Better days ahead for grain
Micheal G. Francom is an agricultural counselor and the U.S. Department of Agriculture (USDA) liaison to the African Union. He has been in Ethiopia for more than three years visiting remote areas to understand better the agricultural practices in Ethiopia. Back in March, Francom, who was involved in the production of an annual report entitled “Grain and Feed” is also the one who approved it to be part of the Global Agricultural Network (GAIN) report. In this interview, Birhanu Fikade of The Reporter sat down with Francom to learn about the outcomes of the report, trends of production, consumption and marketing in agricultural commodities and current price buildup on products such as wheat, maize, sorghum, barley and millet. Excerpts:
The Reporter: In the “Grain and Feed” report which focuses on production, consumption and marketing patterns in Ethiopia and many countries have also highlighted the trends of wheat, barley, sorghum and millet production. However, it has not incorporated trends in teff production which is one of the major crops in Ethiopia; so can we say it shows a complete picture?
Micheal Francom: In the past years, we have included teff, but now we were trying to look at the major grains. Because of time constraints I didn’t have the chance to include teff in this analysis. The other thing is we are looking at some of the major international grains which mean the major commodities produced and traded globally. That is part of the reason why teff is not included in the report. It’s produced and consumed in Ethiopia. We started to see countries like Israel, the US, Spain and a few others start growing teff due to the increasing level of gluten free consumer population who wants the product. Coming back to the report, we tried to see what happened from October to January of last year. We tried to assess what happened and what we expect to happen in both situations. Hence, in 2017/18, without getting into the details, production of grain increased in Ethiopia primarily because of favorable weather conditions. This was on a national basis. But certainly, if you go to different parts of the country, there are significant shortages, particularly in the eastern half of Afar, Somali, Southern region and in parts of Oromia Regional States. The report is to demonstrate the national overall picture, which sometimes I feel is lacking in other analysis. Be that as it may, if you want to get a long-term trend analysis, see how much wheat or maize has increased in production in the last ten years. I can show you our database of production, supply and demand and what it looks like. I think in the report we did; wheat fluctuates every year. But, the purpose of the report is to look at what has happened in the recent years and forecast what we think will happen in this coming year. Hence, in trying to come up with the assessment, we are looking at the weather. It is one of the difficult things to predict here because of many agro-climatic conditions and rain patterns. In addition to this, we have pest and policy problems making it hard to forecast. For instance, a year ago when we did the report, we assumed that production wasn’t going to change significantly from the current year. In the last growing season, we didn’t know what Fall Army Worm is going to do. It’s a pest and we know it’s there. The government and development partners have done a great job in mitigating the potential impact in the last growing season.
There was a forecast that says at least 30 percent of maize production in the country will be affected by Fall Army Worm. How do you see that?
It’s hard to say how much is going to be really impacted because every part of the country is having different levels of infestation. The pest is moving at a very quick pace. The level of infestation is going to depend on how quickly the farmers respond to the pest and what type of interventions are applied. In the past year, we didn’t see a significant impact but we don’t know what’s going to happen in this coming year. That’s why we have to calculate; to provide the assumption determining the impact. We can always come back and say our assumption was incorrect and we need to modify our projections. Based on what we saw in the government’s response and other efforts to mitigate the spread and impact of Fall Army Worm, we assume we will not see large level of infestation and a minimal crop loses.
One of the interesting issues indicated in the report is the improvement of production trends despite expectations. It’s interesting because the country has endured consecutive and persistent drought seasons at least for three years. Despite the expectations, the report sees improvement in grain production. Why?
I think the expectations have been that this year is going to be better than the last year; because the conditions in the major growing regions were more favorable. From the national stand point, it improved from the previous year. If you were to ask the government or other experts, they would all agree grain production has improved primarily because of favorable weather conditions. Access to fertilizer, improved seeds and mechanization are playing a role in the production. Yes, Ethiopia has been in a drought situation. We have seen the humanitarian requirements that have been announced. Nevertheless, we have seen increase in grain production.
I want to hear your views on the trends of imports of wheat against the trends of production here. For instance, 800,000 metric tons of wheat purchase was announced last year by the government.
