In Sarcb of a Stratgy: Rtbinking

Agricultur-ld Crowtb in Etbiopia

Svntbesis Poper preporeJ os port of o stuJv on
Aqriculture onJ 6rowtb in Ftbiopio
1



Stfan Drcon, Rutb Vargas Hill
and Andrw Zitin

May 2009


1
1hls work has been funded bv Lhe ueparLmenL for lnLernaLlonal uevelopmenL (ullu), unlLed klnadom. 1he
vlews expressed are noL necessarllv Lhose of Lhe ullu. Cnlv Lhe auLhors are responslble for anv errors.
ConLacL: sLefan.derconeconomlcs.ox.ac.uk


1

In Seaich of a Stiategy: Revisiting Agiicultuie-leu uiowth in Ethiopia
Stefan Beicon, Ruth vaigas Bill anu Anuiew Zeitlin
0niveisity of 0xfoiu, Naich 2uu9

Summary and action points
1he backaround Lo Lhls sLudv was a requesL Lo explore Lhe scope and consLralnLs on furLher
arowLh and commerclallzaLlon of LLhloplan aarlculLure, wlLh an emphasls on Lhe maln food
sLaples ln Lhe counLrv, Leff, wheaL, malze, barlev and sorahum. 1he conLexL ls
unprecedenLed arowLh ln aarlculLural Cu, larae lncreases ln reporLed areas culLlvaLed and
vlelds ln recenL Llmes buL also, mosL recenLlv, rapld food prlce lncreases.
AarlculLure ls Lhe kev secLor ln Lhe aovernmenL's developmenL sLraLeav. lurLhermore,
cereals are Lhe maln food sLaple, cruclal for real waaes ln Lhe resL of Lhe economv and, ln a
landlocked economv, Lhev are besL undersLood as a commodlLv LhaL ls noL lnLernaLlonallv
Lradable. 1he lmpllcaLlon ls LhaL Lhe sLudv of producLlon arowLh has Lo be undersLood wlLhln
Lhe conLexL of Lhe overall economv, leadlna us Lo conslder also Lhe underlvlna quesLlon of
Lhe role of aarlculLure ln arowLh ln aeneral, and lLs lmpllcaLlons for Lhe process of fosLerlna
arowLh ln aarlculLure.
1he aovernmenL sLraLeav, as reflecLed ln AuLl , and lLs recenL arLlculaLlon ln ASuL,
concepLuallzes Lhe overall arowLh process Lo sLarL essenLlallv ln aarlculLure and cereal
producLlon, wlLh producLlon arowLh leadlna Lo more markeLed surplus, more demand for
non-aarlculLural commodlLles and a release of labour for urban and non-aarlculLural
developmenL. ln our work, we have quesLloned some of Lhe premlses of Lhls sLraLeav, boLh
on concepLual/LheoreLlcal arounds as based on Lhe recenL experlence from LLhlopla and
elsewhere ln Lhe world. Powever, we found a kev premlse ln AuLl, Lhe need Lo boosL cereal
producLlon, Lo be correcL. We quallfv Lhls premlse neverLheless LhaL ln order Lo feed lnLo
overall arowLh, lL requlres a commensuraLe efforL focuslna on Lhe arowLh process ouLslde
aarlculLure. lurLhermore, a narrow focus on producLlon ls counLerproducLlve ln Lhe
medlum run, requlrlna more focus on Lhe value of producLlon and on reLurns Lo aarlculLure
across Lhe value chaln.
Cur work has led Lo Lhe ldenLlflcaLlon of a number of acLlon polnLs, whlch should asslsL ln
prlorlLlzlna furLher aovernmenL efforL ln aarlculLure.


2

Act|on po|nt 1: We urgent|y need a process of va||dat|on of the data on cerea| product|on,
area cu|t|vated and y|e|ds.
1he flaures on recenL aarlculLural performance are lmpresslve: doubllna of cereal ouLpuL ln
Lhe lasL Len vears, 44 more land culLlvaLed wlLh cereals and 40 hlaher vleld ln Lhe same
perlod. ln Lhe lasL flve vears, 12 more cereal producLlon pet veot, vleld arowLh of 6 percenL
per vear and area arowLh of 3 per vear. 1he same daLa sources show no evldence of
lnLenslflcaLlon of aarlculLure: no lncrease ln ferLlllzer use per farmer or per hecLare, no
slanlflcanLlv more lrrlaaLlon, and expandlna buL sLlll relaLlvelv small areas under Lhe
exLenslon proaramme. LLhloplan vlelds have arown fasLer Lhan recorded elsewhere, even
compared Lo Lhe areen revoluLlon ln lndla, Chlna or vleLnam. lf Lhe daLa are correcL, Lhls ls
Lhe fasLesL areen revoluLlon ln hlsLorv, and lLs mechanlsms should be analvzed. lf anv of Lhe
daLa, such as Lhe area expanslon daLa, are noL correcL, Lhen Lhls has huae lmpllcaLlons for
pollcv, as lL would suaaesL LhaL food producLlon ls conslderablv lower Lhan reporLed. lf Lhe
vleld arowLh ls due Lo Lhe exLenslon efforLs, Lhen careful evaluaLlons could pln down lessons
learned, as Lhev would be lmmenselv lmporLanL for oLher parLs of Lhe counLrv and bevond.
Act|on po|nt 2: 1he sc|ence to promote product|v|ty growth v|a |mproved seeds requ|res
more support.
lL has commonlv been assumed LhaL Lhere are huae aalns ln vlelds Lo be obLalned uslna
exlsLlna packaaes of lnpuLs such ferLlllzer and seeds. lor example, lL has been commonplace
Lo quoLe evldence from Lhe Sasakawa Clobal 2000 work suaaesLlna LhaL vlelds could
lncrease Lhreefold from uslna packaaes of lmproved seed, ferLlllzer and exLenslon. 1he
ASuL pro[ecLed a 120 aaln ln averaae cereal vlelds ln LLhlopla ln flve vears. lL ls well
known LhaL onlv for wheaL and malze can slanlflcanL aalns be obLalned vla lmproved or
hvbrld seeds, Lhe lmprovemenLs avallable for oLher crops, noL leasL Leff, remaln llmlLed.
locuslna on Lhe mosL promlslna crop, malze, Lhe svsLemaLlc revlew bv Anchala eL al. (2001)
showed LhaL on farmer demonsLraLlon ploLs, Lhe vleld aalns from lmproved or hvbrld seeds
under LradlLlonal pracLlces were abouL 20 compared Lo LradlLlonal seeds, under lmproved
pracLlces (such as ln Lerms of ferLlllzer use and culLlvaLlon pracLlces) Lhe aalns from
lmproved seeds were 30 compared Lo LradlLlonal seeds. 1hese percenLaae aalns on offer
are subsLanLlallv lower Lhan whaL was on offer durlna Lhe Creen 8evoluLlon ln SouLh or LasL
Asla.
roaress on seeds ls noL onlv hlndered bv sclence, Lhe aaro-ecoloalcal dlverslLv of LLhlopla
makes developmenL of sulLablv adapLed varleLles cosLlv and dlfflculL for Lhe small buL
compeLenL crop sclence communlLv ln LLhlopla. 8uL ln Lerms of lnLernaLlonal sclenLlflc
aLLenLlon, LLhlopla ls serlouslv maralnallsed. lL would be Llmelv Lo encouraae hlah-proflle
lnLernaLlonal lnvesLmenLs ln relevanL crop research, lncludlna ln Lhe fleld of bloLechnoloav.
arLnershlps wlLh lnLernaLlonal prlvaLe secLor parLners should noL be lanored, and Laklna a
lead from recenL proaress ln vacclne developmenL and oLher medlcal research, lL ls posslble


3

Lo deslan research arranaemenLs LhaL creaLe lncenLlves for research and developmenL,
wlLhouL anv subsequenL dependence on mulLlnaLlonal flrms.

