Ethiopia Borena Maize Market Analysis - Aug 2011 FINAL

Borena, Ethiopia Market Analysis:

August 2011

An assessment of the maize market’s capacity to respond to cash programming

Oxfam & GPDI* Research Report:

12 – 20 August 2011

Research team: Tafadzwa Makata, Gregory Matthews, Blessing Mutsaka, Huqa Adhi Gedho*, Gollo Wako, Jo Zaremba.

* GPDI = Gayo Pastoral Development Initiative

Borena, Ethiopia Food Market Analysis

Ethiopia Market Analysis - Borena - Aug 2011 (v. 5 Oct 2011) Page 2 of 25 06/10/2011

Borena Market Analysis: August 2011

An assessment of the maize market’s response to cash programming

Introduction This report provides a summary of a rapid market assessment carried out into the market systems for maize (primarily) and beans (secondary) in Borena Zone, southern Ethiopia between 12 and 20 August, 2011. The objective of the assessment was to determine how well the market in Borena could respond to meeting the basic food needs of pastoralists and agro-pastoralists in Miyo, Dire, Dillo and Teltelle woredas. The specific purpose of the analysis was:

1. To determine the availability of key food items (see below) in the Borena market system

relative to demand;

2. To assess how the markets would respond to increases in purchasing power of pastoralist

households which would result from cash disbursement to 5,500 households (OGB) + 4,000

households (OA)

3. If food availability is constrained, to recommend specific market-based responses that would

ensure access to key food commodities as prioritised by beneficiaries;

4. Consider market mechanisms for transferring cash to beneficiaries (e.g. through traders). 1

The study focused on the following commodities which were identified as the most important and preferred foods of a food basket for poor households in the area.

Figure 1 – Most important and preferred food products Primary products Secondary products

Maize Milk

Beans Oil

Sugar Wheat

While maize, beans and sugar were identified as products of primary importance for beneficiaries, this assessment focuses on maize as the most important food commodity for rural pastoralists, and the commodity for this rural populations are most dependent on markets to obtain. Maize and beans are important crops in the agro-pastoral areas of Borena, grown for both subsistence and surplus sales within the District. The failed rains for the past two seasons have reduced production in these areas to almost nil, affecting food security and incomes of pastoralists and agro-pastoralists. Sugar which forms another important source of food was excluded from detailed analysis due to the controlled nature of trade of this commodity.

Summary & Conclusions Purchasing power in Borena zone has been severely curtailed on account of the drought and consequent high losses of animals and livestock value. People within the zone are dependent on livestock for both income and food, and as both these have fallen, reliance on markets for the

1 Cash disbursement plans are being developed separately by OGB and OA and are not part of this document.

OGB and OA premised this assessment on plans to provide cash to 2,500 – 5,500 and 4,000 beneficiaries respectively.



Figure 2: Ethiopia National Maize Prices (WFP 2011)

purchase of staple foods has risen. Equally, crop producing households’ food security has been impacted by two consecutive failed rains raising their need to buy food. Due to lowered purchasing power, the rise in food needs has not translated into market demand. The market centres are currently operating in Borena, albeit at reduced capacity for staples. We estimated that stock levels in traders whom we visited were running at about 30 – 50% of usual capacity, and recorded almost universal complaints that ‘business’ and turn-over is lower than a year ago. The cause of this lowered level of trade in maize is primarily due to lower demand because of the reduced purchasing power. The main market centres should begin to restock once demand rises – though how quickly they can meet a rise in demand will vary depending on the trader and the remoteness and nature of the market centre.

Maize is available outside the zone, and high

prices nationally (maize is trading at 81% higher price compared to the same period last year) 2 are reflected in local markets and will continue to be a challenge to poor buyers. These prices are expected to stabilise and fall over the coming months with forthcoming harvests between September and November (predicted to be average) increasing supply, in line with price trends over the past year (see Figure 1). However, high transaction costs - transport and various levies imposed on goods brought in from

outside the zone – act as a deterrent to some wholesalers from stocking up whilst demand and turn-over are low. One trader interviewed explicitly stated that these high transaction costs deter her from stocking more goods from Sheshemane (a large maize production and trading centre) as she is unable to sell the product at a price that covers these incremental costs. The combined effects of reduced purchasing power and low and expensive supply have led to critical situations for many households. Oxfam has assessed the best form of intervention to be through cash disbursement to needy households in Dire, Dillo, Miyo, Teltelle and Moyale districts which would address the purchasing power. Given the immediate need for food in Borena, it is important to ensure that when demand increases, stock is available to meet this demand. Some traders are reluctant to restock with high-priced maize that has to be transported from afar, and there is a risk that stocks will still be poor by the time that demand rises. It will be important to communicate to traders any plans for cash disbursements in order for them to prepare for the demand and increase stock levels. However this may not be sufficient to increase supply, particularly as prices may start to fall once harvests come to market in upland areas, leaving some wholesalers with expensive product that they may have to sell at a loss compared to traders who held back from buying early. A secondary priority would involve helping willing traders to restock before cash disbursements actually translate into increased demand. Cash disbursements to traders to supplement their own working capital could help to buffer the risk involved in buying early, and also help to cover some of the additional costs of bringing maize from upland areas (i.e. transport and 'customs')

