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The future of Ethiopia's agriculture: Drivers and Scenarios
1. ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
The Future of Ethiopia’s Agriculture:
Drivers and Scenarios
Presenters: Paul Dorosh and Bart Minten*
Ministry of Agriculture
Addis Ababa, Ethiopia
February 1, 2019
* This presentation compiles results of work by a team of researchers including:
Bart Minten, Mekdim Dereje, Seneshaw Tamru and Fantu Bachewe (Food Systems); Emily
Schmidt and Timothy S. Thomas (land constraints), and Paul Dorosh, James Thurlow, Tadele
Ferede, Frehiwot Worku Kebede, and Alemayehu Seyoum Taffesse (Perspectives Future of
Ethiopia’s Agriculture; Economy-wide Modeling).
Funding for this ongoing study by the Ethiopian Strategy Support
Program (ESSP) was provided by USAID, the European Union, and DFID.
2. 2
• Agricultural sector performance
• Substantial public investments, technical change and output growth
• Spatial and structural transformation
• Urban population doubled over 20 years (7.3mil. in 1994 to 16.7mil. in 2014)
• Agriculture’s share of national employment and GDP have fallen
• Dramatic improvement in household welfare
• Rural poverty fell (45% in 1999/00 to 26% in 2015/16)
• Child malnutrition (stunting) fell (58% in 2000 to 38% in 2016)
• Looking forward, how can this progress be sustained or even
accelerated?
Introduction
3. 3
1. Evolving Food Systems: 2000 to 2018
2. Future of Ethiopian Agriculture: 2018 to 2040, Drivers and
Scenarios
3. A Note on Climate Change
4. Conclusions
Plan of Presentation
6. 6
1. Context Drivers
Income growth and diet transformation
Increasing diversification in
the food basket
• However, quantities of
cereals consumed is
increasing:
- 1996: 127 kgs/capita
- 2000: 141 kgs/capita
- 2005: 150 kgs/capita
- 2011: 155 kgs/capita
• Share of cereals in
expenditures on the
decline 0
10
20
30
40
50
60
70
80
2000 2005 2011 2016
Shareinfoodexpenditures(%)
Cereals
Non-cereals
7. 7
1. Context Drivers
Income growth and diet transformation
Important difference between
urban and rural areas
• Urban residents have
different food basket:
- More consumption of teff
and meat
- Lower consumption of
maize, sorghum and
enset/kocho
0 5 10 15
teff
sorghum
maize
processed cereals
animal products
enset/kocho
F&V
% food expenditures
Rural
Urban
9. 9
2. Agricultural Land
Two sources of data: Satellite data and CSA
• Use satellite landcover data to evaluate landcover changes over
time
– MODIS land use and landcover satellite data produced by
NASA: 500 meter resolution between 2001 and 2013
– Average satellite data over time periods: 2001-2004 and
2010-2013
– Estimate kebele averages of cropped area over time (excluding
Somali and Afar)
10. 10
2. Agricultural Land
1. Factors associated with changes in crop land
– Evaluate land area change over time (2001-2013) taking into account:
• Share of cropland in base period
• Rainfall
• Elevation
• Terrain roughness (slope)
• Market access
• Road improvements
• Double cropping systems (Belg and Meher harvests)
2. Estimate the maximum [economic] cropland expansion potential
– Taking into account a kebele’s unique characteristics (above), what is the
maximum crop expansion it could achieve?
– Based on current cropped area share, how much more can each kebele
expand their cropland share?
11. 11
2. Agricultural Land
Land expansion is slowing down
Average Annual Growth in Crop Area, 2001-04 to 2010-13
Tigray SNNP Amhara Oromia Other Total
2001-04 to
2005-09 2.7% 1.2% 3.9% 2.1% -1.5% 2.7%
2005-09 to
2009-13 0.1% -1.1% 0.8% 3.2% 4.0% 1.2%
2001-04 to
2009-13 1.2% 0.0% 2.1% 2.3% 1.1% 1.8%
Total 2001-13 11.6% 0.3% 20.3% 23.2% 10.3% 17.0%
Source: Calculated from MODIS satellite data.
15. 16
2. Agricultural Land
CSA Data – Agricultural growth increasingly driven by yield increases,
less by area expansion
• Increases in area cultivated, labor use, use of fertilizer and improved seeds, and
total factor productivity (TFP) accounted for much of the 8.3 percent annual
average crop output growth from 2004/05 to 2015/16.
• Growth in crop output slowed to 6.7 percent per year in the second part of this
period, however, as growth rates of most major inputs declined (except
fertilizer).
