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Wheat Value Chain Analysis The Case of Innovation Platform Sites of SARD-
SC Wheat Project Wheat Value Chain Analysis The Case of Innovation
Platform Sites of SARD-SC Wheat Project

Technical Report · September 2018

DOI: 10.13140/RG.2.2.30306.38085

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 Wheat Value Chain
Analysis

The Case of Innovation Platform Sites of

SARD-SC Wheat Project

Tadele Mamo
Wudineh Getahun
Agajie Tesfaye
Tesfaye Solomon
Ali Chebil
Tolessa Debele

Research Report No 119

የኢትዮጵያ የግብርና ምርምር ኢንስቲትዩት
Ethiopian Institute of Agricultural Research
 Wheat Value Chain Analysis

The Case of Innovation Platform Sites of

SARD-SC Wheat Project

©EIAR, 2018
ኢግምኢ፤ 2010
Website: http://www.eiar.gov.et
Tel: +251-11-6462633
Fax: +251-11-6461294
P.O.Box: 2003
Addis Ababa, Ethiopia
Copyediting and Design: Abebe Kirub

ISBN: 9789994466535

ii
 Contents
1. INTRODUCTION 1
1.1 Background 1
1.2 Conceptual framework of value chain analysis and IP approach 3
1.2.1 Concepts and definitions of value chain and its core activities 3
1.2.2 Overview of SARD-SC wheat project Innovation Platform 5
1.3 The need for value chain study 6
1.4 Objectives of value chain analysis 7
2. METHODOLOGY AND STUDY APPROACHS 7
2.1 The study area 7
2.2 Data collection and target groups 8
2.3 Sampling frame and sampling procedure 9
2.4 Data analysis and synthesis 11
3. RESULTS AND DISCUSSION 11
3.1 Input use and delivery 11
3.1.1 Wheat seed availability and supply 11
3.1.2 Fertilizer supply and use practices 21
3.1.3 Chemicals supply system 23
3.1.4 Farm machineries supply and use practices 24
3.1.5 Land and labor inputs 26
3.1.6 SWOT analysis of input supply segment 28
3.2 Wheat production and productivity 28
3.2.1 Production 28
3.2.2 Productivity of wheat 34
3.2.3 Stress incidences in wheat production 35
3.2.4 SWOT analysis of wheat production segment 39
3.3 Profit margin analysis and marketing segment 40

iii
 3.3.1 Profit margin analysis 40
3.3.2 Wheat marketing 41
3.3.3 The role of Ethiopian Grain Trade Enterprise in wheat marketing 42
3.3.4 Marketing channels 45
3.3.5 SWOT analysis of wheat marketing segment 47
3.4 Wheat processing 48
3.4.1 Potentials 48
3.4.2 Wheat flour millers 48
3.4.3 Value addition in bakeries 55
3.4.4 SWOT analysis of wheat processing segment 56
3.5 Wheat consumption 57
3.5.1 Practices 57
3.5.2 SWOT analysis of wheat consumption segment 59
3.6 Wheat value chain 60
3.6.1 In the IP site of Tigray Region 60
3.6.2 In the IP site of Amhara Region 61
3.6.3 In the IP site of Oromia Region 62
3.6.4 In the IP site of SNNP Region 63
3.6.5 Aggregated value chain of the SARD-SC wheat project IP sites 63
3.7 Added value at each step of the value chain 65
4. PROBLEM ANALYSIS OF WHEAT VALUE CHAIN 67
5. CONCLUSION AND RECOMMENDATIONS 72
5. 1 Conclusion 72
5.2 Recommendations 73
6. References 76

iv
1. INTRODUCTION

1.1 Background
Wheat is one of the important cereal crops consumed in different forms in Ethiopia
and the rest of the world. Ethiopia is the second largest wheat producer in sub-Saharan
Africa (SSA) next to South Africa (Abu, 2012; Demeke and Marcantonio, 2013). The
crop ranked fourth after tef, maize and sorghum both in terms of area coverage
(1,663,845.63 hectares) and quantity of production (4,231,588.72 tons) in 2014/15
cropping season in Ethiopia (CSA, 2015). Four major wheat producing regions in
Ethiopia, namely Oromia, Amhara, SNNP, and Tigray account for about 99% of
national wheat production sharing 58%, 28%, 8% and 5% in 2014/15 cropping season,
respectively (CSA, 2015).

Even though Ethiopia is one of the top ranking producers of wheat in Africa, it is not
yet self-sufficient because of huge population and the consequent growth of demand.
The FAOSTAT data of half a century indicates that the wheat self-sufficiency ratio of
the country has declined from 99% in the 1960s to 70% in 2000s. This is due to the
fast growth rate of domestic consumption resulted from population growth and
urbanization. As a result, the country has been importing wheat for several decades.
For instance, Ethiopia imported about 900,000 tons of wheat grain to satisfy its
demands of 5,250,000 tons for domestic utilization (for food, industrial use, seed, and
feed consumption) in 2014 (USDA, 2014). In addition to the wheat grain, the country
has also been importing wheat flour although it is very low compared to the wheat
grain import. The FAOSTAT data of fifteen years (1999-2013) shows that the wheat
flour (in wheat grain equivalent) imports is about 2.01% of the total wheat grain
imported during the same period. The supply and demand gap has been persisting for
several decades and the quantity of wheat imported showed a steady growth over
years. According to USDA (2014), the quantity of wheat imported, which used to be
about 200,000 tons in 1993 has reached nearly about 1,800,000 tons in 2009, which is
an increment in eight folds. Similar trend over years has forced the country to drain its
limited foreign currency. For example, the country incurred more than 600 million
USD in only a single year of 2011 for wheat import.

1
To substitute wheat import with domestic production and be self-sufficient, the
country has been implementing several research and development strategies. The
attention given to improved wheat variety generation and dissemination is one of the
attempts made by the government. According to MoA (2014), 67 and 33 bread and
durum wheat varieties, respectively, were released and disseminated to beneficiaries
from different federal and regional agricultural research centers until 2014 and
reported to be under production. As a result, wheat revealed steady growth in
production and productivity over years even though it could not grow in par with
growth of demand. According to the CSA (2005) and CSA (2015) reports, the
domestic production of wheat increased from 2.2 million tons in 2004/05 to 4.2
million tons ten years later (2014/15), which is a 91% growth. Similarly, productivity
has increased from 1.56 tons/ha in 2004/5 to 2.54 tons/ha in 2014/15, which is a
growth by 63%. This swift growth of productivity could largely be attributed to the
use of improved technologies of wheat. Within the same period, the area coverage for
wheat has also increased from 1.4 million hectares in 2004/5 to 1.6 million hectares in
2014/15, which is a growth by 14%.

On the other hand, the domestic wheat consumption of the country for the past half
century has revealed high growth over years. The growth in demand was especially
rapid for the last five years. According to USDA (2014), the domestic consumption of
wheat demonstrated the fastest growth trend from 3.72 million tons in 2010 to 5.25
million tons in 2014, which is a growth by 41%. Despite the county's attempt to
increase wheat production through engaging various strategies, such as enhancing
productivity and area expansion, domestic self-sufficiency of wheat both in the form
of wheat grain and flour is still far from the plan for the country. This might be
because of high population growth, change in food habit resulted from fast growth of
urbanization and the expansion of service sectors, such as universities, hospitals,
commercial companies and others which largely require at least one meal of wheat
products per day.

Therefore, filling the huge gap of supply and demand in the wheat sector needs a
strategic approach. One of these strategies is employing a value chain approach in the
wheat sector. The value chain approach involves identification and assessment of the
whole range of actors involved and activities ranging from input supply to final
2
utilization. It could include operations such as improved wheat variety generation,
seed and supply of other inputs, production, marketing, and processing and
consumption segments. It also investigates supporting and enabling environments at
each segment of the chain to understand the interwoven problems in the wheat sub
sector.

In order to make its own contribution in bridging-up of wheat supply and demand
gaps, Support to Agricultural Research for Development of Strategic Crops (SARD-
SC) wheat project was launched in Ethiopia in 2013.

The project is composed of technology generation, technology dissemination and

adoption, capacity building, and project management. It follows the innovation
platform (IP) approach that brings all stakeholders together to achieve its broad
objectives. The IP approach is underpinned by two components including multi-
stakeholder processes and; value chain analysis and performance (CORAF/WECARD,
2012).

1.2 Conceptual framework of value chain analysis and

IP approach
1.2.1 Concepts and definitions of value chain and its core
activities
Michael Porter (1985) used the term value chain for the first time as an analytical
approach. Nowadays, it is extensively used for wider application in the field of
agriculture. Kaplinsky and Morris (2001) gave the working definition of value chain
as "the full range of activities required bringing a product or service from conception,
through the different phases of production—involving a combination of physical
transformation and the input of various producer services; delivery to final consumers,
and final disposal after use of a product or services". According to GTZ (2007), the
term value chain encompasses two main concepts. One concept focuses on the
functional view that describes the value chain as a series of functions (activities) from
the provision of specific inputs for a particular product to primary production,
transformation, marketing, and up to the final sale of the particular product to
consumers. The other concept focuses on the value chain actors and states value chain
3
as a set of enterprises (operators) performing these functions such as producers,
processors, traders and distributors of a particular product.

There are varieties of actors, business development service providers and business-
enabling environments (enablers) interlinked in the value chain function of
agricultural products. The value chain function ranges from input supply to
consumption supported by business development services.

In the value chain approach, goods and services flow from producers to consumers
through value chain actors in between while the money (benefit) and information flow
in the opposite direction to purchase the goods and services and guide the producers
the quality of products and goods required by consumers. Business enabling
environment is also one of the key actors in developing appropriate policies,
establishing relevant institutions, technologies and infrastructure to support the value
chain.

According to GTZ (2007), the following four core activities are identified and applied
in value chain analysis. These are value chain mapping, identifying costs and margins
along the value chain, economic analysis of the value chain and bench marking, and
analysis of the constraints and strategy setting.

Value chain mapping

It is the first and most essential core task of any value chain analysis and it is the task
of drawing or visualizing the chain system to represent the business operations
(functions), chain operators and their linkages, as well as the chain supporters within
the value chain.

Identifying costs and margins along the value chain

After drawing the value chain map, the next core activity in the value chain analysis
process is quantifying and describing value chains in detail by attaching numbers to
the basic chain map and by indicating numbers of actors, the volume of produce or
the market shares of particular segments in the chain.

4
Economic analysis of value chains
It is the act of evaluating the chain performance in terms of economic efficiency. It is
the act of calculating the value addition along the stages of the value chain, the cost of
production and, the incomes of operators, as far as possible.

Analysis of constraints and strategy setting

Formulating a strategy to develop a value chain (value chain upgrading and value
chain promotion), is the final task in value chain analysis. Value chain upgrading is
the process of jointly improving the value chain by private enterprises and their
associations without the involvement of external bodies while value chain promotion
is the act of facilitation by external facilitators (governments and NGOs) to develop
value chain. Strategy setting involves agreeing on a vision and strategy for value
chain upgrading; analyzing opportunities and constraints to chain upgrading; setting
operational objectives and preparing upgrading action; identifying actors
implementing the value chain upgrading strategy, and anticipating the impact of value
chain upgrading (GTZ, 2007).

1.2.2 Overview of SARD-SC wheat project Innovation Platform

To understand the complex patterns of interactions among different stakeholders in
agricultural research and technology development processes, agricultural innovation
systems approach is increasingly being promoted as a framework in recent
development approaches. One of the innovation system approaches is an innovation
platform (IP) which refers to a forum established to facilitate interactions and learning
among stakeholders with a common challenge to be addressed together. The ultimate
aim of IP is to promote problem solving by a wide range of stakeholders, including
researchers, extension workers, farmers, NGOs, policymakers, equipment
manufacturers, traders, and processers working towards a desired transformation in
agriculture through knowledge, information, technology generation, diffusion and
adoption, and designing an appropriate policy along the value chain. The intention of
the platform of SARD-SC wheat project is, therefore, to agree on and work towards a
common goal that leads to greater wheat productivity and income for smallholder
farmers in the project IP sites. The IP diagram is shown in Figure 1.

5
 Design of SARD-SC Wheat Project Innovation Platform Approach

NARS
Local and
national
decision
makers
Education
Input suppliers and training
organizations
Extension Farmers
agencies
Manufacturers SARD-SC Wheat
Farmers Research teams
NGOs Organization

Service providers

Credit agencies

Government policies, Informal institutions, practices, behaviors and attitudes

Figure 1. Innovation platform of SARD-SC wheat project in Ethiopia

1.3 The need for value chain study

To be successful in IP approach in general and for the SARD-SC wheat project in

particular, there should be a means of understanding the performance of all actors
involved across the wheat sector of each actor is through undertaking value chain
analysis in the wheat sector in the IP sites. There have been some attempts made to
study wheat value chain in Ethiopia (Bergh et al, 2012; Demeke and Marcantonio,
2013; Mohammed, 2009; USAID, 2010). These studies described the wheat value
chain briefly and identified that input supply, production; marketing, processing, and
consumption are the major value chain segments in Ethiopia. However, most of the
previous studies were brief in their entirety as they have wheat value chain together
with other crops and they are dated now and do not represent the current situation of
wheat value chain in the country. There is dynamism of value chain events over time
in response to demand patterns, progresses of research and development, world
6
markets and other factors. Therefore, there is a need to assess the recent functions of
the value chain segments, challenges and constraints faced and development needs. To
fill this gap and design interventions that help upgrade value chain functions in the
wheat sector, there is a need to launch this study and generate information. The
information generated in this study is anticipated to be utilized by the respective value
chain actors in the wheat sector and eventually strive for enhancement of wheat
production and productivity.

1.4 Objectives of value chain analysis

The general objective of value chain analysis is to make assessments of the whole
value chain segments of wheat sector and come up with relevant information that help
design strategies and measures to ensure enhanced production and productivity of
wheat. The specific objectives are:

 To assess input use practices, production trends and technology use status of wheat;
 To investigate domestic marketing practices, import trends and associated constraints;
 To assess the processing, value addition and consumption practices of wheat;
 To identify wheat value chain actors, their roles and status of linkages;
 To map the wheat value chain and illustrate wheat product flows; and
 To identify, prioritize and reveal problem-solution analysis of the wheat value chain.

2. METHODOLOGY AND STUDY APPROACHS

2.1 The study area
The study was conducted in six districts of SARD-SC IP sites selected from four
major wheat-producing regions of Ethiopia. Two districts each from East Gojam
Gojam Zone of Amhara Region and Bale Zone of Oromia regions, and one district
each from South Tigray Zone of Tigray Region and Gurage Zone of SNNP Region
were purposively selected for the following reasons: First, these districts were selected
by each of the regions themselves for the SARD-SC wheat project IP intervention.
Second, the districts did not receive enough attentions and supports from other
development projects to enhance wheat production and productivity. Third, the
districts have a high potential of wheat production even though Enemay and
7
Shebelberenta Districts are not as high potential as others. The selected sites represent
the African Highlands hub of the SARD-SC wheat project of Ethiopia (Figure 2).

Figure 2. Wheat value chain analysis study districts

2.2 Data collection and target groups

A combination of different approaches was employed to gather pertinent information
and data from different target groups. These included desk reviews, qualitative and
quantitative data collection methods. To understand and conceptualize the wheat value
chain, desk review was conducted using different published and unpublished sources,
electronic and print media. Secondary data from sources such as USDA, FAOSTAT,
and CSA were largely used in the study. Reviewing and referring relevant documents
was a continuous process to substantiate the information collected through primary
data collection methods.

Apart from collecting secondary information, both qualitative and quantitative

approaches were also engaged to collect primary and quantifiable data from relevant
value chain actors. The tools and techniques adopted in qualitative approach included
focus group discussion (FGD), key informant interviews, and observations during
field survey. A checklist was used as a tool during qualitative stages. On top of this,
quantitative method was used to gather quantifiable data from wheat producers,
8
millers, traders, input suppliers, and other actors. The structured questionnaire was
used to help collect quantifiable data especially from wheat producer households while
data collection formats were used for other value chain actors. Data from wheat
producer households was collected in two seasons using two different methods. In the
first season from December 2013 to January 2014, comprehensive baseline data was
collected through trained enumerators and supervisors using structured questionnaire
created in CAPI (Computer Aided Personal Interview). In the second season from
November to December 2014, supplementary data was collected from wheat producer
households mainly using Focus Group Discussions (FGD). The FGD was held using a
checklist to substantiate and update the baseline data.