Wheat is a fascinating commodity for a number of reasons. One reason is that it is becoming so popular. Pasta production and consumption trends are going-up. I think that is one of the reasons that is driving some of the increases not only in production but in imports too. Consumers want to have more and if you think about it what is there for the two or three million Ethiopians that are born every year? Partly, injera is getting expensive and teff is becoming the most expensive grain in the market right now. Hence, all this and several factors I might have omitted have contributed to pushing consumers towards greater consumption of wheat and wheat products.
In the report you have highlighted about difficulties of wheat trade in this country as the government subsidized some products. What do you mean by that?
The volume of wheat production here is not enough to meet the actual consumption demand. On top of that, you need to import wheat for bread which is subsidized. You could be importing more to match the local consumer demand and in addition you have the US government as donors which imports wheat for humanitarian purposes. You end-up producing a little over four million tons and import close to 1.7 million tons every year. Looking into the future, I would expect the country to grow and consumers’ diets to change. From this simple assumption alone, more wheat production will be there in addition to the demand for more imports.
There is production and there is also a sizable import of grains. But when we see the stocks from the report, we don’t see much availability in the country. What is the reason?
The availability of information in the market place is difficult. You don’t have good numbers being reported on a monthly basis to tell us how much is produced or how much is exported and imported. You do have some data out there but you need to consistently triangulate and figure out the real story on the ground. We don’t have the transparency to know how much is being held. Most of the figures reported in the analysis are the number of stocks held by millers and the amount of stocks held by the government. Sometimes, there are other factors that drive stock figures to be higher or lower. The government-held stocks are related to better response for local needs as opposed to tendering to buy 400,000 tons and waiting for five or six months for the purchased wheat to arrive. You need to have it now to respond to humanitarian purposes or commercial purposes.
In addition to production and imports of grains, the report indicates the trends of exports. Some of the grains such as maize have been banned from export officially? Could you tell us about that?
It’s widely known that the government has authorized limited export of maize. That decision was made based on the assessment that there was a million-ton surplus of maize production in the country. As you saw in the report, we didn’t agree that there was a surplus production. This was due to the persistent humanitarian needs that are present. But, what you did end up seeing was in fact maize being exported to Kenya. Officially, if you looked at the numbers of the Ethiopian Revenues and Customs Authority (ERCA), the export is a little over 60,000 tons. Many people put that number up to 100,000 tons may be even higher. In addition to the official trades recognized, there are also some informal trades as well that had a number of implications. Not knowing what production looks like, not knowing what impact the Fall Army Worm had, the impact of drought in certain parts of the country and the fact that the country had allowed the export of maize, in my view are some of the contributing factors in fueling the rise in the price of maize. If you looked at the price of maize in January last year and in August and September, the price has doubled. You wouldn’t have expected prices to go up that high with the new crop being harvested. I think there was perhaps unintended consequence with the decision to export maize.
The prices of all of the grains you have put in the report show a staggering increase. The price of teff has seen an ever-increasing trend and similarly barley, sorghum, millet, and maize have also shown similar trends. What do you make of that?
I think what you are seeing is a demand push. When demand is greater than supply, price increases. I think there is market inefficiencies that cause prices to go as high as they are now. For instance, if you look at the prices of wheat, maize or other commodity prices including livestock; Ethiopia tends to have higher prices than what is in the international market. That suggests there is some sort of market inefficiency that needs to be adjusted. I am not sure what the answer is to help mitigate the rising price. Some of the measures depend on the country’s ability to produce more food, to import more food and to institute other reforms that will help keep food inflation down.
Have you met any officials, especially from the Ministry of Agriculture and Natural Resources or from the Central Statistics Agency in a view to discuss and reflect on the report?
I have other people to help me with the report. It’s not my own product, I have to say. Hence, they are meeting with the ministry of agriculture or livestock authorities depending on what the report is covering. I think by-and-large the government appreciates our analysis. It gives them something to reflect on. They might agree with it or may not. We are trying to work with the government to have some information that might not come out as quickly as we like to get in time to answer your questions; yes, we meet and discuss with them. But, I haven’t met officials to discuss this particular report. It is an international report and the government is appreciative of what we are doing and it helps us understand at a high level to identify where our resources should be channeled