Joining the trend in several other African countries, Ethiopia plans to set up a commodities exchange system as part of efforts to re-energize its agricultural sector. While in some countries they are run by the private sector, Ethiopia's first such system is being spearheaded by the government. The Christian Science Monitor talked to key people involved in the initiative.
Stereotyped more by images of emaciated people during the famine of the 1980s than known for its farming prowess, the country actually produces more maize than its neighbors Kenya, Tanzania and Uganda combined. Most is grown for subsistence by smallholders, so only 30% reaches the market.
To change this situation, ways are being sought to make agriculture profitable enough for farmers to engage in it commercially, rather than merely for household food security. Ms. Gabre-Madhin, the head of Ethiopia's soon-to-be-functioning commodities exchange says, "Ethiopia is the second-largest maize producer in Africa, and yet Ethiopian farmers are getting poorer and poorer.We're going to have to do something very dramatically different."
There are 10 million farmers in Ethiopia, a country of 80 million, growing mostly cereals such as wheat, maize, sorghum, barley, sesame, and teff, an indigenous grain. Yet few farmers travel more than 12 miles from their homes in their lifetimes, so they have very little information about what their food would be worth if they did decide to sell it. When they do sell, they sell to a local trader, who then sells to another trader, and another, adding cost to the food when it finally reaches the consumer in large cities like the capital, Addis Ababa.
"The farmer doesn't know the price. He might get five cents here, but on the other side of the country, where there's a drought, he might get three times the price," says Gabre-Madhin. "So let's imagine the farmer goes to a warehouse where you have constant updates with the latest market prices. Now the farmer starts thinking nationally, not locally."
Similarly, traders in Addis Ababa would never buy product unless they saw the quality themselves. This is understandable. Some farmers have a habit of adding dust and stones to their grain to increase the weight and thus, the value of each sack sold. Under Gabre-Madhin's plan, each warehouse would have an independent neutral party that would test and grade the farmer's harvest, allowing traders in Addis Ababa, and potentially outside Ethiopia, to place bids on food, sight unseen.
Already, farmers are switching from their traditional crops to more profitable export crops. For example, over the past three years sesame-seed production has risen nearly 200 percent, from 199,000 tons in 2001 to 380,000 in 2005, even though sesame seeds are not used in Ethiopian cuisine. All of it is destined for the Middle East. A commodities exchange will only accelerate this trend.
While most academics applaud Ethiopia's embrace of the free market, some say that there are no easy fixes for a landlocked country that lacks good roads, reliable electricity, and where there is little investment in irrigation for those years when the rain clouds don't provide.
Convincing farmers and traders to abandon the only system they have ever known will not be easy. But by making the process of buying and selling food more transparent and predictable, everyone should benefit.
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