2 WFP, Ethiopia. 2011. ETHIOPIA MONTHLY MARKET WATCH, Vulnerability Analysis and Mapping (VAM). July –

2011



Objectives and Methodology The objective of the assessment was to evaluate the ability of markets to provide priority food grains during a cash-distribution (either conditional or non-conditional) for six months in five woredas in Borena Zone: Moyale, Miyo, Dire, Teltelle, and Dillo. The specific purpose of the analysis was:

1. To determine the availability of key food items (see below) in the Borena market system

relative to demand;

2. To assess how the markets would respond to increases in purchasing power of pastoralist

households which would result from cash disbursement to 5,500 households (OGB) + 4,000

households (OA)

3. If food availability is constrained, to recommend specific market-based responses that would

ensure access to key food commodities as prioritised by beneficiaries;

4. Consider market mechanisms for transferring cash to beneficiaries (e.g. through traders).

The study examined a list of ten key commodities, prioritising them in terms of preference, priority and importance in meeting the food security needs of the target population (pastoralists), usual consumer base, and ability of an intervention to influence market prices and availability. While maize, beans and sugar came out as top priority in terms of target group preferences and needs, sugar distribution is controlled by the government and thus was eliminated from the research. Research eventually focused only on maize, as more information was readily available and it appeared beans did not feature strongly in the target population’s food basket at this time of year. Primary research was carried out through semi-structured interviews with six government officials, nine wholesalers / larger traders and 15 small traders / retailers across five markets in Borena zone plus Gedebe and Sheshemane which act as main supply markets for Borena.3 Eight of the interviewed traders were female. Field research days were alternated with de-brief and analysis where the team regrouped to map out findings into a ‘market map’ as well as geographic maps. The research teams split into sub-teams for ease of research and each sub-team worked with a translator. Secondary research included numerous sources available on the internet and through key contacts in Addis Ababa, Borena and across Oxfam. The study tried to visit markets on operating ‘market days’ where possible. Traders were selected when identified visually. (Lists of traders were not available.) When it was not possible to visit on a market day, traders were interviewed who operated on non-market days.

Market Distance from Yabello Market Day

Teltelle 100 km / 2 hours Saturday Dillo 155 km / 3 - 4 hours Monday Miyo 150 km / 2.5 hours Saturday Dire – Mega 120 km / 1.5 hours Saturday Dire - Dubuluk 100 km / 1.25 hours Friday Yabello Saturday & Tuesday

(Sunday for livestock) Gedebe 140 km / 2 hours Friday Sheshemane 360 km / 4 hours All week Nazaret 500 km (?) Thursday Konso 100 km Monday & Thursday

3 Please refer to Annex F for a copy of the assessment questionnaire used to guide interviews.



Background Borena zone in southern Oromia Region has a total population of over 962,489 (49.4% female) of which over 90% are classified as ‘rural’.4 According to zone authorities, the prolonged drought situation has affected 331,000 people - the UN has this figure at 412,000 - and are now (as of July) in need of food aid, in addition to the PSNP-targeted population of 124,000, and an estimated 185,000 heads of cattle have died so far. Malnutrition levels have also gone up.5 Of eight woredas, five (Teltelle, Moyale, Dillo, Dire, and Miyo) have been identified as most vulnerable, and Oxfam America will be working in all five of these Woredas, while OGB will focus on Dillo, Dire and Miyo. There are two rainy seasons in the southern part of Ethiopia: the main season, Ganna, runs from March to June, and the small season, Hagaya, from September through November. (Note that the rain seasons for Borena vary from the rest of Ethiopia, and that actual times appear to vary). There have been no or minimal rains across Borena for the past two rainy seasons (i.e. since September last year) and predictions for the lowlands remain below average for the coming months. However, most meher producing areas are expecting good rains for the coming season.6 Figure 3: Seasonal Calendar for Borena7

Figure 4: FEWSNET Seasonal Calendar Ethiopia

Borena is described as mainly lowland (kola) zone with the main source of livelihoods being livestock, though some (mainly poorer) households also produce crops, mainly maize and beans. Agricultural produce is consumed, and surplus is traded locally. Pastoralists rely on livestock

4 Government of Ethiopia, 2007. Population and Housing Census of Ethiopia: Statistical Report for Oromiya

Region. 5 Oxfam, 2011. Borena and Guji Zones Mission Report, July 2011. Borena and Guji Zones Mission

Report_Final_July_27_2011.docx 6 GoE 2011. Early Warning and Response Analysis. Early Warning and Response Directorate DRMFSS, MoA.

August 18, 2011. 7 Livelihood Profile, 2008. Oromiya Region, Ethiopia Borana-Guji Cattle Pastoral (BGP) Livelihood Zone February

2008. Bgp.pdf



production (meat, milk, and some other animal products) predominately from goats, sheep, cattle, and camel for income and food. In a normal year, poorer households will receive around 60% - 80% of their income from livestock sales and rely on a further 10 – 20% on safety nets, with the balance coming from a combination of wages, remittance, collecting and selling of firewood and charcoal.8 In normal years, these households meet over 60% of their food requirements through buying staples.9