-2
0
2
4
6
8
10
%
grain area
yield
16. 17
3. Changes in Farms and Farmers
Farm sizes smallholders are declining
0.7
0.8
0.9
1.0
1.1
1.2
1.3
2005 2007 2009 2011 2013 2015
hectares
Crop area per holder Agricultural area per holder
17. 18
3. Changes in Farms and Farmers
Farmers are getting older
Share of farmers in four age categories
16
18
20
22
24
26
28
30
32
%
Under 30 30-39 40-54 55 and older
18. 19
3. Changes in Farms and Farmers
Youth farmers have less land
0.7
0.8
0.9
1.0
1.1
1.2
1.3
hectares
Under 35 35 or older
21. 22
4. Agricultural Markets
Number of people that need assistance not coming down
0
5
10
15
20
Million
Source: World Bank
Number of HRD/PSNP beneficiairies
22. 23
4. Agricultural Markets
But Ethiopia in most years net agricultural exporter
(2.0)
(1.0)
-
1.0
2.0
3.0
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
BillionUSD
ag. imports ag. exports net exports
26. 27
• Drivers of Growth and Transformation
• Trends and Constraints on Agricultural Production
• Macroeconomic Environment and Constraints
• Future of Ethiopian Agriculture: Model Simulations
• Summary and Conclusions
Plan of Presentation
27. 28
• Increasingly binding land and water constraints (esp. in highlands)
• Technology-driven yield increases
– Improved seeds, quantity and quality of fertilizer
• Modernized value-chains
– Larger share marketed, reduced transport costs, cold-chains, value-addition
• Decelerating demand for cereals
– Accelerating demand for meat, dairy and process goods
• Faster urbanization: 16% in 2010/11 to 27% in 2034/35 (off. est.)
• Public investments
– Road and port infrastructure, urban versus rural allocations
• International economic climate and foreign investment
Drivers of Growth & Transformation
28. 29
• To a large extent, the effects of production increases on farmer
incomes are determined by the extent to which supply increases
relative to demand
– If supply increases faster than demand, real prices fall.
– Given relatively small change in quantity demanded when
prices fall (price-inelastic demand), real gross revenues decline
(though incomes could still rise if costs/ton fall due to technical
change).
– In general, declining gross revenues tend to reduce farmer net
incomes and welfare (though net consumers gain because of
lower real prices).
Effects on Farmer Incomes
29. 30
• Earlier CAADP analysis
– Would 6 percent / year agricultural growth raise rural incomes and reduce
poverty? (given rapid non-agricultural income growth)
– Model results suggested … with rapid non-agricultural growth, real prices of
food would not fall significantly, farmer incomes would increase; poverty
would decline.
• What actually happened?
– Major production increase
– Nonagricultural economy grew
– Real cereal prices rose
– Poverty fell
– Many other factors also
influenced outcomes.
CAADP Analysis & Actual Outcomes (c.2008)
0
100
200
300
400
500
600
700
800
900
1000
(2010Birr/quintal)
Maize Sorghum (red)
Teff (mixed) Wheat (white)
30. 31
Key factors
• Growth of agricultural supply relative to demand (price effects on
agricultural incomes)
• Structural change in economy: Number of farmers (and agricultural
workers) declines as a share of total population.
• Changing structure of demand: share of agricultural/food products
in total demand falls as incomes rise.
• Small investments targeted to poor farmers could still reduce
poverty even if aggregate agricultural growth has limited effects.
Will Further Agricultural Growth Promote Poverty
Reduction Given Structural Change?