Validation workshop encompassing the study team, senior researchers, and invited
guests at Ethiopian Institute of Agricultural Research (EIAR) level and regional levels
was also held to collect further information and capture feedbacks from draft report.
Valid comments were noted from this platform and the report was enriched
accordingly. Information and data were collected from all relevant value chain actors
including input suppliers, producers, traders, processors, and consumers. In addition,
enablers and supporting institutions were assessed during the study period.

2.3 Sampling frame and sampling procedure

The sampling frame of the study is the list of wheat producer households and other
actors across the wheat value chain in the study districts. During baseline survey, a
stratified multistage stage sampling technique was employed to select the required
samples of households. First, four wheat growing regions were identified purposively
to represent the diverse socio-economic and biophysical environment of wheat
producers in Ethiopia. Second, in the stakeholder consultation workshop in each
region, six districts, which are considered representatives of the respective regions
were selected, based on wheat growing potential, and status of previous wheat
research and development interventions. Then, three kebeles from each of the districts
were selected based on their level of participation in SARD-SC wheat project. These
are intervention kebeles where the project has been implemented; spillover (neighbor
to those intervention kebeles), and control kebeles (situated at remote distance to the
intervention ones). Finally, from the household list available at each kebele, 946

9
sample households were drawn randomly for interview using a structured
questionnaire (Table 1). To supplement the baseline data, 18 FGDs and in-depth key
informant interviews were also conducted at each of the kebeles.

Table 1. Distribution of sample sizes by IP districts and region

Region Zone District of IP sites Sample size

Tigray South Tigray Ofla 128
SNNP Gurage Gedebano-Gutazer-Welene 100
Amhara Enemay 218
East Gojam Shebelberenta 189
Oromia Sinana 166
Bale Gololcha 145
Total 946

Since the number of actors of other value chain participants such as millers, traders
and input providers is a few in the study areas, there was no need of sampling
procedure. Hence, most of the available millers, traders and input suppliers operating
in the study areas were interviewed through key-informant and FGD approaches.
Similarly, representatives of unions, district agriculture offices and other enablers and
supporting actors were contacted mainly through key-informant interviews. A total of
eight millers (one each from Amhara and SNNP regions, two from Tigray region and
three from Oromia region) operating in the study areas and one large wheat processing
factory from Addis Ababa were included in the interview. Of the eight millers, six of
them were located at the capital towns of each zone where IPs are located except one
of the Tigray miller found in the regional city (Mekele) and one found in Addis Ababa
that we assumed to represent the central market. There were no millers operating at
district levels of SARD-SC IP sites. Similarly, four wheat traders were interviewed to
capture information related to marketing. Wheat consumers’ data was also collected
using FGD at both rural and urban levels. The FGD members ranging from five to
seven in numbers having different combinations of education, gender, age and other
household backgrounds.

10
2.4 Data analysis and synthesis
Information and dataset collected was analyzed and synthesized using different
statistical and descriptive tools. Descriptive statistics was largely utilized to analyze
the data and summarize the information. Graphs, figures, tables, and maps are utilized
to display the study results. .

3. RESULTS AND DISCUSSION

Wheat value chain embraces series of functions and activities starting from input
supply to end utilization. There are also several actors at each segment of wheat value
chain specialized in a specific function, such as input delivery, production, marketing,
processing, transportation and service provides. Subsequent sections and sub-sections
present how all these value chain segments, the respective chain actors interact with
each other, and all these activities are illustrated in the value chain map. .

3.1 Input use and delivery

Farmers use different inputs to enhance production and productivity of wheat. These
inputs could be categorized as purchased (inorganic fertilizers, seeds, hired labor,
rented oxen, machineries, farm implements, sacks, fuels and chemicals) and non-
purchased inputs (family labor, land and oxen). Governmental and private input
suppliers play key roles in delivering these inputs to the farmers. Some of the major
suppliers included governmental input distributors, chemical companies,
wholesalers/retailers, and petty traders. Input delivery and farmers’ use are presented
in subsequent sections:

3.1.1 Wheat seed availability and supply

3.1.1.1 Overview of the seed supply system
The formal wheat seed supply system of the country involves different stakeholders.
At the outset, elite germplasm introduced from abroad through Consortium Group for
International Agricultural Research (CGIAR) are offered to federal and regional
research institutes to make screenings and adaptation tests. In addition, the Ethiopian
Institute of Biodiversity and Conservation (IBC) maintains local collections and

11
accessions to keep biodiversity and for further research (Figure 3). Breeders make
selections, adaptation tests, and verifications of promising varieties and eventually
release the best performing and high yielding varieties for promotion, dissemination,
and production. After official release of varieties, breeders maintain seeds and further
multiply pre-basic and basic seeds for mass multiplication and distribution through
certified and licensed seed producers. For instance, basic seeds of released varieties
are supplied to federal and regional seed enterprises established for seed
multiplication. Finally, the certified seed is supplied to farmers through various routes
of dissemination, such as cooperatives, agriculture inputs supply sector under the
ministry of agriculture, higher learning institutions, NGOs, special purpose projects
(such as SARD-SC wheat project) and others. There are also cases where pre-basic
and basic seeds are directly supplied to farmers by research centers as demonstration
and pre-scaling up trials.

12
 CGIAR IBC

NARS (EIAR, RRIs, HLIs)

Plant seeds
quality Lab. RSEs ESE

MoALR
Multipurpose Cooperatives & unions
RBoAs

Special
ZoAs CBSPs/Farmers groups/cooperatives
purpose
projects
DoAs

Wheat producers Own saved seed

Figure 3. Formal improved wheat seed supply system in Ethiopia

13
The national agricultural research system (NARS) is responsible for variety
development and generation at the national level. Since the establishment of
agricultural research centers in the country, about 100 wheat varieties (67 bread and
33 durum wheat varieties) are released, distributed, and produced until 2014.
However, the total number of varieties released is higher than the reported figure since
varieties out of production was not included in this number. Figure 6 illustrates wheat
varieties released and distributed in Ethiopia. The contribution of CGIAR centers,
such as CIMMYT and ICARDA, is also significant in supporting national and
regional agricultural researches in the course of technology development and
generation processes through germplasm supplies, financial and technical supports,
and capacity building.

As depicted in Figure 4, 13 research centers, one University and one NGO have been
involved in the release of the 100 wheat varieties in earlier times. The major research
centers which were devoted to wheat research and variety release are presented in
Figure 4.

Kulumsa Research Center focuses on bread wheat research and has so far released 37
varieties of bread wheat, much higher than any other research center. On the other
hand, Debrezeit (DZARC) and Sinana Agricultural Research Centers focused on
durum wheat research and generated 15 and 10 improved durum wheat varieties,
respectively until 2014.

14
Figure 4. Wheat varieties released by research institutes and reported to be under production
Source: MoA (2014)

In Ethiopia, the formal seed system is not sufficient to meet the national seed demand
of wheat. As a result, there is an engagement of intermediary and informal seed
producers and suppliers to relieve acute demand for seeds. Community based seed
production (CBSP) system is also becoming a vibrant option to meet seed demands of
the farmers. Farmers receive intensive trainings on how to produce and supply seed
for market maintaining the required quality standards. The CBS producers are playing
an important role in areas where formal seed supply system is inadequate. However,
they are lacking certificate and legal entity in some cases to fully act as seed suppliers.
To solve this problem, the government is planning to organize them as formal seed
producer cooperatives and set legal issues so that they can contribute more in the seed
subsector. Even then, the demand for quality seed is still far from satisfaction. Farmer-
to-farmer seed exchange, which is the most notable and recognized option, is believed
to contribute for large proportions of growers to access improved seeds, particularly
second and more generation seeds.

3.1.1.2 Seed supply and improved varieties use in the IP sites

Before rushing into discussion of improved wheat varieties, it is better to define what
it stands for. Although there may be different basis when referring to improved
variety, varieties listed in the crop variety register book were taken as an improved

15
varieties for this study because, they are still considered as improved varieties,
multiplied by the federal and regional seed enterprises and distributed to farmers as
improved seeds regardless of the year they have been released. For instance, Dashen
variety was released in 1984 but still listed as an improved seed in the book and it is
still considered as a popular improved varieties. Therefore, unless the varieties were
declared as out of production by the MoA as it was happened for some of the varieties
such as Enkoy which are listed as out of production system in the book, it is
considered as an improved variety for this study as there is no any reason for
considering them as local. In addition, improved seed and improved variety are
interchangeably used for this study as both refer to released varieties, multiplied as an
improved seed and distributed for use to farmers.

Table 2 shows the varietal adoption in the study area. The results show that there are
differences in varietal distribution and utilization across the different locations of IP
sites. For instance, Dashen is a popular variety in Northern part of the country, such as
Ofla (62%) and Enemay districts (39%) while Digelu is popular in Southern part of
the country, such as Sinana (61%) and Gedebano Gutazer Welene of Gurage Zone
(62%). However, these varieties were released long times ago (Dashen in 1984 and
Digelu in 2005) implying the low rate of replacement. This might be either due to
recently released varieties couldn't be adequately demonstrated to farmers or they
were not fit to the environment to stay long under production.

The result also shows that Durum wheat varieties are grown in Shebelberenta and
Gololcha Districts (Table 2). For instance, durum wheat variety Foka (13%) is grown
in Shebel while Bekelcha (32%), Obsa (18%), and Ejersa (9%) are popular in
Gololcha District. One of the possible reasons why some varieties are concentrated in
a specific location is that each variety has its own niche even though they can grow in
a wider range. Moreover, durum wheat needs a heavy Vertisols and that is why it is
widely grown in Shebelberenta and Gololcha Districts. In addition, availability and
accessibility to some specific variety may lead farmers to use varieties easily available
in their locality.

16
 Table 2. Wheat varieties grown in SARD-SC IP sites in 2012/13 cropping season (% of area allocated)

Varieties Ofla Enemay Shebel Sinana Gololcha GGW Overall

Bread wheat
Dashen 62.22 39.03 2.56 0.0 4.46 0.0 9.92
Kekeba (Picaflor) 11.15 0.0 3.42 0.14 0.0 0.0 1.21
Digelu 5.55 0.0 0.0 61.26 7.65 62.26 32.11
Dande’a (Danphe) 2.82 0.0 0.0 5.16 5.43 0.0 3.97
Hawii (HAR 2501) 3.0 0.0 0.0 0.0 3.55 0.0 1.23
Kubsa 2.1 017 0.0 0.27 6.06 3.48 3.64
Meraro 0.36 0.0 0.41 0.09 0.0 0.0 0.10
Pavon 0.0 0.0 0.41 0.0 1.2 0.0 0.36
Galema 0.0 0.0 0.0 0.18 0.0 0.6 0.11
Meda-Welabu 0.0 0.0 0.0 8.35 0.43 0.0 3.73
Tusie 0.0 0.0 0.0 8.89 3.23 0.0 4.74
Sof-Oumer 0.0 0.0 0.0 12.13 3.91 0.0 6.33
Dure 0.0 0.0 0.0 0.18 1.7 0.0 0.55
Tura 0.0 0.0 0.0 0.14 0.0 0.0 0.06
Huluka 0.0 0.0 0.0 0.14 0.0 0.0 0.06
Shina 0.0 0.0 0.0 0.68 0.0 0.0 0.29
Durum wheat
Foka 0.0 2.09 12.86 0 0.0 0.0 1.10
Yerer 0.0 0.0 2.8 0 0.0 0.0 0.20
Ude 0.0 0.33 0.0 0 1.84 0.0 0.54
Oda 0.0 0.0 0.0 0 0.35 0.0 0.10
Ejersa 0.0 0.0 0.0 0 8.7 0.0 2.42
Obsa 0.0 0.0 0.0 0 17.5 0.0 4.86
Bekelcha 0.0 0.0 0.0 0.21 31.88 0.0 8.95
Illani 0.0 0.0 0.0 0.41 0.0 0.0 0.18
Megenagna 0.0 0.0 0.63 0.0 0.0 0.0 0.04
Other improved 0.0 13.51 10.79 0.33 0.75 1.81 2.40
Total improved 87.2 55.23 33.89 98.57 98.63 68.15 87.73
Local wheat 12.8 44.77 66.11 1.43 1.37 31.85 12.27

Table 3 summarizes the use of improved varieties by IP site. The result revealed that
the Amhara IP sites in Enemay and Shebelberenta districts used less proportion of
improved varieties of seed followed by SNNP (Gedebano Gutazer Welene District).
On the contrary, more than 98% of the Oromia IP sites (Sinana and Gololcha) used
improved varieties of seed during 2012/13 cropping season. The low level of use of
17
improved variety was mainly due to low supply and inadequate awareness of farmers
about improved wheat seed. Therefore, government extension services have to be
strengthening to fill this gap in collaboration with regional and federal seed
enterprises.

Table 3. Seed used in SARD-SC IP sites in 2012/13 cropping season (% of area allocated)

Seed Ofla Enemay Shebel Sinana Gololcha GGW overall

Improved bread wheat seed 87.2 39.29 6.8 97.62 37.61 66.34 66.94
Improved durum wheat seed 0.0 2.43 16.3 0.62 60.27 0.0 18.39
Other improved* 0.0 13.51 10.79 0.33 0.75 1.81 2.40
Total improved seed 87.2 55.23 33.89 98.57 98.63 68.15 87.73
Local seed 12.8 44.77 66.11 1.43 1.37 31.85 12.27
*improved seed obtained from government extension but the exact name of the variety is not known by the farmers

Table 4 shows the farmers' adoption of improved wheat varieties both in terms of the
proportion of household producing improved variety and area allocated to it as
compared to the local ones, which tells us both the rate, and an intensity of adoption of
improved wheat seed. The result shows that farmers’ practices of using improved
wheat varieties were recognized to be substantial in the study areas. Except for
Shebelberenta that recorded adoption rate of 42%, adoption rate of improved wheat
varieties was more than 70% for all other study sites (Table 4). The overall rate of
adoption was recorded to be 77%, which is higher rate of adoption than other crops.
The apparently higher rate of adoption for wheat might be because of the focus of the
study mainly in the IP sites. The findings can generally indicate that the practice of
growing improved wheat varieties has become a well-established practice. That not
only a large proportion of farmers have become adopters, but also improved varieties
have occupied 88% of the area allocated for wheat production. Improved wheat
varieties seem to have almost fully replaced local wheat varieties in the IP sites of Arsi
and Bale zones. On the other hand, local variety of wheat (named as Abune Eger) is
still popular in Enemay and Shebelberenta of East Gojam Zone. The surprising result
is that all farmers of the Ofla district of the Tigray IP site planted improved seed at
least on one of their plots (that is why 100% of household adopters) although these
households plant local varieties for their own reasons.

18
 Table 4. Adoption rates and extents of improved wheat varieties in the study areas in 2012/13

IP Site Local variety Improved variety

Area HHs Extent of adoption (% Adoption rate (%
allocated (%) growing (%) of area covered) of grower HHs)
Ofla 12.8 0 87.2 100
Enemay 44.86 36.7 55.14 63.3
Shebel 66.12 58.2 33.88 41.8
Sinana 1.4 1.2 98.6 98.8
Gololcha 1.4 2 98.6 98
GGW 31.84 26 68.16 74
Overall sample 12.27 23 87.73 77
GGW=Gedebano Gutazer Welene

Table 5 shows the sources of improved varieties of wheat seeds used in the IP sites.
The dominant seed source in all the IP sites was reported to be own saved seed with
the highest and lowest proportion in Gedebano Gutazer Welene and Enemay Districts,
respectively. The role of formal seed supply (government extension) was less than
10% in all IP sites except Gololcha district. However, it is only this formal seed
system that is believed to supply the certified seed in the country while other sources,
even though provide improved seed, cannot talk about the certified seed supply. The
result implies that farmers reuse improved seed once they obtain it. The role of local
market and farmer-to-farmer seed exchange are also high in some districts like
Enemay and Gololcha. In such kinds of informal seed sources, the quality of seed
usually is a big concern. Hence, there is a need of strengthening the formal seed
system or intermediary sources of seed such as community based seed producers, local
seed producers, and seed producers groups through some technical supervision and
support to increase quality seed supply at a right time. The price of improved seed
supplied by the formal sector is relatively higher than the informal sector available at
the local market. For instance, the price of one kilogram of seed obtained from the
formal sector was about 12Birr (nearly about 0.57USD) while that purchased from the
local market was about 9birr (0.43USD) during the study time. This may lead low-
income farmers to purchase local seed unless some mechanism of credit is arranged
during the planting time.

