Regional Overview

The initial focus of the ACC Initiative in the the Oromia Region includes nine clusters across 114 woredas and ten commodities: maize, tef, bread wheat, durum wheat, malt barley, horticulture, haricot bean, beef, dairy, and apiculture. In 2015-16, greater emphais was placed on five clusters and commodities (maize, tef, durum wheat, bread wheat, and malt barley). The malt barley cluster in particular was given intensive support along most components of the value chain, while the other clusters have received support on selected components only.

Meanwhile, the Regional Transformation Council, chaired by the Regional President, has directed that (among other things) adequate attention be given to the development of value chains for secondary and rotation commodities. Analytical work is currently being done for maize, horticulture, and beef to serve as potential secondary commodities. In the coming year, the Council intends to revise its membership to encompass representatives from other sectors (such as trade, industry, roads, etc.); identify clusters that can serve as backward linkages to the IAIPs; engage the private sector and youth to expand value addition of commodities; and revise the roles and responsibilities of stakeholders supporting commercial farmers. Apiculture and beef clusters are also being considered as priorities for the coming year. In addition, mapping will be undertaken to identify other clusters in the region where the MoANR and MoLF can work with the region during the scale-up phase of the ACC initiative.

Clusters

MAIZE

Eleven woredas and 401 kebeles covering 103,350 hectares constitute the maize cluster in Oromia, which is located in Horro Guduru Wellega, East Wellega, and West Shewa zones. In total, 111,666 farmers are reached through this initiative. Maize is the most important crop in the cluster, with 22% of the cultivated area being dedicated to crops and production accounting for more than 15% of the nation’s output of the crop.

The vision for the cluster is to generate annual revenues of 59 million USD by 2020 through domestic sales of maize grain, flour, feed, processed cereals and snacks. This includes import substitution of maize products worth nine million USD, with 100% in-cluster product processing. Other targets that have been set are an increase of 129% in the marketed amount of maize, a growth of 50% in the cluster’s agro-processing capacity, and an improvement in farmers’ use of recommended inputs of 125%.

To meet these targets, a number of interventions have been initiated by the ATA and partner organizations. Strengthening the use of contract farming arrangements is one such intervention, as is investing in capacity building of cooperative storage facility staff in storage and aggregation techniques. Finally, other Transformation Agenda Deliverables, such as the Commercial Farm Services project and the DSM modality will be leveraged to help farmers better access vital inputs.

MALT BARLEY

The malt barley cluster in Oromia encompasses Arsi and West Arsi zones, covering 15 woredas, 79,273 farmers, and 30,347 hectares. Malt barley is the second largest cereal crop in the cluster (after wheat) and makes up a massive 65% of national production. The majority of malt barley produced in the area is supplied to Asela Malt Factory (AMF), the primary malting factory in Ethiopia. Although AMF already has a 70% share of the domestic malting market and its operations have tripled in recent years, it is as yet incapable of meeting the demand of breweries.

The strategic driver for this cluster is to exploit the opportunity for import substitution of malt barley in order to satisfy the growing demand of the beer industry (marketable surplus of malt barley for agro-industries is currently low). In addition to the needs of AMF, major brewers Diageo and Heineken are seeking to boost local barley production with the eventual aim to source domestically 100% and 60% of raw materials respectively within two years.

As such, the cluster envisions generating annual revenues of 81 million USD by 2020, through domestic sales of malt barley grain, malt, and beer in the country. Import substitution of malt barley products are estimated at 43 million USD, with 50% processing happening within the cluster and 50% through contractual agreements with processors in Addis Ababa and surrounding cities.

Increasing farmers’ use of improved inputs is therefore critical to this endeavor, with targets set at an increase of nearly 400% within five years. This is expected to contribute to increases of 24% in the average yield per hectare and 165% in the amount of marketed barley. Ultimately, this will lead to a growth in total revenue of over 450%. To realize the full potential of the cluster, priority interventions already under implementation include building agro-processing capacity; ensuring steady supply of farming inputs; and strengthening the contract farming framework and enforcement mechanisms for agreements between farmers and malting factories.

BREAD WHEAT

The Arsi and West Arsi zones are also home to the bread wheat cluster, as is the Bale zone. Overall, 22 woredas, 520,777 farmers and 308,846 hectares of land make up this cluster. The combined production of these three zones accounts for 32% of bread wheat grown in Ethiopia, of which only 20% is marketed. There are plans to increase this amount by 150% while also reducing post-harvest losses by 43%, thereby helping farmers to raise their income by at least 200%.

In addition to playing a vital role in raw bread wheat import substitution, the goal for the cluster is to source bread wheat for agro-industries by increasing local production and productivity. An estimated 221 million USD is expected to be generated by this cluster by 2020 through domestic sales of bread wheat grain, biscuits and crackers, flour, and bread. Import substitution, on the other hand, is expected to generate 18 million USD, with clusters undertaking between 20% and 100% of product processing.

In order to achieve the goals set out for this cluster, a number of interventions have been designed to remove the current bottlenecks. Greater input financing will be made available to smallholder farmers, especially women, who typically have even more restricted access. On the other side of the equation, cooperatives will also be assisted with output financing to enhance their crop aggregation and marketing capabilities. Stronger linkages are being built between suppliers and flour factories to stabilize the supply of wheat, and cooperatives are receiving training to improve their organizational, financial, and supply chain management.

