1. Supporting Agricultural Transformation in Ethiopia: P4P contribution
January 2013

2. Ethiopia’s Growth Transformation Plan envisions economic expansion driven by increases in smallholder productivity
Ethiopia Growth Transformation Plan (GTP)
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)
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
Source: ATA team analysis

3. ATA has identified 17 interventions across crop value chains that if addressed holistically can increase the productivity and income of smallholder farmers
TECH. RESEARCH & PROMOTION
INPUT PRODUCTION
INPUT DISTRIBUTION & ACCESS
ON-FARM PRODUCTION
ACCESS TO POST-HARVEST TECH.
MARKET LINKAGES
DEMAND SINKS DEVELOPMENT
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
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 1
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) 6
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 8
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 11
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 14 2 9 12 15 3 7 16 4 13 10 17 5

4. ATA’s Maize value chain program focuses on 10 interventions, of which four are done in partnership with WFP - P4P
ATA
WFP – P4P
TECH. RESEARCH & PROMOTION
INPUT PRODUCTION
INPUT DISTRIBUTION & ACCESS
ON-FARM PRODUCTION
ACCESS TO POST-HARVEST TECH.
MARKET LINKAGES
DEMAND SINKS DEVELOPMENT
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
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 1
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) 6
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 8
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 11
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 14 2 9 12 15 3 7 16 4 13 10 17 5

5. Maize sheller maintenance
ATA and WFP are partnering with Sasakawa Global 2000 to improve access to agro-processing and post-harvesting technology at cooperative union farmer organizations
Maize sheller maintenance
Grain cleaner repair
Engine 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 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

6. The P4P program supports agricultural transformation by providing a large and structured demand sink, and by building aggregation capacity of farmer organizations
Farmers
Large buyers
Efficient aggregators
~ 100,000 maize farmers
16 unions receiving management support
WFP Forward contracts for 30,000 MT maize for local WFP use
2012
> 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
By 2015
Source: ATA team analysis

7. 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
Institution
Regional Cooperative Promotion Agencies
Audits
Monitoring, Learning & Evaluation
Commercial Bank of Ethiopia
Output financing
TechnoServe and
ACDI/VOCA
Management support
Sasakawa Global 2000
Post-harvest handling training
Ethiopian Agricultural Transformation Agency
Primary Government liaison
Linkages between unions and other partners
Forward delivery contracts
Technical assistance
P4P/WFP
Source: ATA team analysis

8. For example, multiple parties convened to provide forward contracts and enable local banks to provide financing without arduous collateral requirements
Forward Delivery Contract
Defined quantity, minimum price and delivery period
Provides confidence to banks that the unions have a secure market
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
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
Majority of the unions participating in the 2012 trial received financing from the Commercial Bank of Ethiopia, without the usual large collateral requirements
Source: ATA team analysis

9. Support to unions has been provided with sustainability in mind, with a clear exit and path to scale
Integrated 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
Unions graduation path
Markets
Advanced
Finance
Intermediate
Basic
Management
Competitive tender
No support
Storage & Post-harvest handling
Soft tender
Mild support
Direct procurement
Intensive support
Extension
Yr 1- 2
Yr 2- 3
Yr 3 - 5
~100,000 farmers in 2012
~500,000 farmers by 2015
Source: ATA team analysis

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
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: A
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 B
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 C
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
Source: ATA team analysis