19
 Table 5. Sources of Wheat seed in SARD-SC IP sites in 2012/13 (% of area planted)

Seed source Ofla Enemay Shebel Sinana Gololcha GGW Overall

Own saved seed 77.0 61.6 73.5 67.8 63.8 82.8 68.0
Market 3.5 16.5 3.1 5.0 4.0 6.6 5.6
Farmer-to-farmer seed exchange 2.3 7.8 6.2 8.9 10.9 3.3 8.4
Farmer groups/Coops/local seed 12.5 6.9 10.8 9.7 2.5 0.2 7.3
producers
Government extension 4.7 7.2 6.4 8.6 18.9 6.9 10.8

Table 6 reveals farmers practice of reusing improved wheat seed in the study area. The
results show that most of the farmers recycle improved seeds two to five times on their
wheat plots in all IP sites once they obtain the improved seeds with the highest and
lowest proportion in Gedebano Gutazer Welene and Gololcha districts, respectively.
The result also shows that farmers reproduce improved seeds more than five times in
all IP sites with the highest and lowest proportions in Ofla district and in both Shebel
and Gedebano Gutazer Welene districts, respectively. As the improved seed recycled
for several times, the quality of seed and its productivity is a concern and there should
be a means of replacing it regularly to obtain high yield. In general, the result shows
that 74% of the overall sample households recycled improved seed at least once. The
result of Chilot et al (2013) shows even a higher proportion (84%) of recycling
practice and suggested that an improved seed recycled for more than five times are not
considered as an improved seed. However, since wheat is self-pollinated crop, there is
no serious problem as such as provided that the seed be produced with great care. This
is also practiced by the federal and regional seed enterprises, which are multiplying
improved seed varieties released before several years.

Table 6. Improved seed recycling practices (% of plots planted)

Recycle improved seed Ofla Enemay Shebel Sinana Gololcha GGW Over
all
Not recycled 17 24 41 21 32 25 26
Recycled once 23 9 17 15 24 4 17
Recycled 2-5 times 39 58 41 57 35 70 46
Recycled 6-10 times 13 7 1 6 8 1 8
Recycled more than 10 times 8 2 0 1 1 0 3

20
3.1.2 Fertilizer supply and use practices
Inorganic fertilizers (DAP and urea) are widely used for wheat production in Ethiopia.
Recently, another inorganic fertilizer named as NPS has also been recommended for
use to meet nutritional requirements of the wheat crop. Some of the smallholder wheat
producers as evidenced by SARD-SC wheat baseline survey have often supplemented
inorganic fertilizer use with the use of organic fertilizer, such as manure/compost, and
FGDs during value chain study. Currently, supply of inorganic fertilizers is controlled
by the governmental organization Agricultural Inputs Supply Enterprise (AISE) and
the distribution is facilitated with regional holding companies, federations, unions and
primary cooperatives. In the country, fertilizer has solely been imported by AISE and
distributed to the regional holding unions and primary cooperatives. Fertilizer supply
system is similar in all IP sites. Multipurpose cooperative unions organized and
supported by the government are responsible for the distribution of fertilizers through
its primary cooperatives. The distribution of fertilizers is also facilitated by district
level office of agriculture, cooperatives, and microfinance. The district input supply
and marketing section plays the roles of facilitation and aggregation of fertilizer
demand, identification of the amount of credit needed and follow up of the general
distribution activities. Even though the price of fertilizer is basically set at national
levels, the actual price at grassroots levels is determined mainly by adding
transportation costs depending on the distance of the district from the city of Addis
Ababa. Accordingly, the end price determination is often made by the regional or
zonal agriculture input supply office. The current price of fertilizer in Ethiopia is
without any subsidy.

In terms of quantity and time of fertilizer supply, there is no problem in all the IP sites
except that smallholder wheat producers perceive the cost of fertilizer is unaffordable.
As a result, most of the farmers are usually applying below the recommended rate of
fertilizer. In reality, however, farmers do not make minimum analysis of the marginal
cost incurred and marginal benefits accrued to applying appropriate fertilizer rate and
obtaining optimum wheat yield. Therefore, arranging some means of obtaining credit
and training to raise their awareness on cost-benefit consequences of recommended
rate of fertilizer application would have positive impacts on enhancing wheat
production and productivity. In spite of variability across the study sites (Table 7),
farmers applied fertilizer on wheat at a rate of 69Kg/ha of urea and 90kg/ha of DAP
21
on average. This is a bit lower as compared to recommended rates. Research advises
that failing to use the recommended rate of fertilizer compromises wheat yields
considerably.

Table 7. Average rate of fertilizer application of IP sites in 2012/13 (kg/hectare)

Fertilizer Ofla Enemay Shebel Sinana Gololcha GGW Overall

Urea 92 100 131 19 16 60 69
DAP 83 84 98 91 88 102 90
DAP+Urea 175 186 229 110 104 162 159

As shown in Table 8, even though it is recommended that both urea and DAP
fertilizers have to be used in combination, wheat producing farmers are not practicing
accordingly. Surprisingly, more than 60% of the wheat plots operated by wheat
farmers (more than 55% of wheat area) of Bale zone received only DAP fertilizer in
2012/13 cropping season. On the other hands, Amhara region IP sites used only urea
for considerable proportion of wheat plots during the same year. Some farmers are not
using any fertilizer at all in all IP sites except GGW district. Even though it needs an
empirical study why farmers in Bale Zone refuses to apply DAP fertilizer, the most
plausible reason for using only DAP in Bale Zone is that soils in these areas are rich in
nitrogen and applying additional urea at the usual recommended rate may cause plant
logging. Therefore, there should be location specific recommendation (soil test based
recommendation). Another reason might be due to lack of credit to purchase fertilizer
and inadequate awareness on yield advantage of using fertilizer. Hence, both arranging
credit option and offering business oriented training would bring a positive effect on
using recommended rate of fertilizer and hence productivity of wheat.

22
 Table 8. Fertilizer use for wheat production in the SARD-SC IP site in 2012/13 (% of area)

District Urea only DAP only Bothe Urea None

and DAP
% of % of % of % of % of % of % of % of
plots area plots area plots area plots area
Ofla 2 2 2 2 87 88 9 8
Enemay 13 11 3 3 70 76 14 10
Shebelberenta 7 6 1 1 89 92 3 1
Sinana 0 0 61 56 36 42 3 2
Gololcha 1 1 61 58 27 34 11 7
GGW 0 0 12 9 88 91 0 0
Overall 4 2 25 41 64 53 7 4

3.1.3 Chemicals supply system

Pesticides are one of the essential inputs in wheat production. Crop protection
chemicals are mainly supplied by private traders located at district level. In addition,
the district agricultural input supply office also supplies chemicals, especially
fungicide upon the diseases outbreak. Even though farmers used different options of
herbicides for weed control, the common chemical being used is 2, 4-D in all the IP
sites except Ofla district during 2012/13 cropping season (Table 9). The reason why
Ofla farmers restrained from using chemicals is that such chemicals are prohibited in
Tigray Region for they are not environmentally friendly and impose negative
consequences on apiculture, the most accepted business sector in the region. Fungicide
use is not as such common except in Gololcha district where tilt is being applied on
wheat fields. However, insecticide use is not reported in the study area during the
study period.

Amid the occurrence of sever wheat diseases and the consequent declines in
production and productivity, fungicide use practice was reported to be meager and
limited to specific location. Even among the IP sites, it was only Gololcha and
Gedebano Gutazer Welene Districts, which reported to have limited experiences of
fungicide, use while the disease has already been a nuisance in almost all parts of the

23
country. Inadequate and untimely supply of the chemicals was blamed to be the causes
of low fungicide use. Even when available, its quality and potency seems to be below
standards failing to effectively control the disease. In effect, fungal diseases have
become a serious threat to wheat production in the country and it is possible to expect
a ―no wheat production year‖ in the near future unless prudent measures are taken to
reverse the crisis. Given that developing and generating disease tolerant varieties
requires some time, the use of fungicide chemicals as a short-term strategy is not a
matter of option, but mandatory. Furthermore, even those varieties that have been
released for their quality of high level of diseases tolerance themselves could not be
100% tolerant and hence need some amount of fungicide to control diseases implying
that application of fungicides is not only a short term but also a long term strategy of
solving the diseases problem in wheat production. Once available, farmers need to be
advised and trained to use the recommended type and rate of fungicide. Quality issue
of chemicals is also worrisome and all the possible options shall be set in place to
ensure supplies of standard chemicals in quality, quantity, and time.

Table 9. Utilization of crop protection chemicals of the IP site sample households (% of area)

category Name of chemical Ofla Enemay Shebel Sinana Gololcha GGW

Herbicide 2,4,D 0 8 4 73.3 94 37
2,4,D and topic 0 0 0 4.6 0 0
Topic 0 0 0 1.03 1 0
Palace 0 0 0 8.7 0 0
2,4,D and Palace 0 0 0 9.6 0 0
2,4,D, Palace and 0 0 0 0.7 0 0
Topic
Stafen-D 0 0 0 0 2 0
None 100 92 96 2.07 3 63
Fungicide Novel 0 0 0 0 0 0.2
Tilt 0 0 0 0 5 0
None 100 100 100 100 95 99.8

3.1.4 Farm machineries supply and use practices

Farm machineries are important for making efficient and effective farming operations,
such as land preparation, harvesting, and threshing, and minimizing post-harvest loses.
24
They also save farmers’ time and drudgery. This eventually leads to enhancement of
productivity. Use of farm machinery depends on its availability, farm size, and
topography of farmlands. Arsi and Bale Zones are major areas where wheat producer
farmers practice using of farm machineries more often than others.

Tractors and combine harvesters are the main machineries used for wheat production
in Bale zone for land preparation and harvesting /threshing, respectively. Most of the
farmers from Sinana and Gololcha districts were reported to be largely dependent on
combine harvesters for harvesting and threshing of wheat. As shown in Table 10, most
of the wheat areas are being harvested by combine harvester in both Sinana and
Gololcha districts. However, tractor is rarely used in Gololcha although about 10% of
the wheat area is being plowed by tractor in Sinana district.

Table 10. Proportion of land operated by tractor or combine harvester in Bale Zone in 2012/13

District ploughed by tractor Harvested by combine harvester

% of plot % of area % of plot % of area
Sinana 7 9 95 96
Gololcha 0.5 0.4 88 94

Private business entities located either at zonal or district towns offer rental services of
machineries to farmers. Contractual agreement is often set based on the size of
farmland and quantity of wheat being produced. Farmers tend to depend on
machineries unless undulating nature of their farmlands is a limitation. Affordability
of machinery rental services and flat topography nature of the wheat farms might have
created favorable conditions for the farmers to depend on machine services in Sinana
and Gololcha Districts.

In areas where machinery is not being used (Amhara, Tigray, and SNNP IP sites), the
option available then is depending on traditional farming implements and tools. This is
the fundamental practice not only in the study areas, but also in the country, in
general. Most of these tools and implements are animal drawn, and being locally made
by the farmers’ themselves from locally available materials. However, they are not
efficient, as such, requiring lots of time and drudgery. It could also compromise to
production and productivity due to inefficiencies of the implements.
25
Although it needs systematic investigation why the use of modern farm machinery is
very low (even none) in most of the parts of Ethiopia including the SARD-SC wheat
project IP sites except the Bale Zone, land fragmentation—in the cases of Amhara and
Tigray Regions where frequent land redistribution is common; low supply and
demonstration of farm machinery; and inappropriate topography of the plot in
highlands where wheat is ideally produced can be mentioned as the main reasons for
low level of using modern farm machinery.

3.1.5 Land and labor inputs

Availability of farmland has been greatly constrained by an ever-increasing population
pressure. Because of this, annual growth rate of area under wheat is miniscule. This
means that most of the wheat production increment comes from an increase in
productivity per unit of area that is largely attributed to the use of improved wheat
technologies. The findings demonstrated that farm sizes varied considerably across
regions. For instance, as shown in Table 11, average farm size is the highest in Oromia
region with 3.25 ha per household followed by Amhara (2 ha), SNNP (1.94 ha) and
Tigray (1.16 ha).

The result also indicated that most of the farmland are allocated for wheat in Sinana
(62%) followed by Gololcha (54%) and Ofla (47%) implying that wheat is the main crop
in these areas. In the IP sites, there is a problem of mono-cropping associated with
frequent occurrence of faba bean diseases, which make faba bean out of production. The
fact that these three districts are situated at high altitude (known as Dega in Amharic) and
hence branded by wheat farming systems where wheat is most suitable and produced
profitably. . On the other hand, the average area allocated for wheat is less than 20% in
Amhara IP sites (Enemay and Shebel) and about 20% in GGW district sample
households indicating that wheat is not the main crop in these areas. In these areas, there
is a need to analyse a comparative advantage of wheat versus other crops such as tef in
the case of Amhara IP site where tef is a main crop so that farmers are able to understand
and choose the profitable venture.

26
 Table 11. Total land and wheat area operated in the IP site in 2012/13

District N Total area (ha) Wheat area (ha) % of wheat area

Min Max Mean Min Max Mean Min Max Mean
Ofla 128 0.26 5.16 1.16 0.13 1.88 0.54 36 50 47
Enemay 218 0.3 5.4 2.03 0.03 1.5 0.34 10 28 17
Shebelberenta 189 0.16 5.1 1.97 0.06 1.63 0.32 32 38 16
Sinana 166 0.42 19 3.52 0.25 19 2.18 60 100 62
Gololcha 145 0.66 14.04 2.99 0.33 11 1.61 50 78 54
GGW 100 0.39 6 1.94 0.04 2 0.41 10 33 21
Overall 946 0.2 19 2.3 0.03 19 0.9 19 100 39

Most of the smallholder wheat producers practice labor-intensive methods, much of

which is provided by family members. There are cases where hired labor is required at
pick farming seasons, such as planting, weeding, and harvesting. In such conditions,
however, agricultural wages continue to rise in response to high demands. It is also
possible that labor scarcity can perpetuate throughout the season eventually
compromising wheat productivity. This necessitates the need to promote and introduce
labor saving farm implements, such as row planters, animal drawn harvesters, and
threshers.

Table 12 shows the land tenure status of wheat producers in the study area. The result
shows that most of the wheat plots cultivated by the sample households were own land
obtained from the government and the owners have land use right certificate.
However, there is a significant variation (Pearson chi2 = 90.4277, Pr = 0.000) among
the districts of the project IP site with highest proportion of own land at Oromia IP
sites and the least at Tigray IP site. Another popular land tenure system is rented or
shared in land with highest proportion in Tigray and least in Oromia IP sites.

27
Table 12. Land tenure system of wheat plots in the IP site in 2012/13

Land ownership Enemay Shebel Sinana Gololcha GGW Ofla Total

Owned 74.8 70.7 89.1 89.3 82.6 67.8 78.7
Rented/shared in 24.2 28.6 10.9 10.7 17.4 31.6 20.8
Borrowed in 1.0 0.8 0.0 0.0 0.0 0.6 0.4
Total 100 100 100 100 100 100 100

3.1.6 SWOT analysis of input supply segment

Table 13 presents the strength; weakness, opportunities, and threats (SWOT) in input
supply segment of wheat value chain.

Table 13. SWOT analysis of input supply segment

Strengths
 Farmers’ input use system improving, such as
improved varieties, fertilizers, etch
 Inputs such as fertilizers available in more than
adequate quantities at district levels for farmers
Weaknesses
 Input distribution not in par with the demand
 high cost of inputs
 Limited and inaccurate information on supply and
demand of inputs, such as fertilizers, improved
seeds, chemicals, etc.
Opportunities
 Wheat research is in progress to generate
disease tolerant varieties of improved wheat
 Government striving all possible efforts to
increase input availability at the reach of wheat
producers
Threats
 Limited supply of improved wheat seeds
 Prolonged storage of inorganic fertilizers
resulting to crystal formation and consequent
risk of insolubility
 Unsafe storage of chemicals for years posing
health and environmental risks

3.2 Wheat production and productivity

3.2.1 Production
According to the 2014/15 CSA report, more than 4.6 million small-scale famers have
been engaged in wheat production. This implies that most wheat production in
Ethiopia comes from smallholder farmers, which often operate on limited and
fragmented farmlands. Technology use practices of these farmer categories is also not
yet developed despite packages of technologies are available. The findings revealed

28
considerable extents of farmers’ awareness on improved wheat technologies,
especially improved bread wheat varieties.