Act|on po|nt 3: 1he |nput packages ava||ab|e need to be reba|anced away from too much
attent|on to fert|||zer.
uslna properlv comblned lnpuL packaaes (lncludlna lmproved seeds, lmproved pracLlces and
ferLlllzer), subsLanLlal vleld aalns are avallable for LLhlopla, provlded Lhev can be made
sulLable for parLlcular locallLles. lor example, near crop research sLaLlons, a doubllna of
malze vlelds on farmer demonsLraLlon ploLs has been proven feaslble from uslna such
packaaes relaLlve Lo LradlLlonal seed and pracLlces. ln pracLlce, ferLlllzer has been sLronalv
promoLed wlLhouL sufflclenL avallable lmproved seeds. lor example, ferLlllzer use has
moved near 40 of land area culLlvaLed wlLh cereals, buL lmproved seeds onlv cover less
Lhan 3. lurLher ferLlllzer expanslon ls bound Lo be consLralned: whlle vleld aalns are
relaLlvelv subsLanLlal especlallv for wheaL and malze (Lvplcallv aL besL abouL 30), for oLher
crops such as Leff Lhev are far more llmlLed. lurLhermore, Lhese aalns onlv maLerlallze when
comblned wlLh Lhe adopLlon of opLlmal farm manaaemenL pracLlces ln weedlna, Llmlna of
planLlna and seed raLes, oLherwlse, aalns are Lvplcallv far less. MosL lmporLanLlv, as ferLlllzer
ls expenslve, economlc reLurns are verv low and llkelv Lo be neaaLlve for a larae share of
farmers noL uslna lL aL presenL. lerLlllzer expanslon should noL be expecLed or promoLed
unless as parL of a compleLe packaae wlLh seeds and aeneral lmproved pracLlces.
Act|on po|nt 4: 1he seed mu|t|p||cat|on system |s fa|||ng Lth|op|an farmers and urgent|y
needs to be reformed and expanded.
Lven lf seeds alone do noL offer Lhe masslve scope for vleld aalns, Lhev are cenLral Lo Lhe
lnpuL packaaes currenLlv promoLed. 1he lnablllLv Lo scale up Lhe mulLlpllcaLlon svsLem ls
sLrlklna. Clven Lhe dlfflculLles for quallLv conLrol, on-farm mulLlpllcaLlon svsLems are unllkelv
Lo subsLlLuLe for Lhe laraer scale svsLems requlred. lncenLlves for commerclal farms Lo
expand seed producLlon are essenLlal.
Act|on po|nt 5: 1he extens|on system needs a systemat|c eva|uat|on of |ts contr|but|on to
|ncreased y|e|ds.
ln recenL vear, Lhe exLenslon svsLem has been developed lnLo a larae-scale demand-drlven
svsLem of advlce Lo farmers. lL mav well have conLrlbuLed Lo Lhe recenL lncreased vlelds.
Powever, lL has noL been sub[ecL of svsLemaLlc daLa collecLlon for evaluaLlon, compared Lo
oLher kev elemenLs of pollcv maklna ln LLhlopla, such as Lhe Sn. A careful quanLlLaLlve
evaluaLlon focuslna on vleld effecLs mav provlde essenLlal evldence on how vlelds can be
lmproved furLher.


4

Act|on po|nt 6: o||c|es re|ated to food markets shou|d focus on reduc|ng transact|ons
costs between urban and rura| areas to reduce the gap between urban cerea| pr|ces and
farmgate pr|ces.
Whlle cereal markeLs are reasonablv well lnLearaLed, LransacLlons cosLs remaln hlah,
conLrlbuLlna Lo farmers recelvlna a relaLlvelv low share of cereal prlces (ofLen esLlmaLed
beLween 30 and 60). SufflclenLlv hlah farmaaLe prlces remaln essenLlal Lo offer Lhe
economlc reLurns necessarv for farmers Lo adopL new Lechnoloales and lmproved varleLles,
buL as arowLh would be affecLed bv hlah consumer prlces, reduclna LransacLlons cosLs ls kev
Lo reLaln Lhese lncenLlves. As road lnfrasLrucLure has lmproved conslderablv, kev areas of
aLLenLlon lnclude LransporL and Lhe (verLlcal) lnLearaLlon of Lhe markeLlna chaln.
Act|on po|nt 7: Urban |ncome growth |s |mportant to susta|n a process of
commerc|a||zat|on of cerea| product|on and the overa|| transformat|on of agr|cu|ture.
World cereal prlces are onlv lmporLanL for cereal producLlon aL Lhe maraln, as LransacLlons
cosLs Lo Lhe border resulL ln a huae aap beLween lmporL and exporL parlLv prlces, l.e. Lhe
aap beLween Lhe wholesale prlce above whlch lmporLs would be proflLable and Lhe
wholesale prlce below whlch exporLs would be proflLable. As exporL parlLv prlces are verv
low, a sufflclenL arowLh ln urban demand for food remalns essenLlal Lo avold LhaL anv
furLher vleld expanslon resulLs ln low ouLpuL prlces LhaL would ln Lurn make lnnovaLlon and
lnvesLmenL ln aarlculLure unproflLable. 1he experlence of Lhe effecLs of Lhe bumper malze
harvesL ln 2001/02 when prlces collapsed Lo verv low, (and for farmers) unproflLable levels,
remalns a relevanL warnlna for Lhe fuLure developmenL of cereal producLlon. 1he kev lesson
ls LhaL wlLhouL expanslon of aarlculLural demand, proaress ln Lhe LransformaLlon of
aarlculLure ls bound Lo be consLralned. AL Lhe same Llme, reduclna LransacLlons cosLs for
lmporLlna and exporLlna cereals, vla lmprovemenLs ln LransporL and markeLlna would
lmprove exporL parlLv prlces and reduce lmporL parlLv prlces, Lherefore lmprovlna farmers'
lncenLlves whlle reduclna urban food prlce pressure.
Act|on po|nt 8: As part of a roadmap to better funct|on|ng pr|vate sector market
|nst|tut|ons, the contestab|||ty of fert|||zer markets, seed markets and transport markets
needs to be mapped and |mproved.
uurlna our revlew of Lhe sLaLe of dlfferenL facLor markeLs, we noLed LhaL all kev markeLs ln
prlnclple allowed enLrv bv prlvaLe secLor flrms. 1he presence of several aaenLs owned or
llnked Lo Lhe sLaLe should Lhen noL necessarllv be a problem. Cverall, onlv few flrms were
found Lo be acLlve ln Lhe ferLlllzer and seed markeLs, and ln markeLs such as lona haul
LransporL. Aaaln, none of Lhls ouahL Lo be a problem as lona as Lhese markeLs are
conLesLable: l.e. where a prlvaLe enLrepreneur could enLer Lhese markeLs Lo capLure anv
excess proflLs or efflclencv aalns lf Lhev were presenL. ln pracLlce, manv of Lhe lncumbenL
flrms, elLher from Lhe publlc or prlvaLe secLor, are offered subsLanLlal beneflLs LhaL would
noL be on offer Lo anv new enLranLs Lo Lhese markeLs. Also, speclflc rules offer furLher