31. 32
Zone Classification Parameters
Elevation:
Highlands: >1500 meters above sea
level
Moisture Reliability:
Annual rainfall (mean/std) >= 7.5
Cropping System:
Cereal or enset based (moisture
reliable highlands only)
Drought Prone Lowland /
Pastoralist:
Mean annual rainfall < 500mm
Ethiopia: Agroecological Zones
Highland moisture reliable zones accounted for 92%
of cereal area cultivated and production in 2013/14
32. 33
• Land (varies by region / agroecology):
– 0.6% annual growth in most scenarios (1.8% in moisture-sufficient lowlands;
0.7% in moisture-sufficient highlands)
• Labor (and rates of urbanization)
– Historical population growth rates 2007-15: urban 4.6%, rural 2.1%, overall
2.5%
• Capital (and rates of investment by sector)
– Determined by domestic and foreign savings
– Private and public investment choices
• Technical change (changes in TFP)
Drivers of Agricultural & Economic Growth
33. 37
• Detailed economic structure
– 75 sectors split across 6 zones (2010/11 social accounting matrix)
• Urban centers >50k | five rural areas and towns <50k
– In each zone, rural/urban labor separated by education levels and
households separated by expenditure quintiles
• Model assumptions and behavior
– National product markets
– Population and labor (by zone) grow at different rates
– Total crop land (by zone) grows at fixed rates (individual crops’ areas are
endogenously allocated)
– Foreign savings is exogenous; real exchange rate is endogenous
Ethiopia Economywide Model
34. 38
• Model captures agriculture’s contribution to the agri-food system
(AFS) and broader national economy
Ethiopia’s Agriculture-Food System
Share of total, 2010/11 (%)
Source: 2010/11 Social Accounting Matrix (SAM)
GDP Employment
National economy 100.0 100.0
Agriculture-food system 52.9 84.4
Agriculture (crops, livestock, etc.) 42.1 79.0
Agricultural processing (milling, etc.) 2.1 0.7
Farm/processing input production 1.3 0.4
Agricultural trade & transport 7.5 4.2
35. 39
• Model run over the period 2010/11 - 2039/40
– 2010/11-2015/16 replicates observed trends
– 2016/17 onwards based on projections
• Five scenarios:
1. Baseline: Business-as-usual
2. Cities: Faster urbanization in cities >50k
3. Agriculture: Greater investment in agriculture
4. Rural Nonfarm/Towns: Faster growth in rural nonfarm and towns <50k
5. Livestock: Shift in geographic area of concentration
Rainfall sufficient highlands: Decline in crop area and increase in livestock
productivity;
Rainfall sufficient lowlands: Increase in crop area and decrease in livestock
productivity
• Targeted investments displace other investments (no free lunch)
– e.g., investing in cities reduces investments in agriculture
Model Simulations
36. 40
Baseline Assumptions (1)
Source: Ethiopia CGE model results
National annual average growth rate (%)
2011-2016 2016-2026 2026-2040
Population 2.6 2.3 1.8
Labor force 2.6 2.3 1.8
Crop land 2.0 0.86 0.41
Livestock herd 1.4 0.8 0.4
Foreign capital inflows 30.0 -8.0 -8.0
Foreign aid inflows 1.5 -4.0 -4.0
Remittance inflows 15.0 -10.0 -10.0
Agricultural TFP 3.0 1.0 1.0
Non-agricultural TFP 3.0 0.5 0.5
37. 42
Model Results: Growth Drivers
Average annual growth rate, 2016/17-2039/40 (%)
Simulations have similar urban/rural population growth rates, labor supply
growth rates, and land expansion rates. TFP growth is fastest in the Cities and
Nonfarm scenarios.
Source: Ethiopia CGE model results
Baseline S1: Cities S2: Agric S3: Nonfarm S4: Livestock
National population 2.04 2.04 2.04 2.04 2.04
Rural 1.70 1.70 1.71 1.71 1.71
Urban 3.30 3.32 3.29 3.27 3.29
Total GDP growth 6.15 6.47 5.54 6.26 5.46
Labor supply 2.04 2.04 2.04 2.04 2.04
Land supply 0.67 0.67 0.78 0.67 0.76
Capital accumulation 7.53 7.85 6.87 7.82 6.79
TFP growth 6.15 6.47 5.54 6.26 5.46
Foreign capital/GDP (%) 24.18 24.26 22.39 24.53 21.82
Investment/GDP (%) 25.90 27.37 20.94 26.53 20.25
38. 43
• Real GDP growth slows
– 7.2% per year during 2016-26
– 10.1% per year during 2026-40
• Investment growth slows
– 25.3% per year during 2011-16
– 3.1% per year during 2016-26
– 25.3% per year during 2026-40
• Increased exports offset
declining foreign capital inflows
in 2016-26 period
• Steady growth in private
consumption
Baseline Results
Source: Ethiopia CGE model results
10.1
6.6
25.3
9.2
8.9
15.5
7.2
5.7
3.1
9.2
15.6
5.7
10.1
6.6
25.3
9.2
8.9
15.5
-10 0 10 20 30
GDP (market prices)
Private consumption
Investment demand
Government
Exports
Imports
Average annual growth rates (%)
Observed, 2011-16 Baseline, 2011-16
Baseline, 2016-26 Baseline, 2026-40
39. 44
