Staple Food Prices in Ethiopia

Cereal production and marketing are the means of livelihood for millions of households in Ethiopia. It is the single largest sub-sector within Ethiopia’s agriculture, far exceeding all others in terms of its share in rural employment, agricultural land use, calorie intake, and contribution to national income. Therefore, while the country has experimented with almost all dominant forms of political and economic ideologies,2 keeping the cereal subsector stable has influenced the agricultural policy thinking of all three political regimes over the past half century. The monarchic regime instituted grain market board; the central planning region (1974-91) renamed it the Agricultural Marketing Corporation (AMC) and expanded its scope to practically take over the staple food markets; and while the current government implemented substantial reforms, it continues to maintain the necessary policy instruments to intervene in case of emergencies. There is a widespread recognition that parastatal-centric policies of cereal price stabilization proved expensive and led to inequitable distribution of benefits. However, recent policy actions suggest that, like many other developing countries, Ethiopia is not yet ready to fully rely on markets. This became particularly evident during the food price crisis when the government re-instituted urban food rationing programs, carried out open market sales, and suspended local procurement by the World Food Programme (WFP), country’s food logistic agency (Ethiopian Grain Trading Enterprise), and non-governmental organizations (NGOs). This perhaps reflects the fact that risks of price instability—in term of economic, human, and political costs—is still the predominant consideration in food policy making of the country. This paper discusses the sources of such concerns and how they are reflected in recent policy actions. It provides evidence of the subsector’s significance; characterizes the key cereal markets in terms of production, trade, and price patterns; and summarizes the policy actions following food price crisis. The evidence on the importance of selected cereals is presented in Section 2, which is followed by a discussion of production and trade of those cereals. Section 4 analyzes price patterns, focusing on seasonality and tradability. A summary of public policy actions following the global food crisis is presented in Section 5; and the paper concludes with a summary and implications.