3

advanLaaes Lo asslsL Lhese lncumbenL flrms. Lxamples are credlL arranaemenLs for ferLlllzer
lmporLs, Lhe oraanlsaLlon of ferLlllzer supplv or Lhe condlLlons for enLrv lnLo Lhe seed
markeL. 1hese rules and beneflLs are ofLen reasonable soluLlons Lo speclflc currenL problems
ln Lhe provlslon of Lhese lnpuLs, buL mav well undermlne Lhe medlum Lerm developmenL of
prlvaLe markeL lnsLlLuLlons, as Lhev leave Lhese markeLs non-conLesLable. ln Lhe shorL run, lL
would be essenLlal Lo map Lhe varlous reaulaLlons and beneflLs exlsLlna ln Lhese and oLher
markeLs Lo undersLand Lhe lncenLlves Lhev alve for Lhe developmenL of maLure, conLesLable
markeLs.
Act|on po|nt 9: Land cert|f|cat|on |s ||ke|y to offer cons|derab|e |mprovements |n terms of
tenure secur|ty, but |t now requ|res steps to ensure the conso||dat|on of the system.
Lmeralna evldence suaaesL LhaL land cerLlflcaLlon has poslLlve lmpacLs. lor cereal and oLher
annual crop areas lL ls llkelv Lo offer a conslderable lmprovemenL over earller arranaemenLs.
Powever, Lo ensure LhaL Lhe svsLem offers lonaer Lerm securlLv, measures need Lo be Laken
Lo ensure Lhe consolldaLlon of Lhe svsLem evervwhere and Lhe developmenL of land realsLrv
svsLems.
Act|on po|nt 10: W|th the dem|se of the prev|ous |nput cred|t system, |nnovat|ve
|n|t|at|ves are requ|red to ensure the deve|opment of funct|on|ng rura| cred|t markets,
focus|ng on the re|nsurance of the exposure of MIIs or other p|aus|b|e entrants.
1he lnpuL credlL ln operaLlon prevlouslv, ln whlch Lhe realonal sLaLe budaeL provlded
collaLeral for lnpuL loans, has proved Lo be unLenable and ls belna dlsmanLled. Powever, a
new svsLem sLlll has Lo emerae. lor farmers, lnpuL credlL ls cruclal as Lhelr worklna caplLal ls
Lvplcallv llmlLed. 1here are, however, aood reasons whv prlvaLe rural credlL markeLs do noL
easllv develop, noL leasL ln areas dependenL on hlah rlsk, ralnfed aarlculLure. 1he kev reason
ls LhaL as poor weaLher evenLs Lend Lo affecL a larae number of pollcv holders, banklna ln
such condlLlons ls hlahlv rlskv as defaulL raLes are hlahlv covarlaLe. As lnpuL credlL ls cruclal,
plloL proarammes on dlfferenL opLlons for lnsurance of farmers' credlL and relnsurance of
loan porLfollos ln rural seLLlnas are Lhen uraenLlv requlred.




6

Introduction
1he ouestions. 1hls paper revlslLs Lwo kev quesLlons for LLhloplan economlc developmenL:
whaL should be Lhe role of aarlculLure ln Lhe overall arowLh sLraLeav ln LLhlopla, and how
can we achleve fasLer arowLh ln aarlculLure? lL ls Lhe ouLcome of a svsLemaLlc revlew of Lhe
exlsLlna evldence from LLhlopla, puL ln Lhe conLexL of Lheorles of economlc LransformaLlon
ln lnlLlallv rural economles as well as Lhe experlence across a ranae of seLLlnas. 1hls
summarv paper bullds essenLlallv on Lwo papers bv Lhe same Leam. ln uercon and ZelLlln
(2009), varlaLlons of Lhe sLandard workhorse for Lhlnklna Lhrouah arowLh and
LransformaLlon ln aarlculLural economles, Lhe dual economv model, was crlLlcallv dlscussed
and applled Lo Lhe evldence from LLhlopla and oLher conLexLs. ln uercon and Plll (2009), Lhe
focus shlfLed more speclflcallv Lo aarlculLure ln LLhlopla, and Lhe kev consLralnLs on arowLh
and LransformaLlon.
2

1he po/icy fromework. Whv ls lL relevanL Lo ask Lhese larae and seemlnalv absLracL
quesLlons ln Lhls conLexL? More Lhan anv oLher Afrlcan counLrv ln recenL hlsLorv, LLhlopla
has a well-arLlculaLed pollcv framework, Lhe AarlculLural uevelopmenL led-
lndusLrlallzaLlon", nesLed ln Lheorv and evldence, and LhaL has aulded pollcv-maklna slnce
Lhe currenL aovernmenL came Lo power (MCLu, 1993). Lven lf lL has evolved over Lhe
vears, lL remalns a sLraLeav Lrue Lo some baslc prlnclples: (l) developmenL wlll have Lo sLarL
wlLh Lhe aarlculLural secLor, and (ll) arowLh ln aarlculLure wlll allow an lncreased demand for
non-aarlculLural producLs, release of labour and a surplus for lnvesLmenL ln oLher secLors.
More Lhan 13 vears laLer, wlLh beLLer evldence, lL ls relevanL Lo assess lLs lnLellecLual and
emplrlcal foundaLlons.
vo/vino po/icy thinkino. lL would be wrona Lo suaaesL LhaL AuLl has been sLaLlc. Cver Lhe
vears, lL has been added Lo, and lL has developed ln a more nuanced seL of pollcv vlews, for
example, as reflecLed ln Lhe lan for AcceleraLed and SusLalned uevelopmenL Lo Lnd overLv
(ASuL), LLhlopla's sLraLealc framework for Lhe flve-vear perlod 2003/06-2009/10.
ConLalnlna a lona llsL of senslble pollcles across a wlde ranae of secLors and lssues, mosL of
whaL ls dlscussed ln Lhls paper somehow ls Louched upon one wav or anoLher. Cur focus ls
on some of Lhe underlvlna fundamenLal consLralnLs on arowLh and LransformaLlon, and
whaL Lhls lmplles for Lhe sLraLeav Lowards aarlculLure.
1he po/icy context. ConLrarv Lo manv oLher counLrles, Lhe LLhloplan aovernmenL has shown
a sLrona commlLmenL Lo aarlculLural developmenL. ln lLs pollcv acLlons, Lhe LLhloplan
aovernmenL has conslsLenLlv and lncreaslnalv looked for wavs ln whlch Lhls sLraLeav can be
made Lo work, such as a larae expanslon of exLenslon servlces and farmers' Lralnlna, and

2
8oLh papers as well as Lhls svnLhesls paper, bulld on a revlew of recenL performance of Lhe LLhloplan
aarlculLure bv Adenaw (2009), as well as 11 speclflcallv commlssloned papers on Lhe hlsLorlcal experlence,
lncludlna ln Lurope and more recenLlv ln Asla, as well as speclflc lssues relaLed Lo Lhe LLhloplan economv. 1he
commlssloned auLhors are noL responslble for anv errors ln lnLerpreLaLlon ln Lhe svnLhesls paper.