Baseline Agri-Food System Dynamics
Source: Ethiopia CGE model results
0.0
10.0
20.0
30.0
40.0
50.0
60.0
2010 2015 2020 2025 2030 2035 2040
Shareofnationaltotal(%)
Agriculture-food system GDP share
Agriculture GDP share
Downstream share of total AFS GDP
52.9
42.1
20.5
28.7
23.0
16.4
40. 45
• City investments raise real GDP
by 7.5% relative to baseline
(agricultural investments result in
a decline by 12.8% relative to the
baseline)
• Largest rural GDP gains (17.4%)
from investments in nonfarm
activities, but draws resources
away from rural agriculture
• Nonagricultural GDP is 17.3% and
18.7% less in the agriculture and
livestock investment simulations
Growth Outcomes
Source: Ethiopia CGE model results
7.5
0.1
15.9
-6.9
10.3
-12.8
-2.4
-24.7
10.0
-17.3
2.5
17.4
-14.4
-0.5
3.1
-14.5
-4.5
-26.0
6.7
-18.7
-30 -20 -10 0 10 20
National
Rural
Urban
Agriculture
Non-agriculture
Deviation from baseline, 2040 (%)
S1: Cities S2: Agriculture
S3: Nonfarm S4: Livestock
41. 46
• Investments in agriculture and livestock accelerate AFS GDP growth
• Investing in cities accelerates national GDP growth, but draws
resources out of the AFS (lowering growth to 3.1%)
Agri-Food System Outcomes
Average annual growth rate, 2016/17-2039/40 (%)
Source: Ethiopia CGE model results
Baseline S1: Cities S2: Agriculture S3: Nonfarm S4: Livestock
National economy 6.1 6.5 5.5 6.3 5.5
Agriculture-food system 3.3 3.1 3.6 3.3 3.4
Agriculture 2.9 2.6 3.3 2.8 3.1
Agro-processing 5.3 5.3 4.9 5.2 4.8
Input production 4.8 4.7 4.8 4.9 4.5
Trade and transport
services 4.3 4.2 4.3 4.2 4.2
42. 47
• Investments in agriculture lead to
similar changes in national household
consumption in 2040 as investments
in cities.
• The largest gains in welfare come
from investments in rural non-farm.
• Urban investments benefit urban
households (by 1.5% points relative
to the baseline), but reduce national
average welfare (by 0.7% points)
– Generates demand for
agricultural products, but some
of these are imported
– Urban nonfarm producers
compete with rural nonfarm
producers
Household Welfare Outcomes (2)
Source: Ethiopia CGE model results
-0.7
-1.4
1.5
-1.0
0.3
-4.6
1.7
4.8
-7.5
-3.5
-2.0
-7.5
-10 -5 0 5 10
All
Rural
Urban
Growth Rates (Deviation from baseline, %)
S1: Cities S2: Agriculture
S3: Nonfarm S4: Livestock
43. 48
Annual per capita consumption growth for poor households
(%-point deviation from baseline)
Poverty* Impacts of Investments (2016-40)
Source: Ethiopia CGE model results
-1.5
-1.0
-0.5
0.0
0.5
1.0
2016 2020 2024 2028 2032 2036 2040
(%-pointdeviationfrombaseline)
Urban investments Agricultural investment Rural nonfarm investment
Agriculture invt more pro-poor
than urban invt through 2023-24
* Defining poor households as the lowest 40% in the income distribution.
44. 49
Annual per capita consumption growth for poor households
(%-point deviation from baseline)
Poverty* Impacts of Investments (2016-40)
Source: Ethiopia CGE model results
* Defining poor households as the lowest 40% in the income distribution.
-1.5
-1.0
-0.5
0.0
0.5
1.0
2016 2020 2024 2028 2032 2036 2040
(%-pointdeviationfrombaseline)
Urban investments Agricultural investment Rural nonfarm investment
Agriculture invt more pro-poor
than urban invt through 2023-24
Rural non-farm invt is more pro-poor
than urban invt through 2025-26
45. 50
• Rural nonfarm investments result
in large gains to poor households
(2.5%) as well as nonpoor
households (3.5%)
• Investments in agriculture and
rural nonfarm are more pro-poor
than investments in urban sectors
• Urban investments draw resources
away from AFS, which hurts both
poor and nonpoor consumers
Poor* Household Outcomes 2040 (2)
Source: Ethiopia CGE model results
* Defining poor households as the lowest 40% in the income distribution.
46. 51
• Agricultural growth is likely to decelerate
– Growing land constraints are only partly offset by cultivating more of the
moisture-sufficient lowlands
– Urbanization slows rural labor force growth (but rural pop. still grows)
• The broader agri-food system becomes more important over time
as agriculture’s direct importance declines (in relative terms)
– Investing in rural nonfarm activities greatly benefits poor (rural) households
• Urban investments generate faster economic growth and
structural transformation
– But trade-off in reducing poverty (faster growth requires greater investment
and therefore a lower share of consumption in total expenditures)
Summary: Economy-wide Analysis (1)
47. 52
• With rapid growth in the non-agricultural economy, demand for
agricultural products will continue to rise.