Figure 5: Sources of household income & food – ‘good’ years10

The main sources of income for medium wealth-ranking households are livestock and related products, agriculture, and government employment. Agro-pastoral communities produce a range of crops including maize, barley, haricot beans and teff, mainly from April to June during the Ganna rains, with lesser cropping season from September to December, during the Hagaya rains. Consumption of meat, milk and other products is largely dependent on household level production, perhaps with some trade happening across households within one Pastoral Association or village. Unique to this part of Ethiopia, children will be prioritised for food in times of need and will receive any rations available at the cost of adults’ well-being. The preferred foods during times of need are maize followed by sugar, beans, and oil that can be mixed into porridge for children to eat. Adults will subsist on tea and sugar. Oils, sugar and tea are all imported into the area – sugar under government controlled quotas distributing to local cooperatives for sale to community members. Despite the ‘thinness’ of these markets, a study conducted in 2005 in Dire, showed that trade constitutes the second and third most important livelihood strategy for medium- and low- income members of the community respectively. The main constraint for poorer community members to engaging in trade was lack of capital.11

8Gemtessa, Kejela; Emana, Bezabih; Tiki, Waktole. 2005. Livelihoods Diversification in Borena Pastoralist

Communities of Ethiopia – Prospects and Challenges. www.saga.cornell.edu/saga/ilri0606/24presentation.pdf 9Livelihood Profile, 2008. Oromiya Region, Ethiopia Borana-Guji Cattle Pastoral (BGP) Livelihood Zone.

February 2008. 10

Livelihood Profile, 2008 11

Gemtessa, Kejela; Emana, Bezabih; Tiki, Waktole. 2005. Livelihoods Diversification in Borena Pastoralist Communities of Ethiopia – Prospects and Challenges. www.saga.cornell.edu/saga/ilri0606/24presentation.pdf

Sources of Food – A good year (2006 – 07) Sources of Cash – A good year (2006 – 07)



Market Assessment - Findings

National market overview Ethiopia, the second largest African producer of maize and third largest of wheat, produces at least 70 percent of the total food available in the country. Availability is hugely variable, and closely related to local production, suggesting that markets do not compensate for shortages through imports (international or domestic), with the possible exception of food aid. According the African Development Bank (ADB) the major food security challenges for the country include undeveloped rural infrastructure and markets, large non-tradability of staple crops, low import financing capacity of the country, and the need to accelerate food production.12

Figure 6: Ethiopia Cereal Production 13

While the country experienced an above average harvest in 2010, keeping prices low until January 2011, prices began to rise in February 2011. The price of maize rose between 73 and 142 percent between February and July 2011 in surplus (Bahirdar) and deficit (Diredawa, Addis Ababa) markets respectively. Prices for wheat, teff and other crops have also risen in the order of 30 – 54 %. 14 The national average price for Maize was Birr 626 per quintal (1 quintal = 100 kilograms) in August 2011 – compared with 450 per quintal during the same period in 2010.15

Prices are starting to stabilise, and maize prices reported a slight drop in June nationally. However, in line with trends over previous years a significant decline would not be expected until harvests begin to enter the markets, around October.

Grains trading in Ethiopia was not researched extensively during this study. A Grains Commodity Exchange has been established, however access to its web site has been down during the assessment period. Following good rainfall in many areas, including parts of SNNPR, southern Amhara and Oromia (not Borena), national maize production estimates have recently been revised upwards and forecast to be slightly above average (2006 – 2010) but below the 2010 harvests. 16 With the main harvests due between October and December (Meher season production relevant) prices of maize are expected to fall in these markets. However, country-level inflation rates remain high affecting other costs of

doing business: national general and food inflation rates have increased by 39.14% and 47.43% respectively as compared to one year ago. 17

12

African Development Bank Group, Ethiopia. Review of Bank Group Assistance to the Agriculture and Rural Development Sector. Operations Evaluation Department (OPEV), 18 April 2008 13

GIEWS, 2011. Country Brief, Ethiopia. Global Information and Early Warning System on Food and Agriculture. 28-July-2011 14

GIEWS, 2011. Country Brief, Ethiopia. 15

Source? 16

GIEWS, 2011. Country Brief, Ethiopia., 17

WFP, 2011. Horn of Africa Weather Outlook. Issue 1 - August 2011.



Upland market overview The main source markets for maize for Borena are Sheshemane and Gedebe, with Nazaret and Addis also cited as possible sources. Sheshemane is a major agricultural area, with large commercial farms displaying ample maize crop in the fields at the time of writing. There are a number of agribusiness signs on the main road, and the government is also reported to be procuring produce in Sheshemane.18 Sheshemane buyers have been procuring maize and other cereals from outside their immediate locality for the past few months. Normal supply from surrounding areas is expected to be restored in the coming months as harvests are anticipated to be good. 19 There is also a large local market, and over 25 large wholesalers with capacities in excess of 1,000 bags and over 250 medium to large sized traders. Research in both Sheshemane and Gadebe were limited in time and timing – Gedebe was shut when the team visited and only one trader was available for interviews. Traders in Yabello have reported a range of trading relationships with Sheshemane and Gedebe. Some physically travel to the markets to buy stock, though this is more usual for Gedebe. Others know merchants and can contact them by mobile phone, place orders, transfer funds through the banking system and organise transport remotely. Some traders ask transporters returning empty from Addis to act as agents and stock up for them. Most of these transactions are on a cash basis, with credit arrangements reported only from traders interviewed in Teltelle and Yabello. Sheshemane and nearby Hawasa have a range of commercial and government services including banks. Maize stocks in Sheshemane and Gadeb are low (around 10% of stock capacity) and prices high compared to last year (Birr 700 / quintal in August, up from Birr 650 in July). A good harvest is expected for October onwards which will replenish stocks and bring prices down. Harvests are anticipated to be high with above normal rainfall reported across Sheshemane. Observations by the research team were that there is abundant crop starting from within 100km from Yabello, and all the way to Sheshemane. There are usually between one and two harvests over a 4-5 month period from September through December and possibly an early harvest in July/August/September timeframe20. This schedule roughly coincides with FEWSNET cropping calendar.