Wheat management practices include appropriate plowing frequency, seed rate,

weeding, and crop rotation practices that increase productivity and ensure sustainable
land management. Timely and required frequency of land preparation is one of the
management practices that are recommended by research. To contribute to optimum
yield, research advises 3-4 times frequency of land preparation. On the other hand,
farmers practice 3–5 times frequency including planting.

Another important wheat production is the use of appropriate seed rate. Research
advises that using recommended rates of wheat seeds, which is 150-175 kg/ha for
most varieties for broad casting and 80-100 kg/ha for row planting considered as
optimum amount, contribute to enhanced productivity. As indicated in Table 14, result
indicates that there are a wide variation in seed rate among the IP sites with the highest
seed rate in Oromia (186.5 kg/ha) followed by Tigray (169 kg/ha) and lowest in
Amhara (110 kg/ha) IP sites. Moreover, more than about 20% of Ofla, Sinana, and
Gololcha Districts used a seed rate of 200Kg/ha. This might be due to the use of mono
cropping which resulted in less tiller capacity of the wheat plant, and hence farmers
use higher seed rate to overcome this problem. In addition, most of the farmers in Bale
IP sites did not use urea fertilizer, which is important for tiller. The result therefore
implies that raising the awareness of wheat producers to adopt wheat technology as a
package rather than focusing only on some components would have a positive effect to
enhance wheat productivity.

29
 Table 14. Seed rate of wheat in SARD-SC IP site in 2012/13 (% of area planted)

Seed rate (kg/ha) Ofla Enemay Shebel Sinana Gololcha GGW Overall
50-79 1 17 28 2 1 4 9
80-120 21 50 54 13 11 60 31
121-140 10 6 5 4 5 4 6
141-200 46 21 10 60 64 27 40
> 200 22 6 3 21 19 5 14
Average 169 120 103 187 186 131 154

The response of FGDs result confirmed that the majority of the wheat producers use
100-120 kg of seed per hectare in row planting and 150-200 kg of seed per hectare in
the case of broadcasting. To reduce this high seed rate, using mechanized drillers with
good seed calibration will optimize the seed rate and hence introducing such
machineries to wheat producers shall be one of the strategies of projects working on
wheat such as SARD-SC wheat project. Row planting, however, is becoming a
common practice in recent years even though most of the sample households used
broadcasting in 2012/13 cropping season. Considerable proportions of farmers have
started adopting row planting practices for wheat. To mention some, 20 – 50% of the
farmers in Amhara region have started adopting row planting. This figure is even high
in Bale zone of Oromia region where more than 60% of the farmers are already
practicing row planting currently.

Weeding is also another important agronomic practice that enhances wheat production
and productivity. It can be weeded by hand or herbicides can be used to protect weed.
As demonstrated in Table 15, higher proportion (> 60%) of wheat plots were not hand
weeded in Bale zone IP sites in 2012/13 cropping season indicating that farmers used
herbicides. Therefore, acquiring effective and adequate herbicide is equally important
as acquisition of improved seed and fertilizer in these areas as farmers are operating
large area of wheat land and difficult to cover with hand weeding. On the contrary,
about half of wheat plots were weeded by hand only once in other IP sites while more
than 35% of wheat plots of Ofla and Enemay districts, and 20% of wheat plots of

30
GGW (Gedebano Gutazer Welene District) weeded twice during the same season.
Every farmer used hand weeding at least ones either to pick up active weeds after
spraying herbicides or firsthand weeding.

Table 15. Hand weeding practices of wheat producers in the SARD-SC wheat IP site in 2012/13

Weeding frequency No of plots

Ofla Enemay Shebel Sinana Gololcha GGW Overall
0 5 2 1 66 63 20 27.8
1 51 54 64 27 27 58 45
2 41 36 30 6 8 20 24
3 3 8 5 1 2 2 3.2
Average no (frequency) 1.5 1.5 1.4 1.2 1.3 1.3 1.4

As indicated in Table 16, wheat producers of Sinana District cultivated wheat after
wheat at about 60% of wheat plots (68% of wheat area) for two consecutive seasons
and at 48% of their wheat plots (51% of wheat area) for the consecutive three years
indicating they used least crop rotation practice than any other district of the IP site.
The result therefore, suggests that introducing food legumes that are relatively
diseases tolerant as crop rotation option in to the wheat farming system would help as
a break to protect wheat pest and disease in these areas. Although, the figure is less,
the second district of the Oromia IP site (Gololcha) also practiced planting wheat after
wheat. . Similarly, in Ofla district of the Tigray IP site, 57% of the wheat plots (56%
of wheat area) planted wheat after wheat for the two successive years and 15% of
wheat plots (14% of wheat area) planted wheat after wheat for the consecutive three
years. The low level of crop rotation practices is mostly resulted from lack of
improved seeds for suitable crop (most probably pulses in Ofla district and mustard in
Bale zone). However, it is reported that pulses are under high diseases stress while
mustard is less profitable and less demanded as compared to wheat in Oromia IP site.
Therefore, there is an urgent need to generate and disseminate alternative crops
suitable for crop rotation. On the contrary, crop rotation practices are well adopted in
the Amhara IP sites. Wheat producers of Amhara IP sites rarely plant wheat after
wheat for three consecutive seasons (0% in Shebel and only 0.3% in Enemay).

31
Table 16. Crop rotation practices of SARD-SC wheat IP site in 2012/13 cropping season

Grow wheat after % of Ofla Enemay Shebel Sinana Gololcha GGW Overall
wheat
Two season Plots 57 30 35 60 42 27.5 45
consecutively Area 56 30 38 68 46 28 53
Three season Plots 15 0.3 0 48 24.7 12 18.62
consecutively Area 14 0.4 0 51 21 13.6 32.6

Table 17 presents the percentage of crops grown in 2011/12 cropping season before
wheat crop in 2012/13 cropping season. The result indicated that pluses (considered as
an appropriate rotation system as pulses play a role in nitrogen fixation and hence
improve soil fertility) covered a larger proportion in the Amhara IP sites (30% in
Enemay and 40% in Shebel). In Bale Zone (Sinana and Gololcha Districts) of the
Oromia IP sites, some farmers also used cereals to rotate wheat. Surprisingly,
fallowing and cultivating grazing land is very common in Gedebano Gutazer Welene
district of the SNNP IP site in which the former leads to every two years production
and the former negatively affects livestock production. Therefore, giving due focus on
sustainable land management practices and testing the soils for deficiencies in such
areas, and apply appropriate nutrient so that enables farmers get production year after
year is an implication of this finding.

32
Table 17. Percentage of precursor crops in SARD-SC wheat IP site in 2012/13 cropping season

Precursor crops to wheat Enemay Shebel Sinana Gololcha GGW Ofla Total
Cereals (other than wheat) 35.7 22.2 24.4 31.3 33.9 26.5 28.3
Maize 7.5 4.1 1.6 7.4 0.0 3.0 4.1
White tef 13.3 13.5 0.5 1.6 0.0 2.4 5.5
Red tef 4.4 2.6 1.1 3.3 0.0 0.6 2.1
Barley 9.5 0.8 18.0 14.8 33.9 13.0 13.2
Sorghum 0.7 0.8 0.0 0.4 0.0 7.5 1.9
Pearl millet 0.3 0.4 0.0 0.0 0.0 0.0 0.1
Oats 0.0 0.0 1.3 1.2 0.0 0.0 0.5
Emmer wheat 0.0 0.0 1.9 2.5 0.0 0.0 0.9
Bread wheat 29.9 32.7 59.7 31.3 27.5 57.2 42.9
Durum wheat 0.0 1.9 0.5 11.1 0.0 0.0 2.1
Both bread and durum 29.9 34.6 60.2 42.4 27.5 57.2 45.0
Pulses 30.0 39.5 5.7 3.3 6.4 10.2 16.6
Haricot bean 0.7 0.8 0.0 0.4 0.0 0.0 0.4
Faba bean 10.9 6.0 2.4 2.1 4.6 3.3 4.9
Lentil 1.7 0.0 0.0 0.8 0.0 0.6 0.6
Grass pea 5.4 21.1 0.9 0.0 0.0 0.3 4.8
Chickpea 8.2 11.3 0.0 0.0 0.0 0.6 3.5
Field pea 3.1 0.4 2.4 0.0 1.8 5.4 2.4
Oilseeds 1.7 1.1 4.8 4.9 0.9 0.6 2.5
Groundnut 0.0 0.0 1.1 3.7 0.0 0.0 0.8
Fenugreek 1.4 0.0 0.0 0.0 0.0 0.3 0.3
Noug 0.3 1.1 0.0 0.0 0.9 0.0 0.3
Linseed 0.0 0.0 3.7 1.2 0.0 0.3 1.1
Horticultural crops 0.3 0.0 0.0 4.5 0.9 2.1 1.2
Irish potato 0.3 0.0 0.0 0.0 0.9 0.0 0.1
Onion/garlic 0.0 0.0 0.0 0.8 0.0 1.8 0.5
Pepper 0.0 0.0 0.0 3.7 0.0 0.3 0.6
Grazing land and fallow
Grazing land 0.3 0.0 0.3 0.8 11.0 0.0 1.0
Fallow 0.3 0.0 3.7 9.5 19.3 0.6 3.8
Don't know 1.7 2.6 1.1 1.7 0.0 2.7 2.0
Total 100 100 100 100 100 100 100

33
3.2.2 Productivity of wheat
Across the study sites, wheat productivity illustrated considerable variability ranging
from 1.46 to 3.37 tons/ha (Table 18). For some of the farmers, such as in Shebel
district, there was complete loss of yield due to devastation of wheat disease and
failure of the farmers to apply chemicals on time. Severe water logging problem has
also effected to meager yields in locations where this problem persists. In spite of this
challenge, the overall average productivity of wheat in the study sites was 2.33 t/ha,
which is closely similar to national average productivity of wheat (2.11 t/ha). In view
of the potential productivity of improved varieties, which is more than 4 t/ha, wheat
productivity in the study sites is lower the potential yield by about 46%. There are
even some of the wheat varieties which can yield as high as 5.2 t/ha. The reason for
low productivity of improved varieties in the farmers’ fields might be attributed to the
use of poor quality seeds (resulted from poor handling system and poor post-harvest
handling even though improved varieties) and failure of applying the recommended
inputs as suggested by research. Addressing these problems could improve wheat
productivity at large.

Table 18. Yield (t/ha) of wheat in SARD-SC IP site in 2012/13 cropping season

Fertilizer Ofla Enemay Shebel Sinana Gololcha GGW Overall

District yield (survey) 2.24 1.70 1.46 3.05 3.37 1.56 2.33
Zone yield (CSA) 1.93 1.86 2.55 2.2 -
Region yield (CSA) 1.86 1.78 2.32 2.19 -
National yield (CSA) 2.11
Source: Baseline survey data, 2014 and CSA (2013)

The study has also presented specific varietal level productivities and adoption rates as
summarized in Table 19. Varietal level adoption rate has figured out that Digelu and
Dashen were the most popular bread wheat varieties with adoption rates of 24% each.
However, Bakalcha and Obsa were reported to have adoption rates of 5% and 4%,
respectively. In spite of low specific varietal adoption rates, some bread wheat
varieties recorded the highest average yield, such as Pavon with 3.7 t/ha and Dende'a
with 3.47 t/ha. Digelu and Dashen yielded 2.9 t/ha and 2.34 t/ha, respectively. The
reason why higher yielder varieties (such as Pavon and Dende'a) are less adopted as
compared to Digelu and Dashen (with relatively lower yield) might be attributed to
34
seed unavailability for old but high yielding varieties such as Pavon which was
released in 1982 and less promotion and unawareness of these varieties as they were
released in relatively recent years (for instance Dende'a in 2010). They may not also
have the required quality attributes (for consumption) as that of Digelu and Dashen.

In the case of durum wheat varieties, some varieties such as Obsa have yielded as high
as 4.15 t/ha followed by Bakalcha, which gave 3.64 t/ha, and Ude with 3.53 t/ha.
There are even some improved varieties of durum wheat which gave lower yields than
the local did (2.55 t/ha), such as Foka (1.83 t/ha) and Yerer (1.35 t/ha) although their
potential yield registered in the crop variety register book was about 3 tons/ha and 5
tons/ha in farmers field and research station, respectively. This might be due to loss of
potentials and consequent yield declines of the improved varieties after a certain
maximum period necessitating replacements with high yielding ones.

3.2.3 Stress incidences in wheat production

As shown in the previous section, only 59% of the overall variation in yield of the
overall sample was attributed to technical inefficiency of wheat producers while the
rest was due to factors beyond the control of the producers. Stress incidences due to
disease and other related factors have been becoming serious problems in wheat
production nowadays. Stress in wheat production such as diseases, drought and water
logging is currently becoming a series threat. Table 26 shows status of stress incidence
on wheat plots in the SARD-SC IP site during 2012/13. The result demonstrates that
more than 10% of wheat plots of all in the IP sites encountered stress incidence except
Gedebano Gutazer Welene (GGW) district (Table 20), and these stresses negatively
affect the yield. Therefore, there is a need to consider these production stresses in
disseminating improved wheat varieties.

35
Table 19. Yield of bread and durum wheat varieties

Species Variety Mean grain Households Varietal level SD % yield gain

yield (t/ha) growing (No.) adoption rates over the local
(%)
Bread Kubsa 2.85 27 3 1.42 44.02
wheat Galema 3.33 3 0.3 2.20 68.28
Digelu 2.90 228 24 1.41 46.62
Mada-Walabu 2.98 35 4 1.24 50.36
Pavon 3.71 6 0.6 1.17 87.05
Meraro 2.50 3 0.3 1.32 26.22
Dande’a 3.47 35 4 1.18 74.96
kekeba 2.43 29 3 1.09 22.63
Tusie 2.79 45 5 1.23 41.11
Hawii 2.64 6 0.6 0.91 33.37
Sof-Oumer 2.92 46 5 1.10 47.47
Dure 3.37 3 0.3 2.28 69.97
Dashen 2.37 228 24 1.36 19.83
Local bread wheat 1.98 405 1.27 Na
Durum Foka 1.83 28 3 1.13 -27.96
Wheat Yerer 1.35 8 0.8 0.78 -47.14
Ude 3.53 6 0.6 1.64 38.50
Bakalcha 3.64 46 5 1.20 42.90
Ejersa 2.95 16 1.7 0.75 16.01
Obsa 4.15 36 4 1.45 63.18
Local durum wheat 2.55 112 1.20 Na

Table 20. Stressed wheat plots in the SARD-SC IP sites in 2012/13 cropping season (% of plots)

Is there stress incidence Ofla Enemay Shebel Sinana Gololcha GGW Overall
No 83 81 87 87 88 93 86
Yes 17 19 13 13 12 7 14

Table 21 presents the major types of stress in wheat production in the study areas. The
result demonstrates that diseases incidence is more common with more than 30%
incidence in all IP sites except Ofla and Shebelberenta Districts. . Therefore, timely
availability of fungicides is becoming a mandatory to minimize losses in wheat
36
production. A stress from drought is more common and highest in Ofla and GGW
districts where about 40% and 10% of plots were affected by this problem. The result,
therefore, implies that relatively drought tolerant varieties have to be generated and
disseminated in such areas to minimize the effect of drought stress. Water logging is
also another common stress in wheat production with the highest proportion in
Shebelberenta (31%) followed by Ofla (28%) and Sinana (27%), and while lowest in
GGW district (13%). Water logging is usually common in Vertisols areas such as
Shebelberenta, Enemay and other districts except GGW. Therefore, appropriate
Vertisols management practices and farm implements like BBM (broad Base Maker)
and using varieties tolerant to water logging problem is important in such areas to
increase wheat productivity. Animal trampling (especially wild life) such as monkey
and apes are also common to all IP sites with the highest proportion in GGW (24%)
followed by Gololcha (13%) and Enemay (10%). The problem is less common (< 5%)
in other districts of the IP sites. Frost is also another causes of stress in all the IP sites
with the highest proportion in GGW (12%) followed by Gololcha (11%), Ofla (10%)
and Sinana (9%), and less common in Amhara IP sites with only 4% and 6% in
Enemay and Shebelberenta districts, respectively. The result suggests that early
planting and the use of full technology packages may help to reduce the effect of frost
on wheat production. The result shows that stress are multifaceted, for instance,
diseases and water logging are common in the Bale zone IP sites whereas water
logging and frost are common in one of the districts (Sinana) of the Bale zone of the
project IP site. In addition, weed infestation is also found to cover 6% of the stress
incidence in wheat plots in Sinana district even though farmers are highly dependent
on weed controlling chemicals in this area.

