Storage Processing Information Transactions costs

Price instability: problems Constraint as it affect producers and consumers Public sector withdrawal from marketing Production efforts not matched by marketing Rigid credit repayment schedules Weather and production risks Adverse effect on livestock prices

Price instability: possible actions Direct public sector involvement not desirable Facilitate private, cooperative thru finance, credit, stock regulations for buffer stocks Maintain investor profit without public subsidy Stabilise price partially to reduce risk, keep incentive for investment using market price as guide Price stabilisation, buffer stocks, supply management, food aid need to be integrated without major public sector involvement in direct handling of commodities

Finance and credit: problems Limited input credit supply Rigid repayment schedules Marketing credit inaccessible Credit for poverty alleviation and for production not complementary Inadequate institutional arrangements for savings mobilisation

Finance and credit: possible actions Recognise multiplicity of roles of credit for production, marketing, trading, storage Supplier credit for inputs Warehouse receipts for products not easy to establish for smallholder conditions Private sector investment in marketing infrastructure rather than commercial production Donor and public fund combined with private sector capital to supply low interest loans

Post-production losses Problems No reliable estimate (20% assumed) Source of problem: production to marketing chain Possible actions Extension recommendation on method and techniques Appropriate technology, location, finance for off-farm investment in storage and processing Define and test role of private sector, cooperatives, public sector

Transport and communication Problems Inadequate road network, limited access to input and output markets, high transactions costs Disincentive to invest in new technology Possible actions Investment in roads and agriculture need to be complementary Investment to improve rural markets to link with larger markets

Grades and standards Problems Possible actions Exist for export, not suitable for rural environment Traditional trading based on local standards and grades Diversity means more local grades, improved technology will lead to fewer grades Possible actions Several options for definition: minimum reference, different for different quality, export quality All approaches difficult to enforce Uniform prices not rational due to differing distance Use local to gradually upgrade and move towards fewer grades

Storage Problems Possible actions On-farm methods poor, inadequate Bulk storage not adequate in private sector Existing capacities not optimally located, serve food aid ore than domestic production Possible actions Extension recommendation on storage methods Facilitate private and coop sector investment in storage combined with credit and finance

Processing Problems Possible actions On-farm methods poor for new crops Limited rural electrification limits expansion Large scale processing inefficient due to poor management, inadequate supply Possible actions Extension recommendation on processing Increased private sector investment in processing

Information Problems Possible actions Inadequate access to market information Information on production technology, costs and prices not integrated Possible actions Extension material need to include technology, production and marketing practices Information on cost and prices be updated regularly and delivered with technology information

Transaction costs Various problems contribute to high transaction costs leading to either no or low participation in market and also low returns where some participation is prevalent Institutional mechanisms needed to overcome problems that will lead to reduced transaction costs Cooperatives are being promoted, need to evaluate farmer participation, farmer control in management for success.

Issues in livestock marketing Efficiency in livestock marketing Livestock marketing and crop sector risk management Product safety and quality Disease control strategy for trade Cross-border trade Tenancy, draft power and land management Non-draft services of livestock and role of credit

Efficiency of marketing system Is the chain functioning efficiently? Are consumer preferences and prices transmitted properly to producers? Are they responding to market? How are quality requirements met and responded to? What are requirements for market oriented production? And for better quality? How can transactions cost along the chain be reduced Opportunities for investment in small stock and apiculture?

Livestock marketing and crop sector risk management Livestock role role in crop sector risk management Crop failure may lead to reduced livestock prices Bumper crop may do the same Need better understanding of linkages between crop sector performance, crop price and livestock price movements to address price instability

Disease control strategy for trade Investment in health and sanitary regulations highly inadequate Export limitations create loss for all stakeholders High benefits expected from investment Options available to recoup cost from traders and producers provided they can be convinced of the benefits

Non-draft services, tenancy and draft power market Inadequate draft power a cause of tenancy Market for draft services or private sector investment in small scale mechanisation may alleviate problem Saving and storage functions of livestock may reduce with expansion of financial institutions, access to credit, leading to investment in more productive livestock.

Conclusions The scope of this project is limited so not all problems can be addressed here but need to recognise the macro-environment within which the project will operate Several options directly relevant to address farm level problems may be identified and tested These options need to be designed keeping in view the diversity of production and market conditions of the pilot sites