Other markets referenced by informants as important markets source markets included Jima (in western Oromia) and Konso (despite proximity to Yabello, this market was infrequently cited and therefore not visited).

18

GIEWS, 2011. Country Brief, Ethiopia. 19

WFP, Ethiopia. 2011. ETHIOPIA MONTHLY MARKET WATCH, Vulnerability Analysis and Mapping (VAM). July, 2011 20

Observations by field team August 2011.



Borena Zone – Normal Market Situation Borena’s ‘market system’ consists of a few physical trading centres that act as feeders to smaller market centres. Access to markets is difficult for many who have to travel long distances (up to 80 km), often by foot. Market centres operate once a week, with only some proportion of traders available in major centres during the rest of the week. Despite these limitations, market centres provide the main resource for trade of both livestock, food and non-food items in Borena zone, with few observed village level shops in operation. (See Annex D – Normal Situation Market Map.)

The Market Chain The supply chain for maize and beans typically involves local producers bringing surplus to the closest market and selling it at spot prices to a selected trader. When local supplies run out, these traders may source from markets in the uplands – Gadebe or further afield like Sheshemane, Nazaret or even Addis Ababa. While wholesalers and larger retailers have developed a network of contacts in these markets, this is fairly loose and traders will ‘shop around’ for the best deal at time of ordering. Trade with more distant locations involves relatively higher transaction, transportation, and taxation costs than with local suppliers. There is some cross-border trade with Kenya in Moyale’s markets, however these were not studied in detail. There are a range of different types of traders in Borena, as shown in Figure 7, below. In addition to traders, co-operatives operate at the Pastoral Association (PA) level, often buying maize and other key commodities (such as sugar or oil) on behalf of households in their communities. Some have storage capacities and working capital.

Figure 7: Estimated Number of Market Traders by Size (based on storage capacity, in quintals) and Location

Tiny

Small

Medium

Large

Market Location < 2 Q 10 - 50 Q 50 - 200 Q >200 Q Notes

Dillo 2 District Officer thought there are 6 – 7 traders but we only saw 2.

Dire (Mega) 30 7

Dubuluk (Mega) Visited on non-market day when all traders were closed.

Miyo 50 4 1 medium trader interviewed – 3 were closed on market day.

Teltelle 15 3

Yabello 20 15 6 Did not visit on market day so only saw 3 wholesalers (medium / large)

Total Borena 70 47 26 9

Many of the traders are women (100% of traders observed in Miyo and Teltelle were women, in Mega all small vendors were women and 2 out of 7 larger traders were women). On the consumer side, Borena’s rural population is widely dispersed. Access to markets can require trekking up to 85 km to coincide with one of the ‘market days’ across dry, un-paved routes.



The transportation network consists of the main Addis – Moyale tarmac road and rough feeder roads running off this main route. Many people rely on informal financial arrangements, such as buying on credit from traders, or Savings and Credit Cooperatives (SACCOs).

Market Support Services There are few market services, and those that do exist are mostly of an informal embedded nature. Traders rely on private trucks for transportation. Most traders reported some form of rental agreement for transportation – either by hitching a ride with their cargo on an ‘ISUZU’ truck or renting space in a truck. Only one or two traders reported owning transportation. Markets along the main route are serviced by trucks (ISUZUs) available for hire or run by some local traders, sometimes taking goods (primarily livestock) to Addis and returning laden with other goods ordered by the local trader. The markets of Miyo and Dillo are accessible by rough, dirt roads only. Dillo has ISUZU truck transport at most a couple of times a day. There are plans to ‘build’ the road however, and surveying teams have been observed along the route. (Whether this means paving or not was not confirmed). Larger traders reported most transactions with their suppliers as being either cash based, or through direct credit arrangement with their supplier. A common arrangement between street vendors and larger wholesalers who provide a ‘sack’ of maize to a vendor in the morning on ‘credit’ and the vendor repays the wholesaler in the evening. Any leftover stock may be left in the wholesaler’s store over-night for sale the following day. While no data is available for the number or capacity of SACCO’s across Borena, several projects have in the past helped to develop and strengthen these institutions (ACDI/VOCA and CARE).21 There are currently at least two commercial banks operating in Borena: Commercial Bank of Ethiopia (CBE) and Oromia International Bank S.C (OIB). The Commercial Bank of Ethiopia is the largest financial institution in the country with a rural banking network that has committed to support rural financing through agricultural input loans, (including loans for the purchase of fertilizer, account for Birr 4 billion), linking microfinance institutions (MFIs) to the funds they need to lend to the poor but productive segments of society in the rural areas of the country. In the last two years alone, the CBE has extended loans amounting to more than Birr 800 million to five MFIs for on-lending purposes. CBE has established a specialized unit called “Small and Medium Enterprises (SME) and Agricultural Unit” specifically to target small rural areas and help meet the financial needs of the petty trade operators in these towns and the small-holder farmers in the nearby rural areas..22 A bank is planning to open a branch in Mega this year. Both CBE and OIB offer ‘Demand Deposit’ or current accounts and require a minimum deposit of between Birr 500 – 1,000, identification, a trader’s license (for traders), photograph, and Tax Identification Numbers to open an account. One bank specifically states that its accounts are for ‘literate’ clients. Women traders who hold an account did not report any gender based obstacles to opening an account. Two of the nine wholesalers interviewed explicitly reported having a bank account, which they use for payment of orders placed in distant markets such as Sheshemane. Smaller traders responded that they did not have accounts, and banks do not exist in Dillo, Miyo, Teltelle, or Mega (although one is being planned).