37
Table 21. Major wheat stresses in SARD-SC wheat project IP sites during 2012/13 (% of wheat plots)

Stress Ofla Enemay Shebel Sinana Gololcha GGW Overall

Insects/pests 0 16 6 8 0 0 7
Disease 12 31 18 32 33 38 25.5
Water Lodging 28 6 32 27 17 13 21.5
Drought (erratic rainfall) 40 21 29 0 10 13 20
Frost 10 4 6 9 11 12 7.5
Hailstorm 2 6 3 0 0 0 2.5
Animal trampling 2 10 3 4 13 24 6
Flood 4 0 0 2 3 0 2
Weed 0 2 0 6 3 0 2
water logging and frost 2 2 0 8 0 0 3
diseases and water logging 0 2 3 4 10 0 3
Total 100 100 100 100 100 100 100

As indicated in Table 22, the level of stress varies among the IP sites. The problem
was more catastrophic in GGW (25%) followed by Shebelberenta and Sinana districts
(12% each). The effect was manifested by very low yield in both GGW and Shebel
districts as compared to other IP sites. For instance, the average yield of GGW district
was only 1.56 t/ha in 2012/13 cropping season which was by far lower than the zonal,
regional and national yield of 2.2 t/ha, 2.19 t/ha and 2.11 t/ha, respectively. Similarly,
the average yield of Shebelberenta was only 1.48 t/ha during the same year which was
again lower than the zonal, regional and national yield of 1.86 t/ha, 1.78 t/ha and 2.11
t/ha, respectively. The highest proportion of wheat plots was under severe stress in
Ofla (54%) followed by Sinana (42%) and GGW (38%). In short, the proportion of
wheat plots under severe stress in all IP sites are not less than 30% which is a high
figure that contributes for the low yield than potentially obtained with the absence of
stress. The result clearly indicates that wheat yield is dependent not only on improved
variety adoption but also on managing the stresses in wheat production using the
aforementioned techniques and other possible options.

Unless timely corrective measures are put in place to control yellow rust and other
related stresses to enhance wheat production, it will pose huge risks on the future fate

38
of wheat commodity in the country. Thus, designing both short-term and long-term
strategies need to be placed at the front agenda to fulfill the demand for wheat grain.

Table 22. Level of stress in wheat plots in the SARD-SC IP sites in 2012/13 (% of wheat plots)

Level of stress Ofla Enemay Shebel Sinana Gololcha GGW Overall

Moderate 42 63 56 46 70 37 53
Severe 54 33 32 42 30 38 40
Catastrophic 4 4 12 12 0 25 7
Total 100 100 100 100 100 100 100

3.2.4 SWOT analysis of wheat production segment

Table 23 illustrates the SWOT analysis of wheat production segment.

Table 23. SWOT analysis of wheat production segment

Strengths
 Wheat technology adoption by far increased at farmers’
level
 Wheat production and productivity are on the rise over
years
 Farmers group or cooperative production through
clustering initiatives have been started
Weaknesses
 Efforts pursued to address wheat rust diseases not yet
effective
 Available varieties of improved wheat not well tolerant to
the diseases
 Wheat supply shortage created many other consequent
problems along the value chain
 High yield gap due to technical inefficiency
 low level of wheat commercialization
Opportunities
 Wheat research in progress to generate disease
tolerant varieties of wheat
 Government striving all possible efforts to increase
input availability at the reach of wheat producers
 Availability of governmental and non-governmental
organizations that are devoted to enhance the
wheat sub-sector
Threats
 Wheat rust diseases threatening wheat sub-sector
and there is high risk of production and productivity
decline
 Farmers likely to switch from production of wheat to
other crops unless dependable remedy is put in
place shortly to address the issue of disease
outbreak on wheat
 Highly dependent on rain fed wheat production
mainly operated by smallholder farmers

39
3.3 Profit margin analysis and marketing segment

3.3.1 Profit margin analysis

Table 24 illustrates the cost of production, gross and net profit analysis of wheat
across the IP sites. The cost of wheat production per hectare of land varied across IP
sites ranging from Birr 7,347.67 to 11,742.80. The highest production cost was
registered in Ofla District where the cost of labor for weeding is reported to be the
highest. Cost of land rental is also large next to the Oromia IP site where land is fertile
and this is accounted for large production cost in Tigray. The highest cost component
accounting for 37% of total cost was labor for plowing, weeding, and harvesting,
threshing and oxen labor. This was followed by input cost accounted for 35%
including costs of seeds, fertilizers, and chemicals. Rental value of land accounted for
29% of total cost of production.

On the other hand, farmers produce grain and straw from wheat as an output. Farmers
in the IP sites obtained a gross income per hectare of land ranging from Birr 10,839.47
to 25,717.53 from wheat grain. Even though limited in amount, wheat straw has also
monetary value that adds up wheat income in all IP sites except the Bale zone where
combine harvester is commonly used and wheat straw is usually being burnt on the
plot. Regarding the overall sample of the IP sites, the result indicates that, farmers of
the IP sites obtained an average net income of Birr 10,793.46 ranging from Birr
5,491.80 to 15,179.17 per hectare of land from wheat production. This net profit from
wheat is estimated from the value of all wheat produced (including wheat grain sold,
consumed and kept for seed) per hectare of land after subtracting all the possible costs,
including opportunity costs of family labor and land rental.

40
 Table 24. Profit margin analysis of wheat in the IP sites

Costs and revenue particulars Tigray IP Amhara IP Oromia IP SNNP IP

site site site site
Costs (Birr/ha)
Herbicide 1.16 6.7 195.10 31.93
Fungicide 0 0 28.08 0
Pesticide 0.43 0.56 1.50 0.58
Urea 1069.79 1255.55 230.93 679.46
DAP 1163.60 1239.95 1390.66 1433.03
Seed 1353.13 757.01 1632.52 892.97
Plowing labor 547.45 443.25 675.75 394.26
oxen 856.80 754.60 936.00 756.00
Tractor/combiner 0 0 1279.27 0
Weeding labor 2418.49 1213.52 127.88 332.61
Harvesting labor 671.99 640.30 25.59 562.60
Threshing labor 659.95 465.44 15.07 264.24
land rental value* 3000.00 2000.00 4000.00 2000.00
Total production cost 11,742.80 8,776.89 10,538.36 7,347.67
Revenue (Birr/ha)
Wheat (grain) 21875.02 17147.52 25717.53 10839.47
Wheat straw 2500 1500 0 2000
Gross income 24,375.02 18,647.52 25717.53 12,839.47
Net income 12,632.22 9870.63 15,179.17 5,491.80
Yield (kg/ha) 2239 1589.2 3175 1559.63
Margin Birr per kg 5.64 6.21 4.78 3.52
Producers profit margin per kg of the pool data is Birr 4.84
*The land value is the actual rental value in 2012/13 at each IP site for rented in land and the
opportunity cost for own land (depending on the land availability at each district as well as soil
fertility status)

3.3.2 Wheat marketing

Over time, wheat is becoming an essential source of income for the farmers even
though it is still a fundamental food crop. While the major proportion is kept for
consumption, farmers sell part of their wheat produce mainly either to cooperatives or
wholesalers at the market. The findings apparently indicate that 27% of the wheat
produced is being used for sale. This indicates that wheat is becoming an essential part
of cash crop to supplement household incomes.

Marketing of wheat passes on the flow of wheat grains from producers to end users.
Alternatively, it is taking place between sellers and buyers using either local units (tin
41
can) or mainly standard units (kg) of measurement. However, most farmers
complained the wrong calibration of beam balance used by traders. This indicates the
need to establish a control mechanism by city administration to check the calibration
of bean balance and take timely corrective measures to save farmers from further
exploitation by traders though unfair weighing. Regarding price, farmers seem to be
contented with the price of wheat they are offered and no other major problem related
to marketing was reported as such.

When traders purchase wheat, the quality parameters they consider are variety most
preferred for bread making, good grain filling and unbroken grain during threshing to
have more flour per unit of volume and good baking quality to be accepted by the
consumers. All these merits are attributed to grading practices and this suggests that
farmers are needed to make sorting and grading of their grain when supplying to
markets. According to the key informants' response, farmers can be rewarded with
about 10 – 15% more price than the one supplied without grading. In light of high
demands for wheat at the markets, traders reported lack of adequate working capital to
collect from all-over the country, aggregate and make as high supply of wheat as
possible during market days. They demanded financial institutions to offer adequate
amount of capital through credit.

3.3.3 The role of Ethiopian Grain Trade Enterprise in wheat

marketing
Ethiopian Grain Trade Enterprise (EGTE) is a governmental entity engaged in grain
trades focusing on market stabilizing strategies mainly through imports. Currently, it
imports wheat and distribute to customers situated at different regions through 11
marketing branches found in Tigray, Amhara, Oromia and Addis Ababa and its
surrounding. Table 25 shows the quantity of wheat distributed to customers situated in
different marketing branches of the EGTE for the last seven years. The result shows
that its annual trade volume is as high as 684895.5 t/ year in 2013/14, which is about
17.5% of domestic wheat production of the same year.

42
 Table 24.Distributed wheat to different marketing centers by EGTE (in quintals)

Branch/year 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

Shashemene 526,314 69,754 461,175 667,224 641,273 1,411,285 690,198
Bahirdar 217,525 354,947 149,818 237,723 371,940 320,887 401,459
Dessie 240,497 84,897 370,052 309,853 405,692 589,780 290,136
Nazreth 872,666 356,516 353,493 853,711 1,376,046 1,893,983 1,578,671
Surrounding A.A 2,904,036 117,277 40,403 23,441 146,664 94,074 140,890
Asela - - 125533.8 176,586 227,152 250,147 299,233
Central Depot - 638,707 726,594 1,515,814 1,715,609 1,387,125 1,100,482
Mekelle 427,643 199,726 352,083 344,558 638,359 857,816 766,649
Debre Markos - - 966 5,615 49,247 40,516 1,968
Nekemite 40,080 65,457 153 3,260 1,695 3,342 9000
Jima 78,518 26,239 - 18,523 17,008 - -
Total 5,307,279 1,913,520 2,580,271 4,156,308 5,590,685 6,848,955 5,278,686
Source: compiled from EGTE from 2008/09-2014/15 (2001E.C-2007E.C).

Price of wheat distributed by EGTE is by far lower than the market price. The result
shows that there is no significant variation among different branches despite different
marketing costs among these branches (Table 26). The price of market stabilizing
wheat distributed by EGTE is 550 Birr/quintal in 2013/14 and 2014/15 while the
average market price for unsubsidized wheat is 850 Birr/quintal (US$ 0.4048 per kg).

Table 25. Price of wheat at different marketing centers by EGTE for the past seven years (Birr/ quintals)

2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

Shashemene 360 392 500 525 522 550 550
Bahirdar 352 371 537 533 541 550 550
Dessie 359 377 535 535 545 550 550
Nazreth 358 388 504 529 549 550 551
Surrounding A.A 346 375 489 524 545 550 550
Asela - - 488 548 570 550 553
Central Depot - 360 499 540 562 550 551
Mekelle 350 410 498 535 548 550 550
Debre Markos - - 485 520 539 550 550
Nekemite 350 397 483 520 555 550 550
Jimma 353 397 - 520 520 - -
Average 353 385 502 530 545 550 551
Source: compiled from EGTE from 2008/09-2014/15 (2001E.C-2007E.C)

43
Tables 27 and 28 presents the volume of wheat sold and major customers of EGTE in
2014/15 (2007EC) and 2013/14 (2006 EC), respectively. In 2014/15 budget year,
92.5% of the wheat marketed by the EGTE was imported while the rest 7.5% is from
domestic production (Table 35). It also shows that 87.6% of the wheat traded by the
enterprise was supplied to wheat flour factories situated at different parts of the
country while the rest was sold to different governmental organization (federal defense
and federal police). The percentage of wheat supplied to flour factories was even
higher in 2013/14, which was about 94.7% while only about 5.3% supplied to
governmental organizations specified earlier (Table 28).

Table 26. Quantity of wheat sold to different customers by EGTE in 2014/15 (in quintals)

Branch Flour factories Federal defense Federal police Total Share

Import domestic Import domestic Import domestic (%)
Nekemite 0 900 0 0 900 0.0
Shashemene 610,247 75,601 1,350 0 3,000 0 690,198 13.1
Jima 0 0 0 0.0
Bahirdar 301,174 100,285 0 0 401,459 7.6
Dessie 290,135 0 290,135 5.5
Nazreth 1,443,700 34,341 94,939 5,691 1,578,671 30.0
Surrounding A.A 81,112 59,779 0 140,891 2.7
Asela 90,711 208,522 299,233 5.7
Central Depot 956,264 109,217 5,000 27,000 3,000 1,100,481 20.9
Mekelle 566,580 200,070 766,650 14.5
Debre Markos 1,968 0 0 0 0 0 1,968 0.0
Total 4,341,891 379,143 505,861 10,691 30,000 3,000 5,270,586 100.0
Share (%) 82.4 7.2 9.6 0.2 0.5 0.1 100.0
Source: EGTE data

44
 Table 27. Wheat sold by EGTE in 2013/14

Distribution channels Flour factories Governmental distribution

organizations Quantity (q) Share (%)
Head Quarter (A.A) 1,150,584 236,542 1,387,125 20.25
Nazareth 1,828,043 65,940 1,893,983 27.65
Shashemene 1,411,285 1,411,285 20.61
Mekelle 802,715 55,101 857,816 12.52
Bahirdar 312,687 8,200 320,887 4.69
Dessie 589,780 589,780 8.61
Asela 250,147 250,147 3.65
Surrounding A.A 94,074 94,074 1.37
Debre Markos 40,516 40,516 0.59
Nekemite 3,342 3,342 0.05
Total 6,483,172 335,783 6,848,955 100
Share of customers (%) 94.66 5.34 100.00
Source: EGTE data

3.3.4 Marketing channels

In most of the SARD-SC wheat project IP sites, observed marketing channels are
similar except minor differences, and they are relatively simpler and shorter. For
instance, in Ofla district, five different channels can represent the wheat routes. The
exception is that some food insecure households in parts of the region sell wheat they
received from productive safety net program (PSNP) food aid to traders and the
traders in turn to millers. The recipients sell the wheat either to buy some other cereals
relatively cheaper (sorghum as an example) or to make some important payments.
Traders are both local and cross boarder who buy wheat from other districts and
supply to millers (Figure 7). In the IP site of Gurage, processors almost only depend
on imported wheat due to limited supply from farmers. The meager farmers’ supply
was channeled only to consumers. What makes the marketing channel different in
Oromia IP was that there is no supply of imported wheat to millers. This was mainly
because of relatively large production and supply of wheat to millers and other actors.
Otherwise, all other channels of wheat are similar in all the IP sites. It is also believed
that the channels could represent the routes of wheat delivery in the country at large.

45
Wheat has large number of marketing channels; it passes through different options of
channels depending on the area of production and availability of infrastructures. The
amount of wheat products moved from farmers to users within each channel is
different. Therefore, a variation in the dominant market channel at each of the IP sites
is observed. For instance, the dominant market channel in Ofla District is the direct
wheat grain channel from producer to consumer sharing 58% of the volume followed
by farmer to trader and final consumer sharing 33% of the volume of wheat marketed.

In the Amhara IP site, the two dominant channels are the direct channel from producer
to final consumer and from producer to trader with 50% share of the market volume
for each. Then most of the wheat collected by the traders supplied to wheat millers.

In Oromia IP sites, the most dominant market channel is from producer to trader with
more than 80% share of the volume of wheat marketed and then channeled to millers
while the share of this channel in the SNNP IP site is 87% of the volume of wheat
marketed and then channeled to consumers.

Each segment in the channel adds value of certain kind and it could be form value,
spatial/transportation value and storage/time value. For instance, traders add both
spatial and time value in that they transport wheat from far off location to urban
centers. They also add time value by making aggregation and storage of wheat for a
while and then supply to markets in later seasons. On the other hand, millers add form
values by changing wheat grain to flour. Bakeries also add form values by changing
wheat flour into bread, biscuits, and other products.

It was reportedly mentioned that there is a little room for direct marketing between
producers and millers, and hence farmers are mainly price takers. There were some
market related problems identified in the study sites. These identified problems
included limited experience of sorting, grading, and cleaning wheat grain to assure the
quality for good end wheat products such as bread, pastry, and cake.

