Can modern input use be promoted without subsidies? An analysis of fertilizer in Ethiopia

Abstract

Fertilizer use in Ethiopia has nearly quintupled since official elimination of direct input subsidies in the early 1990s. During this time, policies changed from liberalization, with both private and public sector participation, to a government monopoly over imports along with exclusive marketing through farmers’ cooperatives. This article presents estimates of detail costs and margins in the value chain, econometrically derived profitability and yield responses, as well as costs of the government's fertilizer promotion policies. Results suggest that (a) irrespective of the methods of calculation, fertilizer use in major cereal is profitable; (b) while there is no official subsidy program, fertilizer promotion has involved large fiscal costs—estimated at US$40 million per year since 2008; and (c) there has been a mismatch between government's policy targets and the effective fertilizer demand, resulting in large carryover stock with estimated implicit costs of US$30 million per year during 2008–2011. Areas of policy attention, value chain improvements, and ongoing efforts to improve for fertilizer use and profitability are discussed.

Transforming Staple Food Value Chains in Africa: The Case of Teff in Ethiopia

“…This leads to a high percentage of farmers being aware of recommended fertiliser use (50%) and improved technologies in teff. Fertiliser delivery also has improved (for example, Rashid, Nigussie, Minot, & Ayele, 2013) and there are now less complaints about lack of fertiliser, especially so in the more accessible zones, compared to 10 years earlier.…”

Structural Transformation of Cereal Markets in Ethiopia

“…The use of improved seeds is primarily found in the case of maize and wheat (Spielman et al, 2011), though the adoption of an improved teff (quncho) seed variety accelerated in the latter part of the decade (Minten et al, 2013). Second, fertiliser consumption in Ethiopia grew from 140,000 tons in the early 1990s to about 650,000 tons in 2012, and the area dedicated to cereal production that was fertilised more than doubled over the last decade (Rashid, Tefera, Minot, & Ayele, 2013). Third, the Ethiopian government has invested heavily in the expansion of the agricultural extension system.…”

Seed for change : the making and implementation of seed policies in Ethiopia

“…As reported by de Waal (2013), the late Prime Minister Meles "clearly stated that there should be no confusion that the EPRDF's mission is to build a capitalist state" (p. 151). However, despite a series of proclamations that emphasize the importance of the private sector, control of the agricultural input market began when the private sector in the fertilizer market was crowded out by the ruling party holdings in 1998 (Gebremedhin, Hoekstra and Tegegne 2006a;Hagmann and Abbink 2011;Rashid et al 2013). Moreover, while vegetable seed is still sold under a liberal market system, as only a limited number of farmers use it, the government is heavily involved in the distribution of seed of major food crops (Hassena and Dessalegn 2011).…”