– Increased agricultural production can prevent an increase in real food prices
that would harm the poor.
• In spite of rapid urbanization and structural transformation, the
bulk of the poor will likely be living in rural areas with livelihoods
dependent on agriculture and the rural non-farm economy.
• Model simulations indicate that while investments in the urban
non-agricultural economy may have the biggest impacts on
growth, agricultural and rural non-farm investments will likely
remain most effective at reducing poverty at least through the
mid-2020’s
Summary: Economy-wide Analysis (2)
50. Climate Change Models:
Projected Higher Temperatures (2055)
Source: Average temperature results of simulations of 32 Global Climate Models. (See Thomas et al., 2019)
Note: R1 = Drought prone, highland; R2 = Drought prone, lowland; R3 = Humid moisture reliable, lowland;
R4 = Moisture reliable, highland – Cereal; R5 = Moisture reliable, highland – Enset; R6 = Pastoralist. .
55
51. Simulated Climate Change Impacts
on Crop Yields (2055)a
a Relative to 2013 yields.
Source: Thomas et al., 2019.
56
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
Maize Wheat Sorghum
2035 2055 2085
52. Simulated Crop Yields with
Climate Change and Technical Change (2055)a
a Relative to 2013 yields. Projections assume yield growth from technical change of 2.0, 1.0 and 1.0 percent per
year for maize, wheat and sorghum, respectively.
Source: Thomas et al., 2019.
57
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Maize Wheat Sorghum
Climate Change Effect Technical Change Total Change
53. 58
• Model simulations suggest that climate change will likely have only
relatively small effects on average yields of maize, wheat and
sorghum in 2035 and even 2055 in Ethiopia.
• Although temperatures are expected to increase, average rainfall is
also expected increase in most regions of the country. Thus,
agronomic conditions for cultivation of these crops may actually
improve in large parts of the country (especially the highlands) that
currently have moderate average temperatures.
• Nonetheless, crop yields will need to increase to enable cereal
production to keep pace with expected demand growth due to
increases in population and per capita incomes.
Climate Change Simulations
54. 59
• Continued public and private investments in agriculture and rural
infrastructure, as well as policies that maintain incentives for input
use and adoption of new technology.
• Moreover, even if future changes in climate have only moderate
impacts on average crop yields in Ethiopia, there is growing
evidence that weather outcomes, particularly rainfall, are likely to
become more variable in the future.
• Thus, there could still be substantial effects on crop production and
household welfare (as well as on livestock) due to extreme events
– droughts, floods or extremely high temperatures. There is no
reason for complacency.
Climate Change Simulations
56. 61
• Massive changes have taken place and continue to take place in
Ethiopia’s economy.
• Land constraints are becoming increasingly binding, especially in
the highlands, implying a likely deceleration in agriculture growth.
• With rural population projected to increase despite continued
urbanization, average farm size will likely decrease.
Overall Conclusions:
Drivers of Change
57. 62
• Rapid growth in the non-agricultural economy will likely result in a
sharp increase in market demand for agricultural products.
• Especially rapid rise of demand for non-cereals (“high-value”
products) and processed and convenience foods
• Rapid expansion of the agro-food system: Implications for
logistics, trading, transport and storage, processing and
distribution and modern retail
• Increasing requirements for improved food quality and safety
Overall Conclusions:
Modernization of Agricultural and Food Markets
58. 63
• Continued urban investments can result in further economic
growth and structural transformation, particularly if macro-
economic stability and incentives for private investment are
maintained.
• But without considerable investments in the rural economy, it will
be very difficult to achieve rapid poverty reduction.
• If poverty reduction is still a top priority, then it is too soon to
reduce the level of agricultural and rural investment in Ethiopia.
Overall Conclusions:
Priorities for Growth and Poverty Reduction
59. 64
Dorosh, Paul, James Thurlow, Frehiwot Worku Kebede, Tadele Ferede,
and Alemayehu S. Taffesse. 2018. “Structural Change and Poverty
Reduction in Ethiopia: Economy-wide analysis of the evolving role of
agriculture”, ESSP Working Paper 123.
Schmidt, Emily and Timothy S. Thomas. 2018. “Cropland Expansion in
Ethiopia: Economic and Climatic Considerations for Highland
Agriculture”, ESSP Working Paper 127.
Thomas, Timothy S., Paul Dorosh and Richard Robertson. 2019.
“Climate Change Impacts on Crop Yields in Ethiopia”, ESSP Working
Paper 130.
Selected References