21

Assefa, Tesfaye. Revitalizing Market-Oriented Agricultural Cooperatives in Ethiopia, ACDI/VOCA, 2002. www.acdivoca.org/acdivoca/CoopLib.nsf/.../$FILE/Final+Eth.pdf 22

Sano, Ato Abie. “Ethiopian Bank Targets the ‘Unbankable’.” The African Executive, 2008. http://www.africanexecutive.com/modules/magazine/articles.php?article=3790



Mobile-telephone banking currently does not exist in Ethiopia, and electronic banking, including ATM’s, is hugely under-developed across Ethiopia. A number of companies are currently entering the market to improve banking software and connectivity, including Temenos,23 Belcash (whose products include mobile banking facilities).24 There is one state-controlled mobile telephone company in Ethiopia (ETC). Network coverage is mixed across Borena, with Dillo currently having no mobile coverage at present. However, a mobile phone transmitter has been erected waiting for connection. There is little evidence of value addition to primary production in the area – the main activity observed was milling of maize, teff or wheat, a service paid for by customers requiring the flour. During normal times, livestock is largely traded in local markets providing cash for buying other commodities. Some products (chicken and eggs) are produced solely for commercial purposes serving urban markets (Mega, Yabello, and Teltelle). (There is a local taboo of eating ‘feathered’ animals).

Market Environment Rules governing trade exist at national and local levels. There are three forms of taxes imposed by the Government of Ethiopia, with local authorities responsible for collecting revenues and submitting these to the central government. Some markets require licenses, which can range from Birr 2 – 3,000 per year (cited by a medium wholesaler in Yabello) to 5 birr per market day traded or 40 Birr for a car-load entering a market. Some markets (Teltelle) reported ‘rules’ reserving rights to trade to local traders. Produce being brought in from the uplands attracts a local ‘customs’ charge at Yabello of up to Birr 10 per quintal. Depending on the source of produce, additional charges may be rendered along the highway between Addis Ababa and Yabello of around Birr 5 per quintal. Other costs for traders include labour paid to load and unload trucks – at Birr 5 per quintal bag in Yabello.

Drought-Affected Market Situation (See Annex E – Drought-Affected Market Map) Markets are functioning, albeit at a lower level of supply (in terms of maize in particular) available for sale. Prices of maize and other food items are high throughout the zone, reflecting overall price rises nationally and regionally. Other costs of doing business, especially transportation, have increased for traders. Despite high levels of need for maize (a staple crop and the only food item available for many poor families) demand has dropped and is particularly erratic around the time of food aid distribution. With limited sources of livelihoods or financing, pastoralists’ terms of trade for livestock has significantly eroded, causing a drastic decline in purchasing power and ability to buy sufficient quantities of maize to feed their families.

23

http://www.temenos.com/ 24

http://www.belcashethiopia.com/introduction



This decline in demand has impacted the markets. In August 2011, stocks being held by traders in markets across Borena were observed to be at around 30% to 50% of the maximum estimated storage capacity. Traders interviewed cited lower demand due to reduced purchasing power of pastoralists and drought relief (food distribution) as two main reasons for not maintaining stocks. Additionally, local production levels being nil means that local produce has not made its way to market. The Ganna (July – August) harvest in Borena would not normally be expected to produce a surplus and contribute to maize stocks in Borena. However, traders are currently procuring from outside the region, mainly in the uplands – though some small street vendors in Miyo are crossing to Kenya by foot to buy poor quality maize (presumably relief food) to sell in local markets.

Figure 8: Estimated Capacity of Traders in Borena, August 2011

Trader Description

Normal Capacity (Number of 100kg bags)

Stock in August 2011 (% of maximum

storage capacity)

Normal Turnover (100kg bags

sold per month)

Current Turnover (100kg bags

sold per month)

Estimated Restocking

Time Comments

Tiny (street vendor) 1-2 bags 50 - 70% 40 bags 20 bags 1 day

no fixed storage

Small (Retailer) 10-50 bags 50 - 70% 170 bags 100 bags 5 days

no fixed storage

Medium (Retailer and/or Wholesaler

50-200 bags 30 - 50% 5 bags 2 bags 3 days

Large (Wholesaler and Retailer) > 200 bags 25% 300 bags 150 bags 1 - 3 days

Extra-Large (National-level Wholesaler)

> 1,000 bags 10 - 30% 200 bags 100 bags 3 days

Note – this table is a very rough depiction of the stock levels in Borena based on observation of limited number of traders interviewed only and should not be used as a basis for absolute calculations of availability of maize in markets. Restocking days are estimates from time of demand.

