The Response of Ethiopian Grain Markets to Liberalization



marketing system since liberalization. The eight zonal offices were closed, the branch offices were
reduced from 27 to 11, and the grain purchase centers shrank from 2,013 to 80. Since this
downsizing, the EGTE has played only a minor role in procuring grain. EGTE's annual average
grain purchases from smallholder farmers and traders has declined from 258,719 tons during the
1984/85 - 1989/90 period to 50,608 tons during the 1990/91 to 1995/96 period.4 In the 1995/96
season, in which EGTE was explicitly mandated to support producers’ maize and wheat prices,
its combined purchases of these two cereals from farmers at the stated support price was 12,373
tons. EGTE purchased less than 45,000 tons on maize and wheat from traders at negotiated
market prices.

Accurate information on cereal production and the volume of cereals marketed is very important
in designing effective price stabilization and food assistance programs. In light of this, the GMRP
has carried out a survey in collaboration with Central Statistical Authority in 1996 to estimate
total grain production and sales by the peasant sector. Preliminary results are given in Table 1.
The proportion of maize, wheat and teff marketed by smallholders is about 30%, 31% and 28%
of production, respectively. Total cereal sales (including teff, maize, wheat, barley, sorghum and
millet) from the 1995/96 meher season was estimated at over 1.6 million tons, about 26% of total
cereal production (GMRP 1996). Oilseeds are mostly produced for the market as their sale
accounted for 78% of the total production.

These results indicate that under the current policy environment, private traders now account for
over 95% of the cereals marketed by peasants in the country. Despite a stated mandate to
stabilize cereal prices, it is unlikely that EGTE’s purchases in recent years have been sufficient
relative to the total volume of trade to significantly influence market prices.

3. CONCEPTUAL FRAMEWORK AND METHODOLOGY

Generally, the elimination of delivery quotas, fixed prices, controls on interregional grain
movement and the reduction of barriers to entry in grain marketing can be expected to increase
competition and reduce costs in the grain marketing system. If the markets are made more
competitive, the profit motives of economic agents (farmers, traders, transporters, etc.), which
drive them to reduce their costs to the extent possible, are often asserted to increase the overall
productivity of the system. However, it is not always true that market liberalization automatically
leads to such idealistic situations and it is important to assess how the grain marketing system is
responding to the new liberalization policy. Such information provides feedback to policymakers
as to where bottlenecks persist and where adjustments are necessary to promote intended national

prices and markets to protect consumers from unfair price increases; (3) when necessary to export grain
to the world market to generate foreign exchange; (4) to maintain buffer stock for market liberalization;
and (5) to engage in any other related activity for the attainment of its objectives. It has been mandated
that EGTE perform these functions in a self-financing manner. However, very few marketing boards in
developed or developing countries have succeeded in appreciably influencing market price levels without
incurring substantial financial losses.

4Prior to liberalization, AMC also procured 100,000 to 300,000 tons of grain annually from state farms,
mainly wheat and maize, for supply to the state mills.

-3-



More intriguing information

1. Une nouvelle vision de l'économie (The knowledge society: a new approach of the economy)
2. Personal Income Tax Elasticity in Turkey: 1975-2005
3. Factores de alteração da composição da Despesa Pública: o caso norte-americano
4. THE CHANGING STRUCTURE OF AGRICULTURE
5. Notes on an Endogenous Growth Model with two Capital Stocks II: The Stochastic Case
6. Regulation of the Electricity Industry in Bolivia: Its Impact on Access to the Poor, Prices and Quality
7. Does adult education at upper secondary level influence annual wage earnings?
8. The Advantage of Cooperatives under Asymmetric Cost Information
9. Feeling Good about Giving: The Benefits (and Costs) of Self-Interested Charitable Behavior
10. The technological mediation of mathematics and its learning
11. Evolution of cognitive function via redeployment of brain areas
12. FASTER TRAINING IN NONLINEAR ICA USING MISEP
13. The name is absent
14. The name is absent
15. The name is absent
16. Testing Gribat´s Law Across Regions. Evidence from Spain.
17. TOWARDS THE ZERO ACCIDENT GOAL: ASSISTING THE FIRST OFFICER MONITOR AND CHALLENGE CAPTAIN ERRORS
18. Migration and Technological Change in Rural Households: Complements or Substitutes?
19. The name is absent
20. The voluntary welfare associations in Germany: An overview