Synopsis: Agricultural prices during drought in Ethiopia

We analyze the evolution of crop and livestock producer prices and wages of unskilled laborers in Ethiopia over the January 2014 to January 2016 period, during which time the country was massively impacted by El Niño triggered droughts. The analyses reveal no evidence of widespread adverse price effects of the drought in the labor and cereal markets. Real prices of the major cereals were lower at the beginning of 2016 compared to two years earlier, especially for maize, sorghum, and wheat, the crops that make up the major source of calories in the areas that were most hit by the drought. Conversely, prices of root crops and pulses increased. Given the large importance attached to cereal consumption, the overall real food consumption basket price declined compared to two years earlier, the decline being lower in drought-affected areas. Considering crop and livestock prices jointly reveals that livestock-cereal terms of trade declined in the worst affected areas, contrasting considerably with improvements seem in areas less affected by the drought. This contrast is mainly due to livestock prices declining faster than cereal prices in such areas. The fluctuating behavior of cereal prices since January 2015 strikingly contrasts with the situation during the major drought of 1997/98. During that period, cereal production declined by 25 percent compared to the year before, with significant simultaneous real price increases of between 15 and 45 percent.