The Response of Ethiopian Grain Markets to Liberalization

producer to wholesale and retail levels are especially important for the design of local
purchase programs designed to raise producer prices through purchasing grain from
wholesalers.

• Based on preliminary findings from the 1996 GMRP/CSA household-level survey, the
estimated marketed cereal output from the 1995/96 meher harvest is as follows:

maize: 506,439 tons, or approximately 30% of total maize production
teff: 409,799 tons, or approximately 31% of total teff production
wheat: 233,904 tons, or approximately 28% of total wheat production
total cereals: 1,634,440 tons, or approximately 26% of total cereal production

These volumes and percentages clearly fluctuate from one year to the next as production
fluctuates. However, these estimates from the 1995/96 meher season provide an order
of magnitude estimate of marketed cereal output in a good harvest year for use in deciding
how much commodity should be purchased through support price operations, local
purchase programs, and/or food aid releases to help stabilize prices at desired levels.

• The volume of imported food aid wheat since the mid-1980s has significantly affected
cereal prices for wheat and teff in some major wheat-producing areas (e.g., Hosaenna)
and in areas where substantial food aid has been distributed (e.g., Mekele, Tigray). The
volume of imported food aid wheat has ranged from 0.3 to over 1.1 million tons since
1985, accounting for an estimated 20 to 50 percent of national annual marketed cereal
output. Econometric results indicate that food aid released in a particular region was
associated with a decline in white teff and white wheat prices in six of 10 cases. In these
cases, wholesale prices in a given region and a given month declined by 2 to 5 birr per
quintal for every additional 30,000 quintals of food aid released within that region over
the prior three-month period. By contrast, the importation of food aid wheat has not
significantly affected maize prices in any of the markets examined, presumably due to less
substitutability in consumption between maize and wheat. The welfare effects of lower
grain prices (due to food aid) on food production incentives, input use, and rural
livelihoods are complex and clearly differ among different types of rural households (e.g.,
those that are net purchasers of cereal vs. those that are net sellers).

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