Public Wheat Imports to Ethiopia since 2008

A wheat farmer in Koka village, Ethiopia training his cows to thresh wheat. Photo credit: Flickr/Ollivier CIFOR

A wheat farmer in Koka village, Ethiopia training his cows to thresh wheat. Photo credit: Flickr/Ollivier CIFOR

Public interventions in the cereal markets of Ethiopia drastically declined after the country embarked on market liberalization in the late 1990s. The government’s share in domestic cereal markets fell from around 40 percent in the 1980s to about four percent by the end of the 1990s and averaged less than two percent from 2001-2007. More importantly, the government did not engage in any large-scale imports of cereals after the launch of their market liberalization programs. This started to change when domestic prices of staple cereals began to rise sharply; wheat and maize prices reached close to US$300 above the import parity by mid-2008.

The sharp increase in domestic prices coincided with the 2007/08 global food crisis, but the situation in Ethiopia was not directly linked to the world market. Instead, price hikes in Ethiopia’s food market were due to a combination of factors, especially macroeconomic challenges related to the money supply and balance of payments. Similar to other developing countries, the 2007-08 global food crisis brought about a fundamental change in policy perception: that governments need to intervene to minimize the political and human costs of rising food prices. In Ethiopia, this resulted in several policy changes: a ban on cereal exports, a re-introduction of urban food rationing programs, the distribution of subsidized cereals through flour mills, and the suspension of local procurement of cereals.

This paper will address several questions:

  1. Are  large volumes of wheat imports justified given the available knowledge about the country’s cereal markets?
  2. To  what  extent  have  wheat  imports  depressed  domestic  prices  and  distorted farmers’ incentives to grow wheat?
  3. Are the policies that support public imports of wheat compatible with the country’s ongoing agricultural policies and programs to enhance cereal productivity?
  4. Could the government have saved precious foreign exchange by procuring locally (instead of importing) without causing a sharp increase in domestic prices?

Read Public Wheat Imports to Ethiopia since 2008: The Rationales and Cost-Effectiveness