Ethiopia’s increasing wheat demand hinders the country from being self-reliant

Published Feb 17, 2021
Ethiopia´s plan to become self-sufficient in wheat is far from becoming a reality. Despite government efforts to spread a national irrigation-based wheat cultivation in the main productive regions, as well as production projected to come in at a record high of five million tons for 2020/21, Ethiopia´s continuously increasing demand for the grain has not been able to secure the country's demand and still has it looking for international suppliers to mitigate the wheat shortage in the local market.

Self-reliance is key to growth

Wheat exporters shouldn't be too concerned yet about Ethiopia´s plan to become self sufficient in their grain consumption. Although Ethiopia’s wheat output jumped about 70% this decade, the country still depends on 1.2 million imported tons a year, which represents USD 210 million that the country spent on wheat imports in 2019.

Since taking office last year, Prime Minister Abiy Ahmed’s government has pledged to invest in irrigation and machinery and encourage more farmers to plant wheat to avoid reliance on imports by 2022. The government has been working vigorously to secure the country 1 billion USD through wheat import substitution efforts.

In order for the country to substitute wheat imports, it will need to boost its own production supply output by about a third, which have not yet been seen due to adverse weather becoming common in the region.

Wheat production is expected to soar by record numbers

Ethiopia’s wheat production for 2020/21 is projected to come in at a record five million tons, up by 2% over 2019/20 production which was 4,925 tons. The 2020/21 harvested area is forecasted at 1.85 million hectares, increasing from 1.80 million hectares from the previous season. Yield is estimated at a record of 2.76 tons/hectare if we see favorable rainfall throughout the growing season in the wheat belt. For the 2019/20 season the yield was 2.73 tons/hectare.

Government initiatives that encourage farmers to adopt improved seed varieties, and increase fertilizer distribution. To help increase wheat supplies, Ethiopia is allowing tax-free agricultural inputs, including better seeds, chemicals and farm equipment.

This situation shows that there is potential to increase wheat production with proper extension support, adequate applications of tools and technology, and proper weather conditions.

Source: FAS/Addis

Local Production yet to Meet Increasing Domestic Demand

According to Miftah Ali, Tridge´s engagement manager in Ethiopia, “local demand for wheat is increasing in Ethiopia because of the increasing number of wheat flour and wheat flour based-goods such as macaroni producing factories in the country. The factories are importing wheat from International suppliers in order to mitigate the wheat shortage in the local market”.

The country is seeing a spike in domestic wheat demand as rapid urbanization, high population and shifting food habits develop. Ethiopia’s wheat consumption is expected to reach 6.7 million tones in the marketing year 2020/21, a slight increase over 2019/20 which was 6.66 million tones.

Source: FAS/Addis

Ethiopian sources of wheat

Ethiopia grain imports are almost exclusively limited to wheat. All wheat imports except for food aid are purchased by the Ethiopian Government through the Public Procurement and Property Disposal Service (PPPDS) under the Ministry of Finance.

In 2019, Ethiopia imported grain from it´s main usual suppliers and holded tenders for purchase bis size amount up to 755,000 tons. The United States is the biggest source for wheat, with 30.7% of the import share, which represents USD 65 million import value. It is estimated that 30% from this value is for aid relief.

The second source of wheat comes from Romania and Ukraine, which have 29% and 24.5% of the import share respectively. Ethiopia imported from Romania a value of USD 61 million and USD 62 million from Ukraine. Other countries that can be considered strong sources of wheat for Ethiopia are; Russia, Bulgaria and Turkey.

It is important to mention that besides these official numbers, there is an estimation of around a 30% of wheat informal import. These informal imports are operations that don't go through the government subsidized protocol. Millers could source wheat from the ETBC (subsidized imported wheat) or from the domestic market, therefore there is a vast disparity in the imported value.

Market Outlook; Ethiopia will source more wheat in 2021

It is estimated that for 2021 Ethiopia will need to import 1.6 million tons of wheat to cover the current shortage in the domestic market. This is a 25% increase from what was estimated to be imported in 2020 (1.2 million) and will represent an increase of around USD 50 million.

For this the PPPDS, since late last year, has announced upcoming tenders that aim to cover shortages in 2021. An 80,000 mt tender financed by the World Bank was launched last September (2020), as well as a 400,000 mt deal that was supposed to be awarded in November (2020) but no apparent agreement was reached between the authorities and the sellers.

Sourcing wheat countries like the U.S, Canada and Russia will need to be attentive to upcoming tenders in 2021 that promise to be a very active year for the sourcing wheat industry in Ethiopia.

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