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Analysis: Farmers endure market sabotage, inflation and price disorientation as government wheat export story takes news headlines by storm

A-farmer inspecting his wheat crop in Assasa-Ardaita area, Oromia ©Addis-Standard

By Getahun Legesse @Birmaduu2

Bale, Robe (Oromia)– For outside onlookers, when Prime Minister Abiy Ahmed officially unveiled the country’s plan to export wheat to neighboring countries from products in Bale zone, announcing the plans to export of 32 million quintals of wheat on the day, it presented a spotless spectacle.

https://twitter.com/AbiyAhmedAli/status/1624709736313819137?s=20

PM Abiy made the remarks during his visit to the scene on 12 February. “We have fulfilled what we promised our people and today we have made Ethiopia’s wheat export dream a reality. It is testimony that we dream big; say what we dream; do what we say, working day and night, and show what we have done after completion,” he boasted.

No sooner than the announcement, wheat prices shot through the roof, trading at 4,700 birr per quintal, up from 3,200 birr the previous day.

While the instant price hike is the immediate reaction, however, economists, farmers and observers have been arguing the wheat market sabotage among stakeholders has resulted in shortage of supply and skyrocketing of price, long before 12 February, and after the government’s decision to intervene in the market to buy wheat products from farmers at a pre-set prices and export to foreign countries, in what came as a bid to resolve the dire shortage of hard currency the country is facing. The decision has aggravated inflation and illicit trading in several parts of the the country.

The impacts of wheat price inflation on farmers, local consumers and the country at large is yet to be defined, but there are enough worries attributing such disorientation to the government’s ill-planned export initiative, while some argue it happened due to deliberate market sabotage. Both sides of the argument, however, agree that the unprecedented price rise and extreme drop of wheat supply to the market were witnessed in the immediate wake pf the premier’s announcement.

Now, tales of flour factories and factories that produce products such as like Pasta and Macaroni struggling to maintain their production lines and being forced to a halt are popping up.

Addis Standard recently traveled to Bale, Robe, in Oromia regional state, one of the areas known for its predominant production of wheat, and talked to relevant stakeholders, including unions, farmers and government officials.

“Although both the farmers and local merchants have a good deal of wheat in their stores, both were unwilling to sell at such price”

Farmer Ahmed Ali

The Bale and Arsi zones vast plain fields are well known for abundant wheat supply to the country, and what farmers in these areas say they witnessed no significant reduction in wheat production this year than previous years.

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Ahmed Ali, a farmer in Ali town, a small town in Agarfa district of Bale zone, Oromia region, asserts that wheat price inflation was “observed after the government started buying wheat” through local unions at a fixed rate.

According to him government officials informally forced wheat farmers to sell their product at a fixed price of 3,300 birr per quintal until it purchased the amount it needed. The market was then “liberated”.

“Although both the farmers and local merchants have a good deal of wheat in their stores, both were unwilling to sell at such price,” he told Addis Standard.

Several local media reports indicate that similar trends were observed in other parts of the region, especially in East Shewa zone, where stories of forced confiscations of wheat produces by local police were reported.

Hailu Yadete is another farmer in Ali town who has been supplying wheat to the market in large quantity in the past. Unlike Ahmed, Hailu believes the unprecedented wheat price hike has emanated from the overall market inflation trends observed across the country. He also believes that to an extent, the government’s initiative to export the cereal has indirectly impacted the market.

“The price of wheat increased as a result of the total price increment on other goods and services, including farm inputs such as fertilizers and pesticides,” he told Addis Standard.

Regardless, Haile is uncomfortable with the aggressive steps the government had taken. It is “unfair to force farmers to sell their products at such cheap prices,” he said, while the prices of other products has remained high.

“The price of goods and services, particularly that of steel, cement and fertilizer is extremely high; even a simple trouser as expensive as a quintal of wheat. Farmers have restricted to sell their products at such low prices”, which impacted their economic ability to cope up with the overall market inflation in the country, Hailu added.

Furthermore, he admits that such disorientation peaked in the immediate wake of the government’s intervention in procuring that “the price hiked as soon as the announcement was mad and movement of wheat from one area to another was restricted”.