Farmers often tend to bring wheat to markets mixed with impurities and even grain of
varying sizes, such as shriveled ones. The other problem was that units for selling
wheat are often local and not standardized ones making farmers disadvantaged.
46
In general, assessment of the prevailing marketing channels of wheat products such as
grain, flour, and bread would help to understand the type of value addition made on
wheat and plan for possible interventions that help promote further value addition and
create more sustainable demands for wheat. It would help us ensure and illustrate a
reliable potential opportunity to enhance wheat production.

3.3.5 SWOT analysis of wheat marketing segment

Table 29 presents the strengths, weakness, opportunities, and threats of wheat
marketing segment

Table 28. SWOT analysis of wheat marketing segment

Strengths
 Favorable infrastructure to facilitate trading of
wheat across the country, such as transportation,
communication and others.
 Options of marketing channels in place through
which producers and traders can exchange
 Government imports of wheat to bridge-up the
supply and demand gaps, and stabilize the likely
mounting of wheat price
Weaknesses
 Limited market integration between supply and
demand areas
 Supply of ungraded and unsorted wheat produce
to markets and processing sectors
 Intermittent wheat supply that may leading to
unpredictable price fluctuation
 limited wheat traders in areas of low wheat
production
Opportunities
 The demand for wheat growing faster than production
does and this can motivate further investments to be
made on wheat sub-sector
 Government still making further investments on
infrastructural facilities
 Development of marketing information system at
district level
Threats
 Wheat supply scarcity and consequent market
irregularities, such as adulteration of produce,
exorbitant price, likely smuggling through boarders,
etc.
 Wheat import would persist with likely effect of
inflicting dependency syndrome
 lack of modern marketing system

47
3.4 Wheat processing

3.4.1 Potentials
Regarding wheat processing industries, recent literatures show that about 216 millers
are available in the country with a total processing capacity of 4.2 million tons per
year. However, these millers are not evenly distributed in the country and almost one
third is found in Addis Ababa (USAID, 2014). In the manufacturing and industrial
sectors, wheat is a grain that is largely demanded by millers for making wheat flour. It
is the product that is highly demanded at the market especially for urban consumers. In
this case, both bread and durum wheat varieties are essential for processing. The
problem often mentioned is lack of flour millers in accessible locations especially for
urban consumers at district level situated at all of the IP sites except the Oromia IP
site. Durum wheat is a highly demanded grain in processing industries for making
pasta, macaroni, and other products. The problem often reported by processing
industries is essentially low and unsustainable supply followed by supply of poor
quality wheat often ungraded and mixed with impurities. This has resulted to
increments in costs for cleaning, sorting and grading. Wheat processing factories are
operating below their capacities and they are not even running throughout the year
because of supply shortages. Even more other processing industries could have been
installed if supply would not have been a constraint. Therefore, persistence of
increasing demand being triggered by population growth, tremendous urbanization,
and consequent expansion of service sectors can drive to the conclusion that Ethiopia
is a country with huge potentials of processing industries.

3.4.2 Wheat flour millers

Most of the milling industries are concentrated in regional capital towns and Addis
Ababa city while only limited numbers of them are operating in the SARD-SC wheat
project IP sites. In this study, only one miller was interviewed in each of the two of the
IP sites, namely East Gojam and Gurage Zones located in their respective zonal towns
(Debre Markos and Welkite) while two were interviewed in Tigray region one located
at zonal town (Alamata) and one at regional town (Mekelle) and three millers were
interviewed at Bale zone of Oromia region. In addition to millers operated in the IP
sites, one large processor located in the capital city of the country (Addis Ababa)

48
 known as KOJJ food processing complex was also included in the study to have a
national picture at the central market of the country (Table 30). All of the millers are
privately owned and used only wheat grain (do not use maize as in case of other
African countries) for processing. As indicated in the Table, millers are often located
at zonal and regional towns where aggregated supplies of wheat could be sourced.
More millers could be found in locations believed to be wheat belt with abundant
supplies of wheat produce, such as in Arsi and Bale areas in which all of them are
privately owned.

Table 29. Millers included in the wheat value chain analysis in 2013/14

Miller/processor Region zone City IP site (district) Established

Welkite flour factory SNNP Gurage Welkite GG Welene 2010

Selam Flour factory Amhara E/Gojam D/Markos Enemay/Shebel 2012
Raya Flour factory Tigray S/Tigray Alamata Ofla 2007
Lemlem Food Complex Tigray Special Mekelle Ofla 2007
Bale Ginir Flour factory Oromia Bale Ginir Gololcha 2011
Sanate Flour factory Oromia Bale Robe Sinana 2012
Weltayi Flour factory Oromia Bale Robe Sinana 2014
KOJJ food processing comp. A.A Kolfe A.A - 2002
Keranio

It is reported by all the millers that the ratio of flour to byproduct is 73:27 under
normal conditions except the KOJJ food-processing complex that reported to recover
75% to flour and 25% to byproduct (bran). This implies that after processing, 73% of
the wheat grain is recovered as flour while the rest 27% is wheat bran, which is still
the most preferred animal feed. Therefore, there is almost no product discarded from
wheat processing and all sorts of products and byproducts are valuable. That is why
analysis of net value addition per kg of wheat grain takes into consideration of not
only the flour but also its byproducts.

Table 31 shows annual processing performance of selected wheat processing factories.

The most noteworthy issue in wheat processing is that all of the millers are operating
by far below their full capacity. For instance, Raya flour factory in Ofla IP site

49
operates only at 11% of its capacity. This means that this processing sector did not yet
make use of 89% of its capacity. Among the processing segments visited, only three
factories, namely KOJJ, Selam flour factory, and Lemlem food complex have utilized
the maximum potentials of 70%, 69%, and 60% of their capacity, respectively; while
all other processing sectors visited, operate by far below this capacity. On the average,
processing industries operated only 49% of their capacities. For instance, while the
factories have the potential to process 206,167 tons of wheat per annum, they are
actually processing only 100,329 tons per annum. This means 51% of the processors’
capacity is not yet tapped, which is very discouraging, and can deteriorate future
investments in the sector. It was disclosed during the field visit that some of the flour
factories operating before two years were collapsed because of shortage of wheat. A
factory called Tesema flour factory situated at Bitchena town (the capital of Enemay),
is one of the factories reported as closed within two years. If the situation continues in
the present pace, there is a threat for some of factories to be closed within a short
period, as they cannot be survive with this low capacity utilization.

Table 30. Annual processing capacities of selected wheat processing factories

Miller/processor Potential processing Currently utilized % utilized Flour Bran

capacity of wheat potential of wheat capacity production production
(t/year) (t/year) (t/year) (t/year)

Welkite flour factory 7200 2203 31 1608 595

Selam Flour factory 15120 10440 69 7621 2819
Raya Flour factory 23400 2640 11 1927 713
Lemlem Food Complex 77767 46660 60 34062 12598
Bale Ginir Flour factory 15120 2880 19 2102 778
Sanate Flour factory 8640 2880 33 2102 778
Weltayi Flour factory 15120 1966 13 1475 491
KOJJ food processing 43800 30660 70 22995 7665
complex
Overall 206167 100329 49 73892 26437

Supply scarcity of wheat is almost the only responsible factor for the processing
segments to operate below their full capacities. Some of them have also mentioned
both power shortage and frequent interruption as additional factor that contributed the
processing sectors to operate below their capacities. This can have tremendous
impacts on future investments in wheat sector unless the problem is tackled soon
50
through setting up of functional and effective strategies to enhance wheat production
and productivity. Wheat rust disease, the most responsible cause for wheat crisis, need
to receive priority agendum not only to control but also to eradicate it. In view of
massive investments made by the government to address power shortage and
interruption issue, we can put a promise that it could be unlocked in the near future.

To ameliorate acute supply shortages of wheat and to let the millers run at least for
some more months in a year, some of the processing sectors have ventured to
production of wheat by their own. For instance, it is worthy to mention the case of
Bale Ginir Factory here which meets 7% of its wheat demand through own production
on 80 hectares of land. However, the productivity of its farm is 2 t/ha which is by far
less than the zonal yield. This might be because such factories are not visited by
extension agents and lacks technical knowledge of wheat production. Therefore,
rendering services to such entities will be one of the homework of development
practitioners at all levels, particularly at the district level, as there is no private
extension service in Ethiopia. Providing land (especially low lands that are not
currently cultivated by farmers due to inability of constructing irrigation facilities in
such areas by farmers' level) for flour factories may help them to narrow the wheat
shortage that they are currently suffering from will be one of the policy issues in the
wheat sector.

In response to supply shortage on the one hand and high demand for bread on the
other, short term strategy applied by the government was to narrow down the gaps
through wheat imports. Ethiopian Grain Trade Enterprise (EGTE) is being given the
national mandate of importing and distributing wheat all over the country. Including
large processing sectors in the country utilize imported wheat mainly to produce flour
and supply it to bakeries and some government institutes such as universities. That not
only the government is importing wheat, but also supplying it to millers at subsidized
price. For instance, the government supplies at a range of 5.50 Birr/kg while real
market price is more than 8.00 Birr/kg. Flour millers and bakeries are, supposed to
sale products (flour and bread) at a fixed price that is being set in consultation with the
government. It is believed that the decision of the government to import and supply
wheat to millers has largely stabilized wheat price which otherwise would have gone
wild to unaffordable ranges for large proportions of the public. However, the subsidy
51
goes to all consumers regardless of their income implying it is not targeted to the poor
only.

Table 31. Source of wheat grain for selected millers (% of wheat supplied by each source)

Miller/processor EGTE traders Own farm Producers

(imported)
Welkite flour factory 100 0 0 0
Selam Flour factory 41 59 0 0
Raya Flour factory 75 25 0 0
Lemlem Food Complex 46 54* 0 0
Bale Ginir Flour factory 0 93 7 0
Sanate Flour factory 0 99 0 1
Weltayi Flour factory 0 100 0 0
KOJJ food processing complex 0 90 0 10
Overall 33 65 1 1
*ACDI-VOCA (import wheat through a permission to import wheat once at five years).

As shown in Table 33, most of the factories sell their products to bakeries followed by
retailers although there is a great variation among regions, which highly depends on
the level of government intervention to supply wheat. In an attempt to stabilize prices
and ensure fair distribution of wheat products, government control is observed to be
noticeable in directing flour channels and setting prices. For instance, flour is
supposed to be supplied directly to recognized and licensed bakeries, and to public
institutions, such as universities and others, on quota system. There are also cases
where millers sell their flour to wholesalers still with the knowledge of the
government. For instance, Welkite Flour Factory sales 36% of its flour produce to
wholesalers and these in turn are supposed to sale to bakeries of neighboring towns.

On the other hand, wheat-processing factories that sourced wheat from traders (but not
from government imports) are free to decide market outlets for their flour and
byproducts. They can also set prices of flour and wheat bran by their own without
government intervention. For instance, they sell wheat flour at a market price of 12.00
– 12.70 Birr/kg while government controlled wheat flour is sold at a price of 7.96
Birr/kg. Once the flour is being processed, it reaches to consumers through various

52
channels, such as wholesalers, retailers, bakeries and even through public institutions
that bake and supply bread to consumers.

The government has means of controlling for the route of wheat it supplied through
requesting a regular report and follow up since the recovery percentage is already
known (73%) and the government assigned customers who purchase the flour
including the amount of flour they have to buy. Moreover, the government covers only
a portion of wheat supply while the rest is supplied by local production through
different channels.

Table 32. Buyers of wheat flour of selected wheat processing factories (% of buyers)

Miller/processor Wholesalers Retailers Bakeries Individual Institutions Consumer

consumers coops.
Welkite Flour Factory 36 0 64 0 0 0
Selam Flour factory 0 0 75 9 10 6
Raya Flour factory 0 0 65 25 10 0
Lemlem Food Complex 30 0 30 0 10 30
Bale Ginir Flour factory 0 71 0 29 0 0
Sanate Flour factory 0 88 9 3 0 0
Weltayi Flour factory 75 0 25 0 0 0
KOJJ food processing comp. 70 10 5 5 5 5
Overall 26 21 34 9 5 5

As shown in Table 34, the average net value added (after processing wheat into wheat
flour and bran) for the wheat supplied by the government is 119 Birr/quintal (1.19
Birr/kg) ranging from 57 – 207 Birr/quintal (0.57-2.07 Birr/kg). The lowest margin of
value addition was attributed to newly established factories looking for better market
access and promotion (for instance, Weltayi Flour Factory). On the other hand, the
value added for the wheat supplied by local traders and other sources during 2014
cropping season was 1.36 Birr/kg.

The results also depict that for the imported wheat supplied at subsidized prices, the
average value of wheat flour processed from a kilogram of wheat is 6.69 Birr/kg while
that of wheat flour processed from wheat grain supplied by local traders from local
production is 10.09 Birr/kg with a range of 9.57 Birr/kg to 10.48 Birr/kg.

53
Table 33. Value added by visited millers through processing wheat grain to flour and byproduct (Birr/100Kg)

Miller/processor Value of Value of flour Value of Total value of Value added

100kg wheat produced from bran 100Kg of wheat
100kg wheat produced after processed into
from 100kg wheat flour
wheat
Welkite Flour Factory (550) (581) (81) (662) (112)
Selam Flour Factory 750 (550) 876 (581) 81 957 (662) 207 (112)
Raya Flour Factory 900 (550) 927 (581) 95 1022 (676) 122 (126)
Lemlem Food Complex 850 (550) 913 (581) 95 1008 (676) 158 (126)
Bale Ginir Flour factory 875 960 88 1048 173
Sanate Flour factory 855 920 86 1006 151
Weltayi Flour Factory 900 876 81 957 57
KOJJ food processing co. 980 975 88 1063 83
Overall 873 (550) 921 (581) 88 1009(669) 136 (119)
Number in parenthesis is for the wheat supplied by government through EGTE

Table 35 summarizes the basic information from processing 100Kg of wheat grain
into flour and bran by the eight millers included in the study. The government supplies
at 5.5 Birr/kg while locally produced wheat supplied by traders is supplied at 8.73
Birr/kg. Then millers produce 73 kg of flour and 27Kg of bran from 100kg of wheat
grain. For the flour produced from subsidized wheat, the government ensure that 73Kg
of flour is sold to registered bakeries and other institutions recognized by the
government at a price of 7.96 Birr/kg which is fixed by the government. Once the
millers ensured selling the flour quantity expected from them by the government, they
can freely fix the price of the flour produced from relatively expensive wheat grain
purchased from the local traders at 8.73 Birr/kg. The average selling price of
unsubsidized wheat is about 12.62 Birr/kg. Unlike the price of the flour, the millers at
3.26 Birr/kg on average set the price of bran produced from both sources. Following
this procedure, the result show that the total value of 73 kg of flour and 27kg of bran
produced from 100kg of wheat grain supplied by the government is 581 Birr and 88
Birr, respectively while that of supplied by local traders is 921 Birr and 88 Birr, in that
order. Finally, summing the value of flour and bran produced from 100kg of wheat
grain, the total value of wheat flour and wheat bran supplied by the government at
subsidy and local traders at unsubsidized price is 669 Birr and 1009 Birr, respectively.
. Subtracting the purchase price from the total value of the final product of millers, the
54
average net value added to 100kg of wheat grain by the millers to the wheat supplied
by the government and the local trader is 119 Birr and 136 Birr, respectively.

Table 34. Basic information from processing 100Kg of wheat grain into flour and bran by millers

Item Subsidized wheat Unsubsidized wheat

supplied by the locally produced and
government supplied by local traders
Initial price (Birr/100Kg) (A) 550 873
Wheat flour in Kg (73% of wheat grain) (B) 73 73
Price of wheat flour (Birr/Kg) (C) 7.96 12.62
Total value of wheat flour produced from 100 Kg of 581 921
wheat grain (D=B*C)
Wheat bran in Kg (27% of wheat grain) (E) 27 27
Price of wheat bran (Birr/Kg) (F) 3.26 3.26
Total value of wheat bran produced from 100 Kg of 88 88
wheat grain (G=E*F)
Total value of wheat flour and wheat bran processed 669 1009
from 100Kg of wheat grain (H=D+G)
Net value added in Birr/100kg (I=H-A) 119 136

3.4.3 Value addition in bakeries

In spite of low production and the consequent rises in demand, there are many
bakeries adding values on wheat throughout the country. Most of the wheat entered to
the market reached to the consumers through bakeries. The bakeries therefore, are
directly linked to end consumers in the wheat-marketing channel and their expansion
is directly related to wheat supplies. As illustrated in the earlier sections, however,
almost all of the bakeries not only in the study zones, but also in the country at large
are operating below their potential capacities because of supply shortages. The study
has made a case analysis of selected bakeries to estimate the extent of value addition
comparing the two major sources of wheat supply: imports and domestic production.