DURUM WHEAT

Seven woredas in the Bale zone make up the durum wheat cluster, which covers 17,500 hectares and reaches 79,273 farmers. In contrast to many parts of Ethiopia in which farmers produce crops for subsistence, an impressive 96% of the wheat cultivated here is also marketed. The role of cooperatives and unions in marketing, however, is a paltry 12%, and the cluster is limited in wheat processing capacity.

Supplying durum wheat for agro-industries is a strategic driver for the cluster, as is durum wheat import substitution. Within five years, this cluster envisions generating annual revenues of 16 million USD through domestic sales of durum wheat grain and pasta, including substituting imports of durum wheat products worth seven million USD. Twenty percent product processing will take place within the cluster and 80% through contractual agreements with processors in Addis Ababa.

Among the targets set to help achieve the above vision is to increase usage of improved inputs leading to a growth of 45% in average yield per hectare. Critical to encouraging farmers to use improved inputs is providing credit access, which is currently being facilitated through the IVS. Linkages between cooperative unions and large-scale buyers are also being promoted to encourage increased commercialization of locally produced wheat.

TEF

The tef cluster in Oromia encompasses West Shewa, East Shewa, South West Shewa and Special Zones covering 200,192 hectares over 15 woredas. Approximately 72% of farmers in this area are engaged in tef production. Slightly more than half (52%) of tef grown is marketed, primarily through traders, but also through six major unions to a smaller degree.

The tef cluster aims to seize the opportunity to market surplus, value-added tef to domestic and export markets. Annual revenues of 127 million USD are expected by 2020 through domestic sales of tef grain, tef flour, and injera. An additional 2.5 million USD will be gained from export of tef grain to the United States and Western Europe, with 90% product processing happening within the cluster and 10% through contractual agreements with processors in Addis Ababa.

Through the activities being implemented, the cluster aims to achieve an increase of 168% in the domestic revenue of processed tef products, reduce post-harvest losses by 42%, and raise farmers’ incomes by 82%. The achievement of these goals depends on successfully addressing some of the challenges facing the cluster. Efforts in this regard include building the capacity of research institutions to expand their supply of early generation seed currently in short supply; improve farmers’ agronomic practices through trainings of woreda professionals and DAs and piloting successful interventions; and providing incentives and technical support to agri-businesses on processing and value addition.

Key progress

Full package scale-up is being implemented on tef, malt barley, and bread wheat. These efforts have been supported by capacity building of regional and zonal experts and farmers.

Work has been undertaken to integrate initiatives with other Transformation Agenda supported activities. In tef planting clusters, the complete package of row planting is being promoted along with planting of chickpea as a rotational commodity for double cropping. Meanwhile, the formal seed supply system is being supported by the DSM modality in all scale up woredas. Awareness raising workshops were organized for relevant organizations on input credit modalities, including zonal and woreda Bureaus of Agriculture and Natural Resources (BoANR), RCPAs, and Oromia Credit and Savings Share Company (OCSSCO). Input credit in the amount of three million USD was made available to farmers in the cluster through the IVS.

In terms of creating market linkages, unions in the cluster supplied 813,773 quintals of bread wheat to EGTE, and 71,000 quintals to unions with agro-processing activities. Additionally, clusters supplied 262,000 quintals of durum wheat to agro-industries, and 442,725 quintals of malt barley, which will enable AMF to source all of its needs domestically and eliminate imports this year.

Moreover, five unions have delivered 86,483 quintals of maize grain to WFP and other buyers through contractual agreements, and another five unions delivered 42,679 quintals of tef grain to Mama Injera and Consumer Association in Addis Ababa.  Through CBM, four unions worked with 72 primary cooperatives to source 290,000 metric tons of coffee, 1.16 million liters of milk, and 168,347 quintals of wheat and barley worth over two million ETB.

Challenges

The malt barley and bread wheat clusters faced numerous obstacles in 2016: limited input credit access, lack of a farmer-friendly and affordable row planters, and inefficiencies in cooperatives’ output marketing.

In addition, highly demanded malt barley seed varieties were in short supply and there were problems in coming to contractual agreements between AMF and breweries for barley malting. On the other hand, in the bread wheat cluster, farmers were continuing to use seed varieties that are susceptible to disease, largely because of the difference between the cost of improved seed and the profit on marketed grain. Lack of storage facilities and other logistical issues limited the capacity of EGTE to collect wheat in volume. Overall wheat price declines and the limited interest shown by agro-industries to engage in contract-based agreements with the unions were other challenges faced by this cluster.

Credit access and the need for row planters proved to be challenges for the durum wheat and tef clusters as well. Moreover, the tef and maize clusters also found cooperatives’ output marketing limitations to be problematic, while maize was additionally challenged by the tendency of unions to conduct business on a case-by-case basis rather than in a sustainable manner. Durum wheat in particular was limited by the fact that high-yielding seed varieties had not been sufficiently popularized among farmers.

In terms of full package scale-up, untimely fertilizer supply, shortage of tractor-mounted row planters, and heavy rain at planting time were the main challenges, as was the reluctance of farmers to take out input loans from OCSSCO due to the complexity of the process.