High prices of supply combined with increased and high (compared to local trade) transport costs and ‘customs’ duties have brought the price of maize in Borena to record highs of between 6.50 – 9.00 Birr per kg. Prices have risen across the board, reflecting the high market prices nationally. Maize retail prices across Borena have nearly doubled compared to the same time last year, while beans and transport have risen by nearly 50%.25

Figure 9: Prices of Maize in Borena & Sheshemane, 2011(in ETB)

August 2011 May - July 2011

Borena

Wholesale 600 - 700 per 100 kg 600 - 700 per 100 kg

Retail 6 - 8.5 per kg 5.5 - 6.0 per kg

Sheshemane (wholesale)

650 per 100 kg 600 - 700 per 100 kg

National (wholesale)

N/A 492 per 100 kg

Note: RETAIL traders use a heaped TIN to measure and not a scale. Actual 'weight' is probably around 700 - 750 g

Prices vary dramatically across the region. In remote areas like Miyo and Dillo, the prices were cited at 9 Birr per kg for ‘upland’ maize in Miyo and 6 Birr per kg in Dillo. (Dillo is far more remote than

25

Oxfam Field research, August 2011.



Miyo so one would expect prices to be higher.) The main trading centres are trading at between 650 and 800 Birr per quintal. These prices are an average of 50 – 70% higher than the same time last year, but expectations are that the prices will begin to fall, or at least stabilise in the coming months as harvests in the upland areas enter markets. Selling prices have stabilised over the past three months, and except for Miyo, they are roughly in line with prices in source markets of Sheshemane, taking transportation costs into account. This indicates that Borena market prices are sensitive to national up-country prices, and are not only driven by local demand and supply dynamics.

Figure 10: Borena Market Prices for Maize and Beans, 2010 to 2011 (in ETB)

Overall traders are reporting that ‘business’ has been declining over the past three months, with lower turn-over compared to previous months and the same period last year. This is despite prices stabilising over the past three months, and increased household needs for food, indicating that purchasing power has declined amongst pastoral communities. Additional demand would also be expected from agro-pastoral households who normally rely on crops both for household consumption and trade. Thus the overall prognosis on the demand side is that while needs are high for the basic commodity maize, demand is actually down due to lack of consumer cash. Whilst some credit is available in part from traders, it will not be sufficient to cover household food and other needs. Terms of trade between livestock and food have eroded significantly. Pastoralists have had to sell of more animals to meet basic food requirements, with herd sizes estimated to be reduced by 75% - 90%.26 Food security indicators (number of meals per day) from several PAs in Dirre, Teltelle, and Dillo indicate a severe reduction in food intake relative to a normal period. The number of meals per day has decreased from a normal of 2-3 meals to 0-1 meals per day in the current situation.

These indicators of reduced purchasing power and reduced demand for maize in the market system help explain why the supply of maize is less than the actual need. Consumers are purchasing less because of less purchasing power, resulting in lower food security. As a result, wholesalers supply less maize to the Borena market because there is low demand.

Additionally, trader business is affected by food aid distributions, which are not always predictable in terms of timing. As traders see their sales reduced markedly at times of relief distribution, the uncertainty of timing makes it difficult for traders to anticipate when they need to stock more or less. With prices currently stabilising and potentially falling, traders will hesitate to hold stock that may fall in selling price.

26

Household interviews in Dire and Dillo, August 2011.

Aug-10 May - July 2011 Aug-11

Avg Retail Price of Maize: 3.76 5 7.25

Avg Retail Price of Beans: 4.5 6.5 7.5

Local Transport (per 10kg) 4 6

02468

PR

ICE

-B

irr

Borena Price Changes 2010 - 11



Conclusions 1. The maize market in Borena is functioning, but at a much reduced capacity due to the low

purchasing power of pastoralist households. Although maize supplies are lower than normal in

the markets, maize is available and there is also supply available in highland source markets.

There are appropriate numbers of traders active in the market centres, and these traders’

linkages with regional and national markets are still in place and functional.

2. It is likely that the market will respond to increased purchasing power of consumers. Traders

have connections with suppliers, and upstream suppliers do have access to maize. Additionally,

the primary maize harvest will become available in October or November, greatly increasing

availability in Borena zone and throughout the country. However, it could take Borena traders

from two weeks to two months when prices come down in November to increase their

availability of maize in local markets. Since cash is likely to enter the market slowly (potentially

phased) this will also dampen any strong ‘demand’ signals to traders, but will at the same time

give traders time to anticipate an increase in demand and respond by expanding maize stock.

(The market in Dillo is a notable exception due to the low capacity of that market vis a vis

potential beneficiary households – see recommendations below).

3. Based on current stock levels (30%-50%), supply is low for a number of reasons and if purchasing

power increases with cash infusion on the demand side, supply needs to be increased. Whilst

supply will likely increase by occur by October / November when harvests are due in the uplands

(and prices will likely stabilize), this timing is very late for many people facing severe food

insecurity.

4. Inflationary pressures on maize are likely to be tempered by a) presence of food aid increasing

supply of cereal throughout the period of intervention; b) sensitivity of the local market to up-

country, national pricing; and c) the maize harvest in October/November will put downward

pressure on national maize prices. These trends, and prices throughout the operational areas,

will need to be monitored.