Bakeries add values and produce readily consumable bread from flour sourced from
wheat millers, add values to wheat grain. When value addition is quantified, the
amount of value added onto the flour sourced from imported wheat was by far higher
than the one obtained from locally produced wheat. As revealed in Table 36, bakeries

55
added a value of 6.2 Birr/kg from flour processed from imported wheat while this
figure is 1.8 Birr/kg for flour processed from locally produced wheat. This does not
mean that domestically produced wheat is less worthy than the one imported. The
government with subsidized price supplies this mean that imported wheat. Bakeries
purchase the subsidized wheat flour supplied by the government at lower price (7.96
Birr/kg) and unsubsidized one at higher price (12.62 Birr/kg). However, they sell the
bread made from wheat flour of both sources at an equal price of 14.3 Birr of pieces of
bread made from a kilogram of wheat grain meaning that they take advantage of
subsidized to composite lower benefit obtained from locally produced wheat.

Subsidy is believed to be imposed to stabilize the real wheat price that would have,
otherwise, swiftly increased from the level persisted now. In spite of the source of
wheat flour, the price of bread per certain weight (it can be either 100 gram or 200-
gram basis) remains the same and it is being set by the government. In this case, those
bakeries that sourced flour processed from imported wheat could make advantages of
higher value addition than the one processed from locally produced wheat. For
instance, from a 100 kg of wheat grain, bakeries can made a value addition of Birr
462.82 from imported wheat while it is only 122.64 Birr for domestically produced
one.

Table 35. Value addition analysis of bakeries

Item Imported Locally produced Average

Price of bread baked from 1kg of wheat flour (Birr) 14.3 14.3 14.3
Purchase price of wheat flour (Birr/kg) 7.96 12.62 10.29
Net value added per kg of wheat flour (Birr) 6.34 1.68 4.01
Net value added from 100 kg of wheat from which 462.82 122.64 292.73
73 kg of flour is recovered

3.4.4 SWOT analysis of wheat processing segment

Table 37 shows the strengths, weakness, opportunities, and threats of wheat
processing segment.

56
Table 36. SWOT analysis of wheat processing segment

Strengths
 Scores of processing sectors striving to meet
flour demands of consumers and bakeries
 Wheat imports partially relieved huge processing
demands of factories
 Processing sectors supply flour at fixed and
subsidized prices
Weaknesses
 Processing millers and bakeries unable to meet
the growing demands of consumers
 Irregularities in quality of wheat products
processed due to supply shortages
Opportunities
 Availability of large numbers of wheat
processing millers and bakeries in most parts of
the country
 Government policy supportive for further
establishment and investments in the
processing sector
Threats
 A risk of close down of processing factories if
they fail to obtain adequate amounts of wheat
 A risk of large numbers of labor layoff and
consequent increment in unemployment as the
factories are not operating all year round on
account of wheat supply shortages (the raw
material)

3.5 Wheat consumption

3.5.1 Practices
Wheat is largely consumed in both rural and urban centers through ample varieties of
dishes. Bread is the most popular dish being prepared from both durum and bread
wheat at household levels followed by enjera, porridge and many types of others.
Other types of dish from wheat including kolo, nifro, kinchie, local beer, chapatti, and
ambasha are also common in rural areas.

According to USAID (2014) report, the share of wheat out of total cereal consumption
increased by 20% in recent years and it is the second most consumed cereal in
Ethiopia after maize. One of the reasons for this higher percentage of consumption of
wheat might be due to subsidies offered for wheat consumption as compared to other
cereals that are without subsidy in the country, and lifestyle changes. The report also
shows that wheat accounts for approximately 200kcal/day in urban areas and
310kcal/day in rural areas in the average Ethiopian household diet. Moreover, wheat
accounts for about 11% of the national calorie intake in the country. The consumption
of wheat has gradually increased in urban areas because of high population growth
57
(about 2.7 percent a year), migration of people to urban areas, and increases in
condominium living.

Bread baking quality is the essential merit demanded by consumers from wheat in
addition to productivity, good grain filling, and clean grain. Even though it varies from
location to location, certain varieties of wheat such as Digelu, Kubsa and Dashen, are
perceived to be of highly demanded for bread quality at household levels out of the
many wheat varieties under production.

Almost all of the rural households make their own cleaning and sorting from foreign
materials, take to grinding mills and make different food products from the flour. This
was also the practice of urban households in earlier days. In nowadays, however,
considerable proportions of urban consumers depend on wheat flour (bread wheat
flour) available in supermarkets and shops. Moreover, urban consumers largely
depend on pasta and macaroni, which are wheat products. As a result, the demand for
wheat of flour milling factories is revealing a highly increasing trend over time. This
has contributed to price hike that the consumer households ended up complaining for
the increases of wheat prices through time.

Although it largely depends on the quantity of wheat produced and family size,
households in rural areas require wheat grain in the range of 50 – 1500 kg per annum
for consumption. Households in high potential wheat growing areas depend more on
wheat for consumption than those with low potential wheat zones. They prepare
various types of dishes out of it even though there are location specific differences.
Out of the total wheat grain demanded for household consumption, 50 - 98% of it is
covered from own production while the remaining share comes from purchases in late
season. This means they turn out to be wheat purchasers in late season even though
they have been selling in early season (especially after harvest) in need of cash for
immediate obligations.

The quality merits demanded by rural households is that the wheat grain shall be
shiny, clean, full in grain filling (not shriveled) and good baking quality. Although
variable across locations, there are wheat varieties that relatively fulfill these qualities,
such as Dashen, Kubsa, Kekeba, Digelu, and some others. Although not common as
58
such, rural households have also started consuming macaroni that is being
manufactured from durum wheat.

Urban consumers are also highly dependent on wheat products for consumption. Even
though it depends on income levels and household consumption practices, a family of
five members is estimated to demand 600 - 950 kg of wheat grain per annum. Most of
the lower income households are perceived to be dependent on products that are being
prepared from whole grain at home. They purchase wheat grain, prepare for milling,
get it grounded in millers, and prepare mainly bread followed by Enjera and other
food products. On the other hand, most of the medium to high-income households are
dependent on wheat flour that is being processed by millers to make bread and other
products of their own. Some of the lower income and most of medium to higher
income households are also dependent on purchased products of bread and durum
wheat, such as macaroni, pasta, biscuits, and others.

Consumption of wheat products is also becoming very high in institutions, such as

universities, hotels, restaurants, hospitals and health centers, military camps,
manufacturing industries and business companies, and many other service sectors.
Along with increases and fast growth of urbanization, consumption styles of the
population is also changing from home processed to supermarket based wheat
products. High population growth and influx of rural population to towns is also
exacerbating the demand for wheat products from year to year. This is believed to the
fundamental cause of increasing demand for wheat over time. This could be taken as
the favorable opportunity of wheat producers for them to make further investments
and increase production and productivity more than ever.

3.5.2 SWOT analysis of wheat consumption segment

Table 38 presents the strengths, weakness, opportunities, and threats of wheat
consumption segment.

59
Table 37. SWOT analysis of wheat consumption segment

Strengths
 Alternative wheat products available at the
markets
 Imported wheat products (flour and others)
partly stabilized the high demands of
consumers and prices
 Easy access of consumers to wheat products
at close proximities in most of the towns
Weaknesses
 Inability of consumers to obtain adequate
quantities of wheat products that can meet
their demands
Opportunities
 Consumption tastes and preference changed
towards utilization of wheat products creating
further demands on wheat, and high demand for
byproducts for animal feeds
 Growth of urbanization and population creating
further demands for wheat and wheat products
Threats
 Apparent exposure of consumers to risks of
adulterated and unsafe wheat products in response
to supply shortages
 Risk of consumers’ exposure to crisis will increase
as wheat scarcity persists

3.6 Wheat value chain

3.6.1 In the IP site of Tigray Region

All of the wheat producers are smallholder farmers who supply 22% (about 33 tons) of
wheat to market. Wheat marketing channel is relatively simple and involves only
limited intermediaries. One miller named as Raya (Betel) Flour Factory is operating as
a miller in South Tigray and another one known as Lemlem Food Complex located in
Mekelle were included in the study as processing segment. Like other parts of the
country that are insufficient in wheat supply, the former and the latter receive 75% and
46% of their wheat supply, respectively from the government through EGTE and the
rest from traders.

ACDI-VOCA is involved in wheat import and supply besides EGTE to Lemlem Food
complex. However, it imports wheat by the will of government once every five year.
Local traders buy most of the wheat out of Ofla District to supply to Raya Miller. Out
of 1100 tons operated by the local traders, Ofla District sample producers supplied
only 11.55 ton in 2013/14 cropping year while other farmers either within or out of
Ofla Districts supplied about 1089 tons of wheat.
60
The millers sell their flour through three main channels namely, bakeries
(32%), flour wholesalers (28%) and consumer cooperatives (28%) and the rest 12%
directly to consumers (individual consumers and institutional consumers). Besides the
direct value chain actors, enabling environments including Ofla woreda (district)
agriculture office, research centers (Alamata and Mekelle), Mekelle University and
different projects including SARD-SC wheat project are enablers of the wheat value
chain in the area. Transporters, financial institutions (especially micro finances), and
primary multipurpose cooperatives play a great role in service provision for the value
chain actors.

One of the peculiar phenomena of this map is that there is no direct linkage between
producers and millers, which implies arranging mechanisms for some contractual
agreement between millers and producers for mutual benefit.

3.6.2 In the IP site of Amhara Region

Wheat producers are all smallholder farmers supplying about 21% of their product (40
tons) to the market through traders and consumers with equal share. Traders who
supply wheat to Selam Flour Factory supply about 7200 tons per annum, of which
only about 21tons come from Enemay and Shebel wheat producers during 2013/14.
The rest comes from other farmers either within or out of the district. The result shows
that there is no direct channel between producers and millers in the area. This might be
because, millers prefer to purchase aggregated product from traders in large quantities
rather than procuring in small lots from producers. The flour factory obtained about
41% of wheat from the EGTE (imported wheat) and the rest 59% from traders
(domestically produced wheat). The flour processed from imported wheat is sold to
bakeries, consumer cooperatives, and institutions (Debre Markos University and
Amhara Police) apparently through government controls while the factory is free to
sale for anyone the flour processed from domestically produce wheat. The government
controls the fact that wheat imports are made by the government and sold to millers at
subsidized prices, flour channel. The factory sells most of its flour (75%) to bakeries
while the rest 19% to households and institutional consumers, and the other share

61
(6%) to consumer cooperatives. Unlike Ofla IP site, there is no involvement of
primary cooperatives in purchasing wheat grain.

In addition to the direct value chain actors, there are also enablers (Enemay and Shebel
district agriculture offices, Adet Agricultural Research Center, Amhara and Ethiopian
Seed Enterprises and projects like SARD-SC) and service providers such as
transporters and financial institutes (micro finances) that facilitate wheat production
and processing in various mechanisms.

3.6.3 In the IP site of Oromia Region

It was observed that the chain is relatively complex as compared to the Amhara and
Tigray IP sites described earlier and there is no government involvement as wheat
supplier (imported wheat) to the millers.

Input providers in the Bale IP site are similar to the other sites described earlier except
that farm machinery (include tractor and combine harvesters) providers are included in
this area that is supplied by some individuals paid on hourly basis for land preparation
and harvesting. Like other IP sites, wheat producers are smallholder farmers in Bale
zone. However, unlike Amhara and Tigray IP sites, the sample farmers of Bale zone
supply a large proportion (47%) of wheat produced to the market through different
channels. They have four alternative channels to sell, of which traders (83%) account
for the largest proportion followed by primary cooperatives (7%) that use for seed,
final consumers (7%) and processors (3%).

Traders of the Bale IP site operate a huge quantity of wheat compared to other IP sites.
They also sell all of their wheat to millers. . Three flour factories were included in the
study although there are also other millers operating in the area. One of the millers has
even its own wheat farm although the proportion of wheat processed from own farm is
very less compared to that supplied by traders. The millers sell their flour products
through four channels namely: flour retailers (53%), flour wholesalers (25%), bakeries
(11%) and directly to consumers (11%).

Like other IP sites explained earlier, there are also enabling environments (Woreda
agriculture office, Kulumsa and Sinana research centers and projects like SARD-SC
62
wheat, regional and Ethiopian Seed Enterprises) and services renders such as
transporters and financial institutions (micro finance) and multipurpose cooperatives
in the IP site in addition to the direct value chain actors.

3.6.4 In the IP site of SNNP Region

Figure 11 illustrates the wheat value chain map of the IP site in Gedebano Gutazer
Welene (GGW) district of Gurage zone, SNNP region. As presented in the Figure, the
four value chain actors (input providers, direct value chain actors, enablers and service
provider are the main actors of the value chain, which is apparently similar to the other
three IP sites described earlier. However, the chain is relatively simpler in this IP site
as compared to the rest. The result shows that there is no market relationship in which
wheat producers sells their product to the millers in GGW IP site implying that there
should be some sort of linking producers with millers for the mutual benefit.

The results tell that millers of Gurage zone (the case of Welkite flour factory as an
example) totally depend on wheat imported by the government. Although this is very
important and one of the solutions for the factory to continue its business, this is not a
sustainable option unless domestically produced wheat is supplied to such factories in
the future. The factory sells its flour through two channels that are as per the direction
of the government at a fixed price also set by the government. Most (64%) of the flour
is sold to bakeries of Welkite Town while 36% is sold to some wholesalers of Sheka
zone as directed by the government to supply to Sheka Zone bakeries. Government
intervention has temporarily helped to bridge-up the alarming gap between supply and
demand of wheat. It has also helped to stabilize the price of wheat grain and flour,
which otherwise would have been unaffordable to large proportions of the public. To
ensure sustainable supply at reasonable prices, the possibility of enhancing domestic
production has to be given paramount focus.

3.6.5 Aggregated value chain of the SARD-SC wheat project IP

sites
To have a national picture, one large food-processing complex (KOJJ) found in Addis
Ababa (the capital city of Ethiopia) was included in the wheat-processing segment.
The Figure summarizes the four value chain maps to have a general picture of the
wheat value chain in some parts of Ethiopia, even though it could not totally represent
63
the national picture as it focuses mainly on the SARD-SC wheat project IP sites. The
input supply sector involves seed, fertilizer, chemical (herbicide, pesticide and
fungicide), farm machineries including tractor and combine harvesters (only in the
case of Oromia IP site), land and labor (both human and animal labor) supplied by
different actors.

The direct value chain actors include wheat producers, multipurpose primary
cooperatives, local traders and EGTE,ACDI-VOCA, millers, flour wholesalers,
consumer cooperatives, bakeries, flour retailers and consumers (rural, urban,
institutional and individual). All of the wheat producers (946 sample households at
four IP sites) are smallholder wheat producers who supply 43% of their wheat
production to the market (most of the supply is from Oromia IP site). These producers
sell their wheat through four channels: traders (80%), directly to consumers (11%),
multipurpose primary cooperatives who resell to farmers for seed (6%) and (3%) to
processors. The traders supply 90% of their traded wheat to millers and the rest 10%
directly to consumers. In addition to local traders, the giant government trader, EGTE,
also plays an important role in importing wheat and supplying to millers at subsidized
prices to stabilize the wheat price. Another actor that imports wheat once in five years
and supplies to Miller (Lemlem Food complex) is ACDI-VOCA. It obtained a
conditional permission from the government to import wheat once in a five-year and
operating in Tigray region. Millers sell their flour through five different channels with
the highest (34%) and lowest (5%) to bakeries and consumer cooperatives,
respectively. The value chain actors are supported by enabling environments and
receive different financial and non-financial supports from different service providers.
However, in general, the relationship among all the value chain actors, enabling
environments and service providers seems to be weaker than expected.

One of the indicators for weak linkage is that there is almost no direct channel (only
3%) from producers to processors implying that there is no contractual arrangements
between farmers and factories that need an intervention point to link them. To make
the linkage effective, exploring the existing environment is an important task. The
factories may set their quality assurance system and guide the producers to produce
accordingly. For example, factories can agree with farmers to grow specific wheat
types with specific management and by meeting specific quality standards can and set
64
premium price to increase their supply as farmers are assured of market and price.
This linking smallholder farmers and factories is one of the home works that shall be
done by projects working on wheat sector.