7

oLher lnlLlaLlves Lo boosL land producLlvlLv, and larae scale road lnfrasLrucLure pro[ecLs Lo
lmprove llnkaaes beLween dlfferenL areas and Lowns. ln parallel, for maralnal areas ln Lerms
of aarlculLural ouLpuL, a larae scale producLlve safeLv neL has been developed, lnLer alla Lo
allow farmers Lo sLrenaLhen Lhelr asseL base Lo allow Lhem Lo araduaLe lnLo more proflLable
aarlculLural acLlvlLles. 1he scale of Lhese acLlons, Lhe commlLmenL bv pollcv makers Lo Lhese
ob[ecLlves and Lhe exLenL of aovernmenL lnlLlaLlve Lo achleve Lhese ob[ecLlves ls more
remlnlscenL of Lhe commlLmenL of LasL-Aslan pollcv makers Lo pollcv lnlLlaLlves Lhan oLher
Afrlcan examples.
Our opprooch. ln Lhls paper, we wlll offer a balanced crlLlque of AuLl, focuslna on lLs
concepLual and pracLlcal sLrenaLhs and falllnas, speclflcallv referenclna Lhe experlences ln
Lhose counLrles LhaL successfullv achleved Lhe aarlculLural LransformaLlon characLerlsLlc of
economlc developmenL. We wlll araue for offerlna a more balanced place of aarlculLural
developmenL ln Lhe overall arowLh process. AarlculLural LransformaLlon ls posslble, buL wlll
requlre concerLed and much broader acLlon vla prlvaLe and publlc lnvesLmenL Lo achleve lLs
arowLh poLenLlal Lhan Lhe relaLlvelv narrow currenL focus and acLlons focuslna on boosLlna
cereal producLlon from smallholders.
Overview. ln Lhe nexL secLlon, we flrsL brleflv revlew Lhe evldence on Lhe recenL experlence
of Lhe aarlculLural secLor. ln secLlon 2, we offer a summarv of our concepLual LheoreLlcal
framework, and dlscuss whaL lL means for Lhe sLrenaLhs and weaknesses of AuLl as a arowLh
sLraLeav led bv aarlculLure. ln secLlon 3, we alve kev lessons from hlsLorv ln relevanL
examples for LLhlopla. ln secLlon 4, we offer a dlscusslon of some of Lhe kev consLralnLs for
arowLh ln LLhloplan aarlculLure. ln secLlon 3, some concludlna commenLs are offered ln Lhe
form of a number of cross-cuLLlna lssues.

1. Agricultur in Etbiopia: rcnt xprinc and lssons
3


1he doto /ook impressive. 1he overall economlc conLexL ls one of arowLh ln real Cu hlLLlna
double dlalLs ln recenL vears (abouL 11.3 per vear on averaae beLween 2003/6 and
2007/8), wlLh aarlculLural Cu arowlna on averaae aL abouL 9.2 per vear ln Lhe same
perlod). 8ased on Lhe daLa from Lhe CenLral SLaLlsLlcal AuLhorlLv, cereal producLlon ln Lhe
perlod 2004/03 Lo 2007/08 lncreased bv more Lhan 12 percenL pet veot, wlLh a close Lo 3
percenL arowLh raLe per vear ln area culLlvaLed and more Lhan 6 percenL arowLh ln vlelds.
Slnce 1996/97, rouahlv Lhe sLarL of Lhe currenL drlve Lo lncrease ouLpuL and producLlvlLv,
cereal vlelds have arown bv 40, and land area culLlvaLed wlLh cereals bv 44.

3
1hls secLlon draws on uercon and Plll (2009), Adenaw (2009) and 1affesse Sevoum (2009).


8

Loroe cereo/ output orowth hos token p/oces in the /ost decode, but its sources remoin
unproven. A larae parL of ouLpuL arowLh has been vla area expanslon, buL Lhe flaures
suaaesL unprecedenLed vleld arowLh, noL drlven bv weaLher alone, ln recenL vears. 8apld
arowLh ln cereal ouLpuL appears noL Lo have been achleved bv rapld arowLh ln modern lnpuL
use, such as lmproved seeds, or lncreased ferLlllzer use. LxLenslon servlces have lncreased
dellverv buL lL ls noL clear wheLher Lhls can be squared wlLh scale of vleld lncreases. WaLer
access vla lrrlaaLlon has noL lncreased subsLanLlallv elLher.
1he doto suooest either one of the fostest oreen revo/utions in history preceded by vost
exponsion of oreos cu/tivoted with cereo/s, or ouestionob/e evidence. lAC daLa suaaesL
LhaL cereal vlelds ln LLhlopla were below mosL counLrles ln Lhe realon, such as uaanda,
Malawl and kenva ln 1993-2003, buL ln Lhe lasL four vears lL has opened a conslderable aap
ln lLs favour. Lven more sLrlklna ls Lhe arowLh ln wheaL vleld relaLlve Lo Aslan areen
revoluLlon counLrles: lL narrowed Lhe vleld aaps wlLh lndla ln four vears Lo abouL 20, whlle
ln 1993-2003, vlelds were on averaae onlv abouL half Lhe lndlan vlelds. 1he lncrease ln vleld
levels beLween 2003 and 2007 Look lndla 13 vears Lo achleve from 1973, lL Look Chlna a
decade. Chlna, lndla and vleLnam have never seen Lhe arowLh raLes ln overall cereal vlelds
shown ln Lhe daLa ln LLhlopla ln anv four vear perlod.
6ettino the doto checked is o priority. lL ls cruclal Lo conducL exLenslve survev work Lo pln
down Lhe sources of Lhe arowLh ln land areas culLlvaLed and Lhe sources of Lhe reporLed
vleld lncreases. lL ls clear LhaL furLher explolLaLlon of Lhe currenL prlmarv and secondarv
daLa sources ls noL aolna Lo offer much more lnslahL, as Lhere ls no means of cross-checklna
or llnklna daLa. 1he daLa wlll need Lo be supplemenLed wlLh ln-depLh buL LaraeLed new daLa
collecLlon. 1he sLarLlna polnL should be carefullv sampled slLes, posslblv lncluded ln Lhe
samples for Lhe compllaLlon of Lhe offlclal CSA daLa, LhaL should be revlslLed bv lndependenL
Leams of enumeraLors Lo cross-valldaLe Lhe evldence aeneraLed. 8oLh Lhe lssue of Lhe
sources of area expanslon ln Lhe lasL 13 vears as well as Lhe recenL vleld arowLh requlre
aLLenLlon. lurLhermore, Lhe aaareaaLlon procedures Lo vleld naLlonal flaures requlre also
aLLenLlon, as Lhev suaaesL LhaL farm slze has been able Lo keep up wlLh rural populaLlon
arowLh slnce 1980, as lf land pressure has noL lncreased aL all.
confidence in doto needs to be restored, by introducino ouditino procedures. ln aeneral, lL
would appear Lo be Llme Lo conslder Lhe esLabllshmenL of a daLa audlLlna unlL wlLhln Lhe
sLrucLures of CSA/MClLu, buL wlLh conslderable lndependence, whose alm should be Lo
monlLor and audlL Lhe quallLv of daLa aeneraLed on kev lssues of economlc pollcv maklna ln
LLhlopla bv Lhe CSA and bv oLher lnsLlLuLlons. 1hev should boLh offer advlce and scruLlnv Lo
ensure LhaL clrcumsLances, such as Lhe recenL vasL dlveraence ln evldence on ouLpuL
beLween CSA and MCA8u can be seLLled bv a sLandard procedure, and noL bv dlscreLlonarv
acLlon. 1he currenL lnlLlaLlves on derlvlna consensus flaures and sLrenaLhenlna procedures ln
daLa collecLlon are poslLlve sLeps buL Lhls ls unllkelv Lo remove Lhe need for audlLlna
procedures.