Recommendations Cash Transfers: Targeted cash transfers to vulnerable households are recommended over other forms of support to households to a) address the lack of purchasing power of poor pastoralists; b) improve household food security; and c.) improve livelihood outcomes of traders and other actors participating in the maize market system. Cash is preferred over other forms of assistance because cash transfers provides consumers the choice purchase/substitute food items they prefer and that are available and provides overall liquidity to needy households to repay debts were necessary etc. Additionally, voucher programming would be costly and difficult to implement in this diverse and immature market due to multiplicity and low capacity of traders. Market Support: To accelerate the supply of maize into Borena in order to meet the anticipated rising demand for food grains that would accompany cash transfers, market support at two levels of the market chain for maize could be considered, as listed in the table below. In the case of Woreda-level wholesalers, the purpose of this assistance would be to mitigate the wholesaler’s risk of purchasing more grain stock now, right before the harvest time, when prices are highest. For support to cooperatives, the purpose of this assistance would be to assist in developing a market-



based supply and delivery route to both beneficiary households and all others living in the communities serviced by the cooperative.

Market Level Nature of Support Rationale

Woreda level wholesalers

Providing incentive payments to wholesalers that covers some of their (additional) costs of procuring maize from the uplands and spreads their risk of ‘buying high selling low’

Woreda level wholesalers are the key link in the markets and have capacity to increase stock

Cooperatives Cash grant to cover administrative and transport costs and an advance for the supply of maize to identified beneficiary households

Cooperatives can increase PA level availability of maize and can be used for supply of maize to specifically identified beneficiaries.

Wholesaler and cooperative selection should be based on a set of pre-determined criteria which includes agreeing to a set terms associated with the support package. Support would be in the form of cash (working capital) and some basic business capacity building / training. Cash Transfer Modality: Several modalities of cash disbursement using traders were considered. Given the capacity of traders and limited experience of their working with Oxfam, disbursement of cash through the traders is not considered appropriate. Setting up a system of transfer through traders would be costly both in terms of time and finance. Many traders will not have enough capital to disburse funds and with the absence of banking systems (physical or mobile) they would carry all the risk of physically transporting cash on distribution days. Recovery Phase and Long Term Planning: The market assessment provided an opportunity to also consider the types of interventions which would help in the recovery and long term livelihoods development processes in Borena. Further markets studies and more complete proposals would need to be worked out, and this section serves to capture some of the learning about what these could look like in order to reduce risks of future interventions leading to the type of food shortages witnessed during this assessment. 1. Agro-pastoralists play an important role in Borena, with small holder farming providing a key

livelihoods strategy as well as surplus staples for pastoralists to consume. While it is likely to be

too late to support crop production for the coming season where rains have already started,

future support to this sector is going to be important through:

a. Further detailed assessments will be needed to assess the need and feasibility of

seed/input support.

b. Considering markets based interventions which support agro-pastoralists with cash,

voucher, seed-fairs, or direct distribution of inputs, depending on assessment findings.

c. Timing is critical for these interventions, and careful consideration is required for any

potential support and whether it is appropriate at this time.

2. Focus on market services to improve finance, transport, and capacity building businesses for

both inputs and output markets.

3. Consider support services to non-livestock value chains (i.e. milk; aloe)

4. Explore opportunities for value addition in Borena, for instance drying crops locally.

5. Develop market based livelihoods recovery programmes, for instance through cash transfers to

pastoralists that enable asset recovery or demand for their preferred livelihoods strategies.



Annexes

Annex A: Key Sources and Contacts

Name Position & contact details Location

Hussein Galgalo Head, Dillo District Pastoralist Development Office

Dillo

Oromia International Bank S.C. Yabello Office + 251 46 446 0733 / 16

Yabello

Commercial Bank of Ethiopia Yabello Office + 251 45 445 0234

Yabello

Patrick Foley International Federation of Red Cross/Red Crescent Societies patfoley@@counterpoint.net

Addis Ababa

Ketay Baye Ethiopian Red Cross [email protected]

Addis Ababa

Hussein Pastoral Development Officer, Miyo Miyo Nyo Mohammed Pastoral Development Officer, Dillo Dillo Tekay Wiyou Pastoral Development Officer, Teltelle Teltelle Liban Arero Deputy Head Pastoral Development Office,

Borena Zone +251 916 607 062 / + 251 046 446 0776

Yabello

Lamman Ajjaman Pastoral Development Officer, Yabello Yabello Stefano Caria ODI Fellow with Ministry of Agriculture DRMFSS

+ 251 912 803 335 [email protected]

Addis Ababa

Persom Getachew Food and Agriculture Organization + 251 911 457 160

Addis Ababa

mailto:[email protected]



Annex B: Glossary Embedded services: Services included as part of another trading relationship – i.e. small vendors receiving bags of maize on credit from their suppliers are enjoying an ‘embedded’ financial service. Enabling environment: The policies, regulations, norms, systems, governance systems and major infrastructure that allow a market system to function. Market System: The whole web or system of people, trading structures, rules, power relations through which products are produced, exchanged and accessed. This may or may not be a series of ‘physical’ markets. Market Integration: Level or degree to which market actors are connected to each other. Horizontal integration refers to linkages between actors in the same value chain – in other words local, regional, national, international traders. Vertical integration refers to the linkages between different market system actors – in other words business services. Werreda / Woreda – administrative unit in Ethiopia below ‘zone’ level. Oromia Federal Region – Borena Zone – Werreda (Woreda). Often used synonymously with ‘district.’