3.7 Added value at each step of the value chain

Table 39 presents the proportion of value additions by processors (miller and bakeries)
for the imported wheat supplied by the government. The result reveals that bakeries
add more value (70%) than millers (30%) in the course of changing wheat grain to
flour and the final product, bread. Millers add many values, both physical and form
values, to wheat grain in sorting, grading, and grinding to come up with the product,
flour. On the other hand, bakeries add form values on flour and change to bread. From
these processes, it can be perceived that millers have apparently added more values on
wheat grain than bakeries do despite that the figures favored bakeries. This was
because of the fact that the price of bread is the same irrespective of where the flour
came from. . Irrespective of the source of wheat grain, the price of bread is the same
for both imported and domestically produced wheat. This again means that the largest
share of profit margin goes to bakeries with the implication that bakeries are the ones
who take the highest advantage of subsidy.

Table 38. Value addition of wheat processing by millers and bakeries from imported wheat

Value addition
Millers Bakeries Consumers

Selling price of flour (Birr/kg) 7.96 14.3

Cost of raw material (Birr/kg) 5.5 7.96
Gross value added (Birr/kg) 2.46 6.34
% of total value added 30 70

Table 40 describes the value addition by producers and processors for domestically
produced wheat. The results show that wheat producing farmers add the greatest value
(44%) followed by millers (37%). This finding is in line with a study conducted by

65
USAID (2010) showing wheat producers add more value (46%) than all other actors
in Ethiopia. It was interesting to notice here that bakeries added only 18% of the value,
which is very less as compared to the value addition they made on imported wheat.
This figure seems to reflect the real value addition where bakeries can make which is
contrary to the figure reported in earlier sections (Table 39). Across the wheat value
chain, bakeries have luckily made advantages of government subsidies not only on
wheat grain but also on wheat flour, which largely minimized costs of bakeries.

It should be noted, however, that adding more value does not necessarily mean earning
more profit margin because not all the costs incurred to create the product have been
included in the calculation of the value added. To see the profit margin, all costs
incurred at each stage should be included.

Table 39. Value addition of wheat processing involving farmers, processors, and bakeries

Value Chain
Farmer producers Millers Bakeries Consumers

Sales price (Birr/kg) 8.8 12.5 14.3

Cost of raw material (Birr/kg) 4.42 8.8 12.5
Gross value added (Birr/kg) 4.38 3.7 1.8
% of total value added 44.33 37.45 18.22

66
4. PROBLEM ANALYSIS OF WHEAT VALUE CHAIN
Table 41 presents the results of problem analysis on problems, their causes and
associated effects, proposed solutions, opportunities and the responsibilities of
stakeholders along with each value chain segments.

67
Table 40.problem analysis of wheat value chain

Rank Problem Causes Effects Proposed options of Opportunities available Stakeholders responsible
interventions
I Input supply segment
1 Limited  Limited capacities  Dependence of  Build capacities of formal  Government highly  Ethiopian Seed
supply of of formal seed farmers on low seed producers committed to support Enterprise (ESE)
seeds of producers to meet productive local  Establish and strengthen seed producers  Ethiopian Institute of
improved the demand variety seeds community based seed  Favorable Agricultural Research
wheat  Inadequate  Frequent recycling production systems environment for (EIAR) and Regional
varieties information on of earlier improved  Timely and reliable private investment Agricultural Research
seed supplies variety seeds information sharing on supply  Options of improved Institutions (RARIs)
available and leading to yield and demands of seeds seeds of wheat  Ministry of Agriculture
demand required declines  Encourage private available in research (MOA)
 Problems of timely  Low production & investments on seed centers  Bureaus of agriculture
distribution of productivities of production  untapped demand for at different levels
available seeds wheat improved variety  Private companies
 Seed Enterprises  Supply shortage of wheat seeds  Community
multiply only some wheat  Various stakeholders  farmers
varieties available
2 Poor quality  Prolonged storage  Crystals of fertilizer  Establish timely and reliable  High demands for  MOA and regional
of inorganic in the warehouses becomes almost information on the actual inorganic fertilizer agriculture bureaus
fertilizer and crystal insoluble and not demand and supply status of  Government  Cooperatives and
formation available to plants inorganic fertilizers determined to community
 Information gap on  Low yield  Proper storage mechanisms arrange mechanisms  Fertilizer importers
the actual fertilizer to minimize crystal formation to supply adequate and distributors
demand required  Capacity building for quantities of
and supply cooperatives and agriculture inorganic fertilizers
available offices on demand
assessment and timely and
reliable information sharing
mechanisms
3 Inadequate  chemicals not  yield loss due to  continuous training on Government commitment  MOA and regional
knowledge, applied on time and diseases chemical use to supply chemicals on agriculture bureaus

68
 Rank Problem Causes Effects Proposed options of Opportunities available Stakeholders responsible
interventions
lack of at the  Threatening of  Establish dependable and time and also for safety  Chemical importers
access to recommended rate human and safe chemical storage measures  Cooperatives and
chemicals on  Unsafe and environmental mechanisms at regional levels community
time and prolonged storage health if not stored  Introduce and strengthen
chemical in the warehouses properly early warning and prediction
storage  chemicals stored mechanisms of diseases and
problem unsafely pests, and make chemicals
available accordingly

II Wheat production segment

1 Wheat rust  Climate change  Low production  Introduce and adapt disease  Supportive and  EIAR and RARIs
disease  Break-down of and productivity tolerant improved wheat collaborative  International Wheat
disease tolerance varieties from abroad international wheat Research
capacity of  Strengthen collaboration with research networks Organizations, such
improved wheat international wheat research available as CIMMYT
varieties networks  Availability of wheat  MOA
 Generation of rust tolerant research programs  Chemical companies
varieties of improved wheat in  Chemical factory is (such as Adamitulu)
the country available in the  Community
 Use recommended chemicals country
on time
2 Moisture  Untimely or Low production and  Strengthen access of irrigation  Huge ground and  MOA and Regional
stress shortage of productivity to wheat production at suitable surface water Bureaus of Agriculture
rainfall locations potential in the  EIAR & RARIs
 Generation and adaptation of country  Water Development
moisture stress tolerant  Availability of EIAR Authority
improved varieties of wheat and RARIs pursuing  Community
with wheat research
3 Mono- Limited break crops  Soil nutrient  Introduce and strengthen  Options of crop  MOA and Regional
cropping available depletion and recommended crop rotation rotation practices Bureaus of Agriculture
practices of consequent poor practices available  EIAR & RARIs
wheat fertility  Community

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 Rank Problem Causes Effects Proposed options of Opportunities available Stakeholders responsible
interventions
 Declining
production and
productivity
 Pose risks to
disease outbreak

III Wheat Marketing Segment

1 Supply of  Limited  Low price offered  Create awareness and build  Traders and  MOA and Regional
mixed grades knowledge of to poor quality capacities of wheat processors willing to Bureaus of Agriculture
(poor quality) traders on wheat producers, cooperatives and pay premium prices  EIAR and RARIs
of wheat to the grading and  Increased agriculture experts on for supplies of quality  Traders & processors
markets by sorting practices transaction costs to improved grading and wheat
traders processors for sorting practices
sorting
2 Price Intermittent supply of  Price unpredictable  Strengthen collection and  Price collection and  MOA and Regional
fluctuation wheat to markets to producers, sharing of price information information systems Bureaus of Agriculture
traders and to producers, traders and available  Cooperatives and
processors processors  Government already Marketing Offices
 Declined  Stabilize prices through committed to wheat  EIAR and RARIs
bargaining power strengthening imports importation  Traders & processors
of farmers  Increase wheat supplies
through domestic production
IV Wheat Processing Segment
1 Shortage of  Low production and  Processing sectors  Increase domestic production  Wheat production  EIAR & RARIs
wheat supply productivity of wheat operate far below and productivity of wheat technologies available for  MOA and Regional
 Limited quantity of potential capacities through expansion of available different agro-ecologies Bureaus of Agriculture
wheat imports  Unable to meet technologies  Ample water potential  Ethiopian Seed
 no involvement of operational costs,  Increase wheat production available for irrigation Enterprise
private traders in such as labor costs through the use of irrigation
wheat import  At risk of liquidation facilities in areas where there is
and insolvency water resource
 layoff labor  improve farmers technical

70
 Rank Problem Causes Effects Proposed options of Opportunities available Stakeholders responsible
interventions
efficiency of wheat production
2 Power  Power shortage  Frequent  Use alternative power  Diesel motor  Processors
fluctuation  Malfunction ing of interruption of sources, such as diesel motor generators of various  Diesel motor
transmission lines operation of power, until reliable mains capacities available on generator importers
processing facilities supply is ensured the market  Intermediaries
 Workout detail feasibility study
of alternative power sources
3 Unsorted  Sorting and grading  Increased  Awareness raising for wheat Processors willing to offer  MOA and Regional
and practice not operational costs of producers , cooperatives, and premium price for graded Bureaus of Agriculture
ungraded common either processors for traders on improved skills of wheat  Traders and
supply of because of sorting and grading sorting and grading cooperatives
wheat unawareness or  Establish premium price for  Farmer producers
negligence graded wheat as a motivation
 Mixture of wheat for suppliers
with foreign
materials, such as
soil and others
v Consumption Segment
1 Limited Low production of  High and Increase wheat supply  Technologies available  MOA and Regional
supply of wheat in the country increasing market domestically  There is also irrigation Bureaus of Agriculture
wheat at the price of wheat potential  EIAR and RARIs
markets  Inability to meet  ESE
the demand for wheat  Producers and traders
products
2 Intermittent Limited production of Consumers’ demand These problems could be solved The potential of the  MOA and Regional
and limited wheat flour in for wheat flour and once wheat production is country for growing of Bureaus of Agriculture
supply of processing factories flour products increased in the country and wheat  EIAR and RARIs
wheat flour due to shortage of restricted demands are adequately met
wheat supply

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5. CONCLUSION AND RECOMMENDATIONS

5. 1 Conclusion

The study was conducted in Oromia, Amhara, SNNP, and Tigray where more than
99% of wheat is produced. These regions were selected purposively based on the
coverage of SARD-SC wheat project IP Site. Both primary and secondary data were
used. This report documents the findings of the wheat value chain covering all
important actors of the value chain, enabling environments and service provision
sector as well.

The study identified input suppliers, producers, traders, millers and consumers as the
major actors in the value chain in the study area. The major inputs supplied are seed,
inorganic fertilizer, crop protection chemicals (herbicides and fungicides), farm
implements and farming services. Land and labor are also the most important inputs in
wheat production. The actors identified in the wheat seed sector are ministry of
agriculture, national and regional research institutions, agricultural universities,
international research institutions and plant quarantine, seed enterprises both at the
national (Ethiopian Seed Enterprise) and regional (Tigray Seed Enterprise, Amhara
Seed Enterprise, Oromia Seed Enterprise and South Seed Enterprise) level, unions,
cooperatives and seed grower farmers. The main sources of fertilizers supply is
controlled by the government owned enterprise called AISE and the distribution is
facilitated with regional holding companies, federations, unions and primary
cooperatives. In the country, fertilizer has solely imported by AISE and distributed to
the regional holding unions and primary cooperatives. The chemicals [herbicides such
as Pallas, Topic and 2, 4-D and fungicides; mainly, Tilt and bumper) are supplied to
farmers by different traders and union/cooperatives. Smallholder farmers obtain farm
implements from traders in the local markets while medium level farmers in the
Oromia region used farm machineries through contractual basis from businessmen.
The major constraints identified were disease, inadequate seed supply, poor quality
seed, carry-over costs of fertilizers, affordability problem of fertilizer, packaging,
inadequate supply of fungicide and poor quality chemicals.
72
The study revealed that the majority of farmers involved in wheat production are small
scale farmers. The productivity of wheat in most of the study area remained low
mainly due to low input use, diseases, and water logging problem. The production
segment also depends mainly on informal seed delivery system, which is responsible
for the poor quality seeds and limited amount of seeds from formal seed system which
also has problem of poor quality and less resistance to diseases. .

Wheat marketing sector takes two categories, the domestic and international market.
In the domestic sector, private wheat traders are involved while EGTE is almost the
sole importer of wheat to distribute it to selected millers that in turn sell to specified
bakeries. The processing segment is operating by far below their capacity mainly due
to shortage of wheat grain followed by electric power. A permanent increase in
domestic wheat consumption due to population increase and changes in life style
resulted in rises in the prices of wheat products.

The results show that there is a weak linkage among the value chain actors in the study
area. One of the indicators for this weak linkage is the absence (very low level) of
linkage between producers and millers as only 3% of the wheat produced is directly
sold to millers.

5.2 Recommendations

Based on the findings of this research, some important recommendations can be

forwarded. The recommendations can be categorized as technical, institutional and
policy recommendations.

Technical recommendations:
 The need to have bottom-up input planning based on the reality, affordable input
packaging, augmenting production and productivity through the use of irrigation and
improved technologies and quality for final use, strengthen local seed producers through
technical and legal support;
 In the short run, it is difficult to generate rust resistant wheat which is the main problem
of farmers. Hence, availing effective chemicals by formal suppliers who have adequate
73
 knowledge about the chemicals, and checking the standards of these chemicals should be
thought as an immediate solution for wheat crop protection so that the yield is not
decreased due to diseases;
 There should be an integrated (breeding-pathology) wheat variety improvement program
at a national level to generate durable disease resistance wheat cultivars;
 Improving agronomic practices is also found to be a necessary condition, especially mono
cropping system in Bale zone is becoming a source of disease outbreak and heavy
weeding. Therefore, appropriate crop that can be used to rotate wheat should be available
in this area; and
 Arranging appropriate training to farmers on analyzing cost-benefit of using improved
technologies such as fertilizer so that they can realize the benefit of fertilizer application
over the cost incurred.

Institutional recommendations
 There should be a strong integration between different institutions that are involved in
wheat variety generation, multiplication and dissemination (research institutes, seed
enterprises, and extension department of the ministry of agriculture) to solve the seed
shortages created as fast as possible. Specifically, there should be a mechanism that these
different institutes have common meeting so that the activity of each support each other;
 There should also be a strong institutional linkage (such as setting quality standard and
communicate with breeders and making contractual agreement with producers) between
wheat producers, processors, research institutes to ensure the desired quality of wheat for
processing is produced and supplied at a fair price;
 There should be a strong linkage between ministry of agriculture, research institutes, and
ministry of trade and processing companies to better understand the interrelationship
between wheat production, marketing, and processing. For instance, there is no any forum
that connects research with ministry of industry, ministry of trade and processing
factories. As a result, each of them is trying to solve the problem in wheat sector. Hence,
there should be a common forum for these institutions so that they seek a common
solution for the problems occurred along the wheat value chain, and develop public-
private partnership; and
 Improve infrastructures (storage, roads, electricity) along the value chain and have
structured marketing

74
Policy recommendations
 In the end, there should be a mechanism to increase domestic wheat production to be self-
sufficient in wheat. Therefore, policy makers should focus on expanding irrigated wheat
production and hence high investment in irrigation facilities. However, the trade-offs
between investing in irrigated wheat or irrigated high value crops and importing wheat
instead should be thoroughly studied;
 Wheat diseases is becoming a serious problem and those varieties released for their high
resistance to diseases are becoming susceptible even before widely adopted by producers.
Therefore, policy makers should think of efficient and sufficient mechanisms of
distributing effective chemicals just like seed and fertilizer supply;
 Most of the millers are processing by far below their capacity. There should be a
mechanism to supply as much as their demand so that these industries are working at their
full capacity. Therefore, policy makers should arrange a strategy for them to get wheat
either through importing enough amount of wheat or through interlinking these factories
to producers;
 Interruption of electric services is also reported as one of the reasons for performing
under capacity of the millers. Even though this is not a serious problem under the current
situation where millers are suffering from a shortage of wheat supply, arranging a
mechanism to continuously supply electricity should be a policy priority in the future;
 Currently, the government is subsidizing the imported wheat to stabilize the price of
wheat and flour. However, the subsidy is failing to target the poor only and it goes to all
consumers, which is unfair. Moreover, subsidizing the wheat farmers to produce more
and increase domestic wheat production instead of subsidizing the imported wheat may
be economical. Therefore, analyzing the wheat subsidy policy shall be one of the future
research agenda in the wheat sector; and
 Even though importing wheat and supplying to domestic market plays an important role
in alleviating the inflation pressure on consumers, it also definitely has a negative impact
on the price of wheat that producers receive, which in turn hinders the motivation of
farmers to produce wheat.

75
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