Shocks and agriculture: Impact of the recent drought

ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE

Shocks and agriculture: Impact of the recent drought

Fantu Bachewe, Feiruz Yimer, Bart Minten, and Paul DoroshIFPRI ESSP

Transformation and vulnerability in Ethiopia: New evidence to inform policy and investmentsGetfam Hotel, Addis AbabaMay 27, 2016Addis Ababa

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Introduction- Ethiopia enormously affected by El Nino triggered

droughts since 2015; leading to severe hardship and food insecurity:

1. FAO (2015) estimates that production in 2015 declined by 14% compared to 20142. 10.2 million people require food assistance in 2016, on top of 8 million of PSNP(HDR 2016)3. In Feb 2016: 47% more malnourished children requiring therapeutic feeding compared to a year earlier (WFP 2016); 4. In March 2016: 2.5 million people in need for treatment for moderate acute malnutrition (MAM)

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IntroductionObjective: Seek to understand the evolution prices of crops,

livestock and wages in the last two years (January 2014 until January 2016).

Compare price evolution of the current drought with another era of major droughts in the country.

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Data and methodology - Two sources of data:1. Distinction of woredas by hotspot category

hotspot 1

hotspot 2

hotspot 3

not hotspot wereda

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Data and methodology 2. CSA price data:- Producer prices monthly collected in 400 woredas- Retail prices collected in 120 woredas

Producer

Retail

Producer and retail

Neither

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Agricultural prices - Price declines overall but less so in Hotspot 1 woredas

Real price changes from January 2016 to January 2014 (%)

Item OverallWoredas categorized as

Hotspot 1 Hotspot 2 Hotspot 3 UncategorizedCereals -11.3 -7.7 -11.9 -11.9 -13.4 Teff -0.0 1.1 -1.0 -0.9 -0.7 Maize -22.0 -18.4 -22.6 -19.0 -26.0 Wheat -8.1 -8.8 -10.7 -5.2 -8.1 Sorghum -19.8 -14.6 -20.5 -21.3 -23.6

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Crop Real Prices (Jan 2014- Jan 2016)

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Cereal price

Real cereal price changes from Jan. 2016 to Jan. 2014 Ja

n-14

Feb-

14M

ar-1

4Ap

r-14

May

-14

Jun-

14Ju

l-14

Aug-

14Se

p-14

Oct

-14

Nov-

14De

c-14

Jan-

15Fe

b-15

Mar

-15

Apr-1

5M

ay-1

5Ju

n-15

Jul-1

5Au

g-15

Sep-

15O

ct-1

5No

v-15

Dec-

15Ja

n-16

4

4.5

5

5.5

6

6.5

7

Hotspot 1 Hotspot 2 Hotspot 3 Uncategorized

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Agricultural prices

Four main findings on cereal prices:1. Overall prices declined by 11.3% for all woredas

combined2. Declines were lower in the hotspot 1 areas but still

substantial (8%)3. Prices in hotspot 1 and 2 are higher (as food deficit

areas, even before drought)4. Similar trends in cereal prices, indicating relatively good

market connection

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Comparison with a previous major drought

- Major drought in 1997/98- Production declined by 25% in that year (CSA)

Sea surface temperatures over the last 30 years

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Comparison with a previous major drought

- Significant price increases in 1997/98; not seen in 2015/16

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Livestock prices

Livestock prices have been declining, especially so in the drought affected regions

Real price changes from January 2016 to January 2014 (%)

Item Overall

Woredas categorized as

Hotspot 1 Hotspot 2 Hotspot 3 UncategorizedCows -4.0 -11.1 -7.7 -6.3 2.8

Oxen -7.3 -15.9 -12.8 -6.3 -0.1

Sheep -0.5 -8.7 -5.2 7.1 4.3

Goats -2.1 -3.4 -4.7 -1.1 -1.1

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Terms of trade

- Terms of trade of cattle prices compared to cereal prices are deteriorating in hotspot 1 woredas

- Overall, no deterioration

Changes in terms of trade (%) between livestock and cereals (comparing January 2016 to January 2014)

Items compared OverallWoredas categorized as

Hotspot 1 Hotspot 2 Hotspot 3 UncategorizedCattle vs cereals 8.4 -4.5 2.7 8.5 19.0Shoats vs cereals 13.6 4.3 8.4 17.5 19.5

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Food consumption

- Maize, wheat and sorghum important in the drought-affected areas

Tigray Afar Amhara Oromiya Somali SNNP Total0

100

200

300

400

500

Teff WheatBarley MaizeSorghum PulsesAnimal-products Enset/kochoRoot-crops Other

Kg/c

apita

/yea

r

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Food consumption

- Cost of the price of the consumption basket declined- Declined less in the most affected areas

Changes in real costs of per capita consumption (in %; January 2016 to January 2014)

Item OverallWoredas categorized as

Hotspot 1 Hotspot 2 Hotspot 3 UncategorizedCereals -11.2 -8.0 -11.4 -12.4 -13.9Cereals and root crops -9.8 -7.8 -10.2 -10.2 -11.8

Cereals, root crops and kocho -8.7 -7.3 -9.7 -6.5 -10.6

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Comparison with a previous major drought

- Significant increases in cereal consumption basked in 1997/98; not seen in 2014/15

Year

1...

Year

1...

Year

1...

Year

1...

Year

2...

Year

2...

Year

2...

Year

2...0.6

0.70.80.9

11.11.21.31.4

1997/98

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Price in last five months

- There is no change in trend

January February March April May234567891011

Real price (Jan-May 2016)

Teff Wheat Maize Sorghum

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Conclusions

- Cereal prices declined over the period studied, possibly because of large imports that came in and are expected;

- Costs of cereal consumption basket declined by 11%; smaller decreases in drought-affected areas

- Livestock prices has declined in drought-affected areas, leading to a decline in the terms of trade

- Overall, price effect is much different than in the previous drought of 1997/98

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Conclusions

- No indication of major large-scale effects of drought in cereal prices as costs of cereal consumption basket have not increased

- Still there is a clear and urgent need to further assist those who are affected