Small beer: Farmers unable to grow enough barley, wheat, rice to supply agro-processors

Tuesday November 18 2014

Hule Abdurrahman (right) listens to a Meta

Hule Abdurrahman (right) listens to a Meta Diageo field coordinator at his barley farm. PHOTO | ANDUALEM SISAY GESSESSE | NATION MEDIA GROUP 

By ANDUALEM SISAY GESSESSE

In a small village in Arsi in Oromia Region, 180 kilometres from Ethiopian capital Addis Ababa, Meti Feyisa grows wheat, barley and beans on three and a half hectares.

About four months ago, Meti received 62.5 kilogrammes of barley seed from Diageo, one of the four leading breweries. Diageo bought Meta Brewery from the Ethiopian government a few years ago.

A few kilometres from Meti’s farm, Hule Abdurrahman, a father of nine, grows the same barley variety — Holker — on half hectare. Holker is a favourite of the breweries because its protein content is suitable for malt.

“I expect to harvest 15 to 17 quintals after four weeks,” he said.

At the current market price, the farmers sell a quintal of Holker and malt barley varieties at $10 more than they do those used for food.

“Farmers are now shifting from producing barley varieties for food to malt barley,” said Feleke Gezahegn, who is in charge of seed production, preparation and dissemination at the state-owned Ethiopian Seed Enterprise, which commands over 70 per cent of the seed market in the country.

Following the expansion of existing breweries and opening of new plants, the factories are now focusing on sourcing malt barley locally. For example, Diageo is pre-financing a barley production package for 6,300 farmers across the country.

“We are doing this as part of our vision to source 70 per cent of our malt from local farmers by 2015,” said Omondi Kasidhi, head of agriculture business development, Diageo-Meta Brewery Ethiopia.

“In addition to reducing the foreign exchange spent on importing malt, we want to increase the income of farmers by buying their crop at market prices and offering a quality premium of up to 20 per cent for the very best grade of barley from farmers," Mr Kasidhi said.

However, small-farm agriculture, which is mostly rain-fed, is itself a bottleneck for the industries that depend on the farmer. But if a company wants to import agricultural inputs from abroad, getting hard currency from the banks is not easy and often takes over six months.

The breweries — which are encouraged to export at least 20 per cent of their beer — cannot fully source their input from the local market. According to current estimates, the seven brewery plants in the country import $25 million’s worth of barley malt every year.

Arsi is also known for producing long distance athletes such as Haile Gebreselassie, Kenenisa Bekele and Tirunesh Dibaba. Asela Malt Factory, the single plant in the country supplying malt to all breweries is also found in this area.

“Unnecessary competition between us [seed producers] and the breweries is causing shortage of barley malt seeds,” Feleke said.

“We are both using smallholder farmers for production of improved barley malt seed. When we offer farmers a higher price, say by 15 per cent, as an incentive to produce the basic seed for us, breweries offer better incentives and buy the crop, which we would have used as seed. This results in a malt barley seed shortage. We need to work closely with the breweries to avoid this unhealthy competition,” he said.

This sums up the dilemma of the Ethiopian government: Even as it tries to woo investors into the country, smallholder farmers who are expected to supply upcoming factories with raw materials — wheat, barley, rice, for example — cannot seem to produce enough. This is a matter of concern for a country that made $3 billion from exports but spent $13 billion in imports in its 2013/14 financial year.

At the same time, the government is grappling with feeding its burgeoning population and its effort to get commercial farming going have been anything but successful. The country’s food import bill has been growing, again, a testament to the unpredictability of smallholder production and inefficient national planning, co-ordinating and regulatory mechanisms.

Agriculture-industry linkage

Agriculture, at 40 per cent, is the second largest contributor to Ethiopia’s $55 billion GDP. It comes after the service sector, which accounts for 44 per cent.

To move the economy from dependence on agriculture to industry, which accounts for 16 per cent of the GDP, the government has identified agro-processing as a priority investment area for the private sector.

From biscuit and edible oil production to milk and fruit packaging, foreign and local investors are entitled to government incentives such as bank loans, duty-free import of machinery and export exempt taxes.

Unfortunately, the small-scale farmer-dependent agricultural system cannot produce enough inputs to meet the demands of the rising number of investors. For example, despite the growing demand for beer and expansion of breweries in the country, the sole malt factory is supplying less than 50 per cent of the total demand.

Before the emergence of private seed firms a few years ago, state-owned Ethiopian Seed Enterprise ruled the roost. The firm now aims to distribute 14,000 quintals of certified Holker malt barley to out-grower farmers in June 2015 for multiplication on around 1,100 hectares.

The enterprise gets its seed varieties from 16 government agricultural research institutions. However, rapid urbanisation has resulted in reduced acreage hence lower output by the institutions.

According to Ethiopian Institute of Agricultural Research director general Fentahun Mengistu, the research centres have produced 60,000 quintals of various improved seed varieties in the past four years from the projected 160,000 quintals. To fill this gap, companies have sought permission from the research centres to import their preferred varieties then pass them on to farmers. For example, Diageo is introducing a malt barley variety from Kenya.

To help the agriculture research institution obtain enough quality seeds to seed multipliers, farmers and the agro-processing industries, Dr Fentahun said a lot needs to be done to strengthen the links between research centres, industries, international agriculture research institutions and universities.

Still food insecure

The country, which failed to feed its 30 million people three decades ago, is today struggling to both attain food security and sustain its emerging agro-processing industries. Some 2.7 million people are facing emergency food security conditions, according to the World Food Programme.

“Despite reducing the number of people living in extreme poverty from 38 per cent to 29 per cent over the past decade and improvements in health services, Ethiopia remains one of the world’s most food-insecure countries, where approximately one in three people live below the poverty line,” WFP stated.

For the past four decades, land in Ethiopia has been the property of the state, which leases it to both small-scale and large-scale commercial farmers. With over two million hectares of fertile land ready for commercial farming, the country continues importing food items from palm oil and sugar to wheat.

The imbalance between the rapid growth of population and the still smallholder farmer-dependent agriculture is often mentioned as a major obstacle for Ethiopia to become food self-sufficient and produce a surplus to foster industrial development.

Though the government insists it is possible to transform the agriculture sector through smallholder farmers, to its credit, it has tried to introduce private commercial farms such as the long awaited rice farm in fertile Gambella Region run by Saudi tycoon Sheik Al Amoudi and another run by Indian conglomerate Karaturi Global.

But commercial farming is not without its challenges. Besides poor planning, insecurity and lack of infrastructure, especially in the Gambella Region, are often mentioned as reasons for the commercial farms not delivering what they promised leading to cancellation of licences.

The previous directorate under the Federal Ministry of Agriculture, which was in charge of land for agriculture, has been transformed to an autonomous entity, Ethiopian Agricultural Investment Land Administration Agency, since July.

“Our duty is to introduce modern farming by the private sector,” said Abera Mulat, director general of the agency, which is in charge of 2.3 million hectares identified in different parts of the country.

“We plan to create agricultural economic zones based on the experience of industrial zones,” he says.

The agency has so far transferred 52,000 hectares to private agricultural investors, while verifying and certifying some 420,000 hectares transferred to investors by the previous directorate.

The question now is, “Can the nation, which will have 140 million population by 2025, feed itself and produce surplus for its industries to realise its vision of becoming a middle-income country?”

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