Annex C: Map of Borena Zone Reproduced from: Livelihood Profile, 2008. Oromiya Region, Ethiopia Borana-Guji Cattle Pastoral (BGP) Livelihood Zone February 2008. Bgp.pdf

Annex D: Normal Situation Market Map, Borena Zone



Annex E: Drought-Affected Market Map, Borena Zone



Annex F: Assessment Questionnaire

Zone: Woreda: Market: Villages covered:

Date of Survey: Surveyor name: Trader / Retailer Name or id: Contact Tel No:

Name of person interviewed:

OWNER / Employee * MALE / FEMALE

If the person interviewed is NOT the owner - Name of Owner

MALE / FEMALE

Length business has been operating:

Trader Profile

1. What commodities does the business trade in? Maize Sugar Oil Beans Other

2. Where does the trader operate from?

Own Warehouse

Rented Warehouse

Open Market / Street

Home Other

3. Where does the trader store goods?

Warehouse Shop front Market stall Off-site (specify) Other (specify)

4. What is the trader size in terms of usual stock and turnover

[__] X- Large Wholesaler (> 1000 bags)

[__] Large Wholesaler (200 – 1000 bags)

[__] Medium Retail / WS (200 - 500 bags)

[__] Small - Retail (10 – 50 bags)

[__] Tiny – Street Vendor (1 – 2 bags or less)

5. How much stock is the trader currently carrying compared to capacity? (Estimate from amount of stock on shelves / in storage)

[__] 100 – 75% of capacity

[__] 75 – 50% of capacity

[__] 50 – 25% of capacity

[__] 0 - 25% of capacity

6. Does the trader operate in any other markets? How does trade here compare to those other markets?

YES / NO



Customers & Sales

7. Who are your main customers (Number / location / relationship etc.)?

8. What do your customers buy from you and in what quantities?

9. How often do your customers buy from you (daily / weekly / monthly?) How does this compare with last year?

10. How do your customers pay (cash, credit, barter?) Do you see a change from one to another form of payment these days?

Maize Sugar Oil Beans Other

11. How much stock do you sell every week?

12. How do sales compare with last month

13. How do sales compare with same period previous year?

Why do you think that demand has changed?



Storage and stocking

14. Are you out of stock of any product which you are being asked for? What is it?

15. How long ago was the last order placed and filled? (Number of days / weeks / since the last replenishing of stocks.)

16. How many days does it take to restock? (Number of days from placing an order to having the stock in store?)

Where and what type of storage does the trader have? (Describe if it is an area in the shop; outside area; if the area is locked; do they have to pay for storage?)

If stocks are low, why? What are the barriers to keeping stocks high / restocking?

If demand suddenly increased, how quickly would you be able to respond? What challenges would you face? What support could you use?

Transportation

17. What transport does the trader use?

[__] Own vehicle

[__] Rents vehicle [__] Jointly rents vehicle

[__] Public Transport

[__] Food / Donkey / Cycle

[__] Other (Please specify): ......................................................................................................

18. What is the cost of transportation? How does this cost compare with a year ago.

How is transport organised? Is it any more difficult to organise / pay for transport than last month? A year ago? Why?



Ordering and payments

19. How are orders placed? (If other please specify) [__] Phone [__] Through transporter [__] In person


20. How are suppliers paid? (If other please specify) [__ Cash in person [__]Bank transfer / cheque [__] Credit note


21. Does the trader have a credit line with his / her supplier? (Note – if possible, please ask and specify how much credit is available from each source)

[__ Credit with suppliers

Birr ....................................

[__]Bank credit

Birr ....................................

[__] family / friends loan

Birr ............................

[__] Other (Please specify): ...................................................................................................... Birr ....................................

22. What is the availability of credit compared to last month? Previous year?

Financials

23. Does the trader have a bank account? What bank?

YES / NO

24. How much working capital does the trader have?

25. How much capital does the trader currently have invested in stock / other business commitments?

26. How much debt does the trader have and whom does he owe it to (bank / suppliers etc.)

27. How much are you owed by your clients?

28. How often / when do you expect repayment?

29. What rate of default do you experience by your clients now? Compared to last year?



Trader monitoring of prices and volumes

30. For each commodity, please provide best estimates for each of the below.

Commodity & Unit

Current Stock levels

Source

(Where does the trader buy these goods from?)

Current average price (Birr)

Price compared to last month

Availability compared

with last month

Price compared to last year

Availability compared to last year

0: n/a 1: lower

2: same 3: higher

0: none 1: lower

2: same 3: higher

0: n/a 1: lower

2: same 3: higher

0: none 1: lower

2: same 3: higher

Maize (grain) - kg

Beans / Protein kg

Sugar - kg

Cooking fat - kg

Other 1

Other 2

Other 3

Other comments on market monitoring:

Date post:	14-Jan-2017
Category:	Documents
Upload:	blessing-mutsaka
View:	161 times
Download:	0 times

Ethiopia Borena Maize Market Analysis - Aug 2011 FINAL

Documents