The farmers do not want to sell their wheat at current price rather preferred to store the crops waiting for opportunities of further market inflation and only the merchants who have bought wheat prior to the inflation are currently supplying the market, Hailu remarked.

The farmer added that he fears the government’s market intervention will also impact the future cultivation and production of wheat as the farmers were forced to sell despite their interests.

Jemal Umer, marketing officer at Siko Mando Farmers Union, based in Bale, Robe said that the union purchased some 170,000 quintals of wheat in January and February this year at a fixed price of approximately 3,300 birr, out of which it supplied more than 30,000 quintals to the Ethiopian crop market as of end of March.

Following the governments initiation to export wheat, a number of farmers unions had been purchasing a large amount of wheat at a fixed price, aiming to export to foreign countries but the inflation has disrupted the market chain, the officer added.

“The union has now stopped buying the grain as it is unable to compete with the existing market price. Previously, the union was purchasing from the farmers easily but now the farmers including those who are member of the union are unwilling to sell at the fixed price and preferred selling to private purchasers,” Jemal told Addis standard, adding that “we cannot force the farmer to sell to the union at 3,200 birr while the price in the market is nearly five thousand”.

A farmer ploughing a wheat field using oxen near Dodolla, Oromia. ©Addis Standard

According to Jemal, in an effort to maximize productivity, the union is working with Oromia Seeds Enterprise to provide seed to the farmers and produced about 1,700 quintals of quality wheat seed on its own farmland while some associations of the union have also produced some 1,200 quintals.

However, government officials do not consider the complaints raised by the farmers and unions, rather shifting the problem to individuals who have been participating in wheat transactions.

The authorities accused the individuals whom they described as “greedy merchants” for plotting market sabotage and illicit trade, abstracting the efforts of the government to regulate the market through fixed price including by restricted wheat movement within the country but also forced state-owned farmers’ unions to buy a quintal of wheat at a fixed price.

“The government bought the crop in huge quantity from farmers at a fixed rate. This certainly has interrupted the market chain and triggered wheat hoarding and illicit trade”

Gutu Tesso (PhD)

Solomon Dadi, the deputy head of the Bale zone agriculture office, said the office has planned to maximize production through increasing productivity and manage to produce wheat thrice in a year through rain-fed and irrigated farming systems to resolve the shortage in the medium and long terms.

“The plan is to achieve food self-sufficiency, meet import substitution and run export of surplus wheat to foreign countries,” he told Addis Standard.

According to Solomon, the Bale zone harvested more than eight million quintals from 238,000 hectares of farmland in the 2022/23 harvesting season. This year’s productivity was almost as good as the previous years except the reduced productivity in the lowland areas caused by prolonged drought, he said.

Despite the assertion of the official regarding increasing productivity, the market has currently fall under scarce of supply and rise of inflation that impacted flour and pasta factories as well as consumers.

Gutu Tesso (PhD), an economist, however, said that although the wheat market inflation is directly intertwined with the overall market inflation, the inflation and shortage observed in the wheat market is mainly caused by the government’s plan to export wheat in a bid to curb shortage of hard currency.

“The government bought the crop in huge quantity from farmers at a fixed rate. This certainly has interrupted the market chain and triggered wheat hoarding and illicit trade,” Gutu told Addis Standard.

Following the increased demand for wheat, the stakeholders were forced to carry out market sabotage, mainly caused by the government intervention, the economist said, adding that “but the Ethiopian government was shifting the blame on the traders.”

The economist also commented on the steps the government has taken in influencing the farmers to shift from harvesting other crops to wheat farming which obviously triggered shortage of other cereals such as Teff in the market and price hike.

Farmers’ shifting from other crops to wheat farming triggered the problems of Teff shortage in the market which indirectly led to price hike in the market as well, and “these initiatives will have long term effect on the production and supply of crops”, he added.

The economist argued that these problems of market chain would have been resolved provided that “the government worked to supply enough wheat for the domestic market and should export after it had satisfied the domestic market. AS

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