Food Grain Marketing Reform in Ethiopia

During the past 15 years, there has been a high level of direct government intervention in food grain marketing in Ethiopia. To maintain its strong hold on the grain market, the government established a compulsory delivery quota system for both producers and traders, with geographically uniform fixed prices with no seasonal variation. Licenced traders were .banned in surplus-producing regions, and grain movements between surplus and deficit regions were restricted. As a result of the government's direct intervention in the grain market, markets beca·me disrupted geographically. The integrated market systems were cut off, giving way to the creation of segmented markets. The prices in these segmented markets were uncorrelated and created distorted prices. The distorted prices in turn led to artificial shortages of food crops. Recognizing the social and economic problems associated with the government's marketing and pricing policies during the late 1970s and the 1980s, a free market system was adopted in February 1990. Since then, the market has experienced price fluctuations related to supply and demand.