9



2. Agricultur and Crowtb in Etbiopia: Tb Framwork
4


4n ooricu/turo/, /ond/ocked ond poor economy. 1he LLhloplan economv ls sLlll
predomlnanLlv aarlculLural, ln Lerms of share of Cu, exporLs and emplovmenL. Cruclallv for
our analvsls, lL covers a vasL LerrlLorv buL ls landlocked, and lL ls malnlv dependenL on lLs
llnks wlLh u[lbouLl for lLs lmporLs and exporLs, puLLlna a llmlL on Lhe exLenL lL can enaaae
wlLh Lhe lnLernaLlonal economv as frelahL cosLs are subsLanLlal. lL ls also sLlll one of Lhe
poorer counLrles ln Lhe world, affecLlna Lhe economlc slze of lLs domesLlc markeL ln value
Lerms. More Lhan 80 of Lhe populaLlon ls dependenL on aarlculLural acLlvlLles wlLh low
land and labour producLlvlLv. 1he baslc sLaples are cereals.

4 de/icote bo/once hos to be found for sufficient/y hioh food prices for formers, but not too
hioh to stif/e orowth ond tronsformotion. lood prlces need Lo be hlah enouah Lo ensure
lncenLlves for LransformaLlon of aarlculLure vla lnpuL adopLlon, buL noL so hlah LhaL Lhev
llmlL lona-run arowLh. More speclflcallv, Lhe LransformaLlon of aarlculLure vla lnpuL adopLlon
wlll onlv come abouL lf Lhe ecooomlc lncenLlves for Lhls LransformaLlon are hlah for farmers.
1hese lncenLlves are sLronalv affecLed bv prlces, suaaesLlna Lhere ls an lmporLanL role Lo be
plaved bv pollcles LhaL arow urban lncomes, whlch wlll plav an lncreaslnalv lmporLanL role as
a source of demand for aarlculLural aoods. AL Lhe same Llme, susLalned arowLh wlll requlre
LhaL economlc LransformaLlon bealns Lo Lake place, wlLh more of Lhe labour force aalnfullv
lnvolved ln Lhe non-aarlculLural secLor. 1o ensure Lhls does noL occur aL Lhe cosL of decllnlna
food producLlon, and urban food prlces LhaL rlse Loo hlah-such LhaL anv arowLh lnduced
from lncreased lncenLlves Lo lnpuL adopLlon ls ulLlmaLelv reLarded bv subsequenL pressure
on urban waaes-a conLlnued focus on lncreaslna cereal ouLpuL ls requlred.

8eino /ond/ocked, the internotiono/ economy connot overcome this reouirement, offerino
some opportunities but moin/y constroints on orowth ond ooricu/ture. LxporLs and lmporLs
are posslble buL hlah frelahL and oLher LransacLlons cosLs mean, for bulkv cereals, hlah
lmporL parlLv prlces (lnLernaLlonal prlces plus cosLs of movlna araln onLo domesLlc markeLs,
so Lhe domesLlc prlces aL whlch lmporLs can be proflLablv lmporLed) and low exporL parlLv
prlces, especlallv as expressed aL Lhe farmaaLe. LxporL parlLv prlces offer a floor Lo prlces,
and lmporL parlLv prlces llmlL Lhe prlce consumers wlll have Lo pav. 1he resulL ls LhaL for a
wlde ranae of prlces, Lhe economv ls closed wlLh cereals behavlna as a non-Lradable aood.
Lven lf lmporLs and exporLs are posslble, domesLlc food producLlon wlll be an essenLlal

4
1hls secLlon draws mosL heavllv on uercon and ZelLlln (2009).


10

deLermlnanL of food prlces and waaes, and Lherefore a cenLral consLralnL on economlc
LransformaLlon and arowLh.

6rowth in urbon demond is reouired for ooricu/turo/ orowth. 1o keep food prlces below Lhe
hlah lmporL parlLv prlces, land producLlvlLv arowLh ls cruclal. 8uL wlLh low exporL parlLv
prlces, sLlmulaLlna land producLlvlLv arowLh wlLhouL arowLh ln urban demand rlsks
depressed food prlces when harvesLs are successful, undermlnlna rural earnlnas and
aarlculLural LransformaLlon. A focus on aarlculLural ouLpuL arowLh wlLhouL arowLh ln urban
demand for aarlculLural produce would be self-defeaLlna. SLlmulaLlna urban arowLh ls llkelv
Lo have Lo come from oLher sources Lhan arowLh ln aarlculLural lncomes: currenLlv, Lhe
evldence suaaesLs LhaL addlLlonal earnlnas ln rural areas are sLlll barelv spenL on non-
aarlculLural commodlLles.

Lond productivity orowth vio odoption of new techno/ooies ond proctices reouires strono
economic incentives. 8oLh ln Lhe areen revoluLlon ln Asla and ln Lhe hlsLorlcal examples
from Lurope, adopLlon of new Lechnoloales and pracLlces onlv Look off sLronalv when lL
subsLanLlallv pald farmers Lo do so. Anv adopLlon lnvolves uncerLalnLv and learnlna cosLs for
farmers, and lL Lends Lo be worLhwhlle for lndlvldual farmers Lo walL for adopLlon unLll
success has been shown bv oLhers. new Lechnoloales and lnnovaLlve pracLlces requlre
subsLanLlallv hlaher mean vlelds and/or hlah prlces for adopLlon Lo Lake off.

1o ensure sufficient incentives for ooricu/turo/ orowth, tronsoctions costs reductions ore
essentio/ to roise export pority prices. Low exporL parlLv prlces lmplv LhaL lnLernaLlonal
markeL prlces cannoL offer Lhe prlce lncenLlves necessarv for adopLlon of new Lechnoloales,
modern pracLlces or hlaher value crops. lor manv crops, bumper harvesLs ln Lhe shorL run
would noL need Lo depress prlces subsLanLlallv, as Lhere would be scope for replaclna
lmporLs, lncludlna for food ald from domesLlc producLlon. neverLheless, observed demand
paLLerns ln LLhlopla would also suaaesL LhaL ouLpuL aalns mav depress prlces rapldlv, as Lhe
collapse ln araln and especlallv malze prlces ln 2001-02 showed. AL Lhe same Llme,
susLalned hlah domesLlc food prlces would hlnder overall economlc LransformaLlon, llmlLlna
Lhls rouLe Lo sLlmulaLlna adopLlon and lnnovaLlon. Cne rouLe Lo aarlculLural LransformaLlon
would requlre conslderable poLenLlal vleld aalns, buL such sLraLeav rlsks depresslna prlces
qulcklv. 1o llfL exporL parlLv prlces, producLlvlLv aalns leadlna Lo lower markeLlna, frelahL
and oLher Lradlna and LransacLlons cosLs are essenLlal Lo offer susLalned lncenLlves Lo
aarlculLural arowLh bv boosLlna farmaaLe prlces.

kuro/-urbon miorotion is constroined by the pressure it oppeors to put on food prices.
8ural-urban mlaraLlon ls an essenLlal lnaredlenL of overall arowLh and LransformaLlon, lLs
susLalned acceleraLlon wlLhln a conLexL of sLable food prlces would be slan of a successful
arowLh and poverLv reducLlon sLraLeav. uesplLe evldence of low labour producLlvlLv, Lhe
evldence suaaesLs LhaL recenL rapld rural-urban mlaraLlon has puL pressure on food prlces.


11

1hls reflecLs a furLher consLralnL on aarlculLural and overall arowLh, as anv shlfL ouL of sLaple
producLlon wlLhouL lncreased labour producLlvlLv, for example lnLo oLher hlah-value crops
or ouL of aarlculLure, mav puL furLher pressure on food prlces.

Lower trodino ond tronsoctions costs wou/d o/so o//ow ooricu/ture to stort shiftino owoy
from troditiono/ stop/es to hioher vo/ue crop, os we// os o//owino miorotion. As downward
pressure on LransacLlons cosLs could brlna down lmporL parlLv prlces, lL would open Lhe
posslblllLv of an aarlculLural LransformaLlon lnLo more hlah-value non-cereal crops. 1he
reason ls LhaL lower LransacLlons cosLs would reduce Lhe upward pressures on urban prlces
LhaL would follow lf cereal producLlon were Lo ao down and lmporLs were Lo be requlred Lo
saLlsfv domesLlc demand for cereals. LlmlLlna Lhls consLralnL on movlna ouL of cereals
would allow farmers hlaher beneflLs from alLernaLlve crops for domesLlc and exporL
markeLs, and lndeed allow more mlaraLlon as well wlLhouL pressures on overall llvlna
sLandards vla real waaes.

4oricu/turo/-/ed lndustrio/itotion {4uLl) hod importont strenoths but o/so weoknesses.
Lven lf noL exacLlv moLlvaLed as ln Lhe dlscusslon above, AuLl's kev sLrenaLh was Lhe
recoanlLlon LhaL aarlculLural ouLpuL arowLh ln Lhe maln cereals was cruclal for arowLh. ln lLs
orlalnal form, AuLl lmplled a phased developmenL, flrsL focuslna on ouLpuL arowLh ln
aarlculLure, Lhrouah Lechnoloales such as ferLlllzer, seeds and lnfrasLrucLure, leadlna Lo
lndusLrlallzaLlon as aarlculLural arowLh wlll Lhen offer labour, lnpuLs and demand for non-
aarlculLural producLs. Lven lf Lhe ldeas surroundlna phased developmenL are plaved ouL
less ln lLs more nuanced currenL lncarnaLlon ln ASuL, ln pracLlce Lhere ls sLlll much focus
on lncreaslna land producLlvlLv ln cereal producLlon vla modern lnpuLs (malnlv seeds and
ferLlllser) and exLenslon. 1he conLlnulna relaLlve focus on fosLerlna ouLpuL arowLh ln cereals
ls noL necessarllv wrona, buL lL lmplles a relaLlve nealecL of oLher necessarv condlLlons Lo
allow Lhls Lo sLarL a LransformaLlon of Lhe economv. Cne wav of looklna aL lL ls Lo suaaesL
LhaL Lhe lmplemenLaLlon of AuLl mav have focused Loo much on ouLpuL raLher Lhan value,
and looked aL aarlculLure ln lsolaLlon of Lhe resL of Lhe economv.

P45uP is not inconsistent with this ono/ysis, but our fromework suooests o number of
priorities omono o// the different P45uP foco/ oreos. AarlculLural arowLh and
LransformaLlon are fundamenLallv consLralned bv Lhe economlc reLurns offered Lo farmers
for producLlvlLv lncreases. Plah reLurn Lechnoloales or crops, buL also hlah prlces, are
essenLlal Lo offer hlah overall reLurns Lo farmers. A floor Lo Lhese prlces ls offered bv exporL
parlLv prlces. Cverall arowLh ls neverLheless consLralned bv cereal ouLpuL arowLh, as ouLpuL
arowLh ls requlred Lo keep urban food prlces sufflclenLlv low. SufflclenLlv low lmporL parlLv
prlces can llmlL Lhe upward pressure on food prlces durlna arowLh vla lmporLs. urban
lncome arowLh and Lhe lnLernaLlonal dlmenslon, ln Lhe form of Lhe levels lmporL and exporL
parlLv prlces, are Lhen relevanL for overall arowLh, noL leasL vlo Lhelr lmpacL on Lhe scope for
aarlculLural arowLh. ASuL offered manv ldeas for prlorlLv pollcv areas. lor aarlculLural


12

LransformaLlon and overall arowLh, Lhose measures LhaL encouraae Lechnoloav adopLlon,
urban lncome arowLh and reduced LransacLlon cosLs ln aarlculLural markeLs sLand ouL as
mosL cruclal. 1he evldence on proaress on Lhese, as well as furLher measures LhaL could be
Laken, are dlscussed ln secLlon 4. ln Lhe nexL secLlon, we brleflv dlscuss some relevanL
lnLernaLlonal and hlsLorlcal experlence on Lhese processes.


3. Agricultur and Crowtb: Som Comparativ Evidnc
5


1he ombition for productivity orowth entoi/ed in P45uP wos probob/y unprecedented in
history. 1hls amblLlon ls well summarlzed bv focuslna on wheaL, a crop wldelv spread ln
areas wlLh hlsLorlcal and recenL aarlculLural LransformaLlon. ln Lhe perlod 1993/2003, vleld
was approxlmaLelv 1330 ka per hecLare, ln facL slmllar Lo some of Lhe more ferLlle areas of
Lnaland or Lhe Low CounLrles ln Lurope around Lhe 14
Lh
cenLurv, and a vleld bv Lhe 18
Lh

cenLurv found across several WesLern Luropean counLrles. A vleld of 1330 ka/ha ls abouL
half Lhe vleld reached ln lndla ln Lhe 1990s, and a Lhlrd of vlelds ln Chlna. 1he currenL vleld
daLa suaaesL arowLh bv more Lhan 30 ln 3 vears, fasLer Lhan ever recorded ln a 3 vear
perlod ln for example lndla or Chlna. 8uL Lhls ls sLlll less Lhan half Lhe vleld arowLh 'planned
for' ln Lhe ASuL, whlch pro[ecLed (for all cereals) a 120 vleld arowLh ln Lhls perlod (and
onlv a 1 arowLh ln area culLlvaLed).
1he perceived wisdom is thot orowth in o predominont/y ooricu/turo/ economy hos to stort
first in ooricu/ture. WlLh Lhe laraer share of Cu from aarlculLure, and Lhe vasL ma[orlLv
emploved ln aarlculLure, lL ls LempLlna Lo araue LhaL such an aarlculLural economv ls bound
Lo have Lo sLarL anv successful developmenL vla arowLh ln aarlculLure, before oLher secLors
and acLlvlLles are developed, noL leasL lndusLrv. lL has domlnaLed Lhlnklna on how arowLh
comes abouL. lor example, lL can be found ln Lhe LexLbook lnLerpreLaLlon on Lhe experlence
ln Lnaland ln Lhe 18
Lh
and 19
Lh
cenLurv, wlLh flrsL an aarlculLural revoluLlon Lo be followed bv
an lndusLrlal revoluLlon. lL can be found ln Lhe lnLerpreLaLlon of Lhe LasL-Aslan mlracle,
when hlah arowLh ln Lhe economv ls ofLen suaaesLed Lo have sLarLed wlLh aarlculLural
arowLh, sLarLed bv a areen revoluLlon and lnsLlLuLlonal facLors. lL ls reflecLed ln Lhe 2007
World uevelopmenL 8eporL on aarlculLure, where aarlculLurallv domlnaLed economles are
sald Lo have Lo sLarL from aarlculLure.
1he evidence suooests o for more nuonced picture, with on importont ro/e for hioh urbon
demond, or other woys of ensurino hioh returns to formers to encourooe /ond productivity
orowth. PlsLorlcallv, aarlculLural LransformaLlons dld noL occur ln lsolaLlon. AarlculLural
producLlvlLv lncreases onlv Look place when Lhere were clear economlc lncenLlves Lo do so.

3
1hls secLlon draws mosL heavllv on uercon and ZelLlln (2009), as well as backaround noLes bv Allen (2008),
ark (2008) and CLsuka (2008).


13

noL onlv should Lhere be worLhwhlle Lechnoloalcal advances, crops or new Lechnlques Lo
adopL, lL should pav Lhe farmers Lo do so. 1he role of urban demand was cenLral Lo
sLlmulaLlna fasL arowLh ln Lnaland ln Lhe 18
Lh
and 19
Lh
cenLurv, where Lhe arowLh ln lncomes
ln London (llnked Lo lncome from lnLernaLlonal commerce) made aarlculLural producLlvlLv
lncreaslna lnvesLmenLs, such as enclosures and converslon from pasLures Lo crop land
proflLable, sLlmulaLlna aarlculLural arowLh. upward pressure on food prlces and lncreaslna
demand for hlah-value crops also drove aarlculLural LransformaLlon ln lrance ln Lhe 19
Lh

cenLurv: Lhe arowLh of arls as a dvnamlc urban cenLre has been shown Lo have been kev
for Lhe aarlculLural LransformaLlon ln lLs surroundlna areas. 1urnlna Lo modern cases,
Chlna's aarlculLural arowLh slnce 1983 was preclplLaLed bv measures LhaL offered a sLrona
lncrease ln reLurns on offer Lo farmers vla Lhe llberallzaLlon of aarlculLural prlces, resulLlna ln
a slanlflcanL lncrease aL Lhe ouLseL of Lhe economlc reform process, and Lhe freelna of
households Lo speclallze ln crops wlLh hlah reLurns. ln vleLnam, Lhe hlahlv ferLlle and wldelv
lrrlaaLed land creaLed ootooomlc condlLlons conduclve Lo larae reLurns aL Lhe ouLseL of LhaL
counLrv's areen revoluLlon, offerlna qulck aalns ln ouLpuL and vlelds when prlce lncenLlves
were puL ln place. ln Lhe hlllpplnes, Lhe areen revoluLlon from Lhe 1960s, llnked Lo Lhe hlah
vleld rlce varleLles, araduallv resulLed ln rlce prlce decllnes, slowlna Lhe aarlculLural arowLh
and economlc LransformaLlon as lL resulLed ln onlv slow aarlculLural lncome lncreases, even
lf lL sLarLed aL a relaLlvelv hlah level of prlces.
1he ovoi/obi/ity of ooricu/turo/ innovotions offerino very hioh productivity increoses o/so
p/oys on importont ro/e. Lconomlc lncenLlves have Lo be hlah for adopLlon, buL as adopLlon
Lends Lo be cosLlv and prlces Lend Lo face downward pressure when vlelds lncrease, Lhe slze
of vleld aalns maLLer conslderablv. 1he Creen 8evoluLlon ln lndla and SouLheasL Asla
appears Lo deserve lLs name noL leasL because of Lhe masslve vleld aalns LhaL were on offer
bv uslna new varleLles. WheaL Lechnoloales developed aL ClMM?1, wlLh sulLable
complemenLarv lnpuLs, offered a more Lhan flvefold lncrease ln vlelds on small farmer
demonsLraLlon ploLs ln lndla. 8lce vlelds on offer vla l88 rlce were earlv on esLlmaLed Lo be 3
Llmes Lhe LradlLlonal varleLv uslna LradlLlonal meLhods and 10 Llmes uslna opLlmal lnpuL
packaaes. 1hese vleld aalns on offer are well above Lhose currenLlv on offer from modern
varleLles and lnpuL packaaes ln Afrlca.
1hree key /essons emeroe from controstino evidence from e/sewhere with theory. llrsL,
fasL aarlculLural LransformaLlon requlres Lhe avallablllLv of hlah reLurn Lechnoloales.
Secondlv, farmers wlll Lend Lo adapL when economlc lncenLlves Lo do so are hlah, so LhaL
whlle Lhe avallablllLv of approprlaLe Lechnoloav, lnpuL and exLenslon packaaes mav maLLer,
Lhese are noL sufflclenL lf economlc reLurns cannoL be susLalned. WlLh lnpuL prlces alven bv
world markeLs, Lhls requlres sufflclenLlv hlah food prlces. 1hlrdlv, ln a landlocked economv,
Lhls wlll requlre sufflclenLlv hlah urban demand and Lherefore arowLh from oLher sources.
LxcepL when some subsLanLlal Lechnoloalcal lnnovaLlons are avallable, aarlculLural arowLh
cannoL sLarL and wlll noL be susLalned ln lsolaLlon from arowLh ln Lhe resL of Lhe economv.


14



4. Constraints on Agricultural Transformation

1hree key issues ore fundomento/ to understond the ro/e ond scope of orowth of
ooricu/ture in overo// economic tronsformotion. 1hese are: Lhe opporLunlLles for boosLlna
land producLlvlLv, Lhe consLralnlna role of food prlces and Lhe llmlLs and opporLunlLles
offered bv Lhe funcLlonlna and performance of producL and facLor markeLs. Cn each of
Lhese lssues, alLhouah Lhere are llmlLs Lo Lhe daLa avallable, Lhe avallable daLa can offer
subsLanLlal lnslahLs, lf Lhev are carefullv collaLed and lnLerpreLed.

4.1 1he scope for boostino productivity

lt is hord to understond the sources of recent reported yie/d orowth. 1he currenL evldence
of rapld land producLlvlLv arowLh ls noL easllv explalned. 1here ls no evldence on rapld
lncreases ln Lhe comblned use of lmproved seeds, ferLlllzer and exLenslon LhaL could
accounL for Lhe reporLed chanaes ln ouLpuL. SaLelllLe daLa suaaesL LhaL Lhe mosL recenL
(2008/09) Meher harvesL was noL experlenclna beLLer cllmaLlc condlLlons Lhan Lhe averaae
of Lhe precedlna four vears. lf Lhe efforL on farmer Lralnlna and exLenslon are behlnd Lhe
lncreases ln vlelds, Lhen Lhls needs Lo be documenLed much beLLer: Lhe evlJeoce base Lo
assess Lhls ls noL Lhere.
1here is current/y not os much scope for /ond productivity ooins os suooested. 1he
evldence on Lhe scope for rapld vleld arowLh ls noL as encouraalna as lL Lends Lo be
reporLed. 1he comblnaLlon of lmproved seeds, ferLlllzer and lmproved pracLlces could offer
conslderable vleld lncreases ln some crops, buL whaL ls on offer ls noL comparable ln Lerms
of Lrlal fleld aalns Lo whaL was avallable durlna Lhe areen revoluLlon ln oLher parLs of Lhe
world. Some of Lhe wldelv reporLed evldence, such as Lhe SC2000 Lrlals, ls, on closer
lnspecLlon, noL as compelllna as lL mav seem. 1he LLhloplan aarlculLural research svsLem
has produced and documenLed solld research uslna proper conLrolled Lrlals, offerlna
encouraalna buL noL dramaLlc vleld aalns from comblnlna seed, ferLlllzer and exLenslon. lL ls
well known LhaL onlv for wheaL and malze one can obLaln slanlflcanL aalns vla lmproved or
hvbrld seeds, Lhe lmprovemenLs avallable for oLher crops, noL leasL Leff, remaln llmlLed.
locuslna on Lhe mosL promlslna crop, malze, Lhe svsLemaLlc revlew bv Anchala eL al. (2001)
showed LhaL on farmer demonsLraLlon ploLs, Lhe vleld aalns from lmproved or hvbrld seeds
ooJet ttoJltloool ptoctlces were abouL 20 compoteJ to ttoJltloool seeJs, ooJet lmptoveJ
ptoctlces (such as ln Lerms of ferLlllzer use and culLlvaLlon pracLlces) Lhe aalns from
lmproved seeds were 36 compoteJ to ttoJltloool seeJs. lor Lhe mosL opLlmlsLlc scenarlo,

6
1hls secLlon draws malnlv on uercon and Plll (2009).


13

ln whlch one compares lmproved or hvbrld seeds wlLh a full packaae of lmproved pracLlces,
lncludlna ferLlllzer, compared Lo uslna LradlLlonal seeds and LradlLlonal pracLlces, a doubllna
of vlelds could be obLalned ln farm demonsLraLlon ploLs near Lhe aarlculLural research
cenLres. 1hese percenLaae aalns on offer are subsLanLlallv lower Lhan whaL was on offer
durlna Lhe Creen 8evoluLlon ln SouLh or LasL Asla.
6reoter investment in new techno/ooies is needed os current techno/ooies wi// not brino
obout ropid yie/d orowth. ?leld aalns on Lrlal ploLs for rlce or wheaL on Lhe eve of Lhe areen
revoluLlon offered vlelds flve Llmes or more of Lhe vlelds for LradlLlonal ploLs, uslna
comparable producLlon pracLlces buL Lhe newlv avallable seeds. Lven Lhen lL Look lndla and
Chlna aL leasL a decade Lo double vlelds, as vleld aalns from Lrlal or demonsLraLlon ploLs are
rarelv fullv achleved when Lhe Lechnoloav ls Lransferred Lo farmers' ploLs. lf whaL ls on offer
ln Lerms of lmproved malze seeds were ls adopLed bv all LLhloplan malze farmers, uslna
currenL Lechnoloales, Lhe aalns ln overall cereal ouLpuL would onlv be 3, whlch wlll be
spread over manv vears. Laraer vleld aalns are onlv posslble bv comblnlna lmproved
producLlon pracLlces wlLh ferLlllzer and lmproved seeds. SLlll, Lhe aalns ln cereal ouLpuL
would onlv be 20. A kev weakness ls LhaL Lhe sclence ls mlsslna: Lhere are no 'aolden eaas'
for an LLhloplan areen revoluLlon. 1he evldence suaaesLs LhaL Lhere are noL enouah hlah
vleldlna seed varleLles avallable, adapLed Lo local clrcumsLances. A concerLed efforL Lo
achleve Lechnoloalcal advances ls needed. 1o achleve Lhls, Lhe currenL research sLrucLure
needs a deLermlned overhaul and expanslon, wlLh sLronaer lnLeracLlons of Lhe lnLernaLlonal
sclence world, and sLronaer llnks wlLh Lhe prlvaLe secLor, boLh domesLlcallv and
lnLernaLlonallv.
1o ensure moximum productivity orowth from existino techno/ooies it is essentio/ thot o
combined pockooe of seed, ferti/iter ond extension is de/ivered to formers. lor this fost
prooress on seed mu/tip/icotion is needed. Lvldence polnLs Lo reasonablv hlah reLurns of a
comblned packaae of seed, ferLlllzer and exLenslon, aL leasL ln kev crops such as malze and
wheaL. Much efforL has been made on exLenslon, and ferLlllzer ls Lvplcallv ln ample supplv
and relaLlvelv wldelv adopLed. Powever, lmproved seeds are onlv coverlna less Lhan 3 of
land area under cereals culLlvaLlon. Whlle some efforLs have been made Lo lncrease seed
supplv, wlLhouL a masslve efforL Lo expand seed mulLlpllcaLlon, lncludlna vla sLronaer
prlvaLe secLor lnvolvemenL, and Lo reform Lhe enLlre reaulaLorv and supporL svsLem
surroundlna lL, Lhls wlll remaln a remarkable mlssed opporLunlLv.
4 norrow focus on ferti/iter is definite/y misp/oced. lerLlllzer alone ls unllkelv aolna Lo offer
much scope for expanslon of vlelds. ln pracLlce, ferLlllzer has been sLronalv promoLed
wlLhouL sufflclenL avallable lmproved seeds. lor example, ferLlllzer use has moved near 40
of land area culLlvaLed wlLh cereals, compared Lo Lhe 3 covered bv lmproved or hvbrld
seeds. lurLher ferLlllzer expanslon ls bound Lo be consLralned: whlle vleld aalns are relaLlvelv
subsLanLlal (when comblned wlLh Lhe adopLlon of opLlmal farm manaaemenL pracLlces ln
weedlna, Llmlna of planLlna and seed raLes) especlallv for wheaL and malze (Lvplcallv aL besL


16

abouL 30), for oLher crops such as Leff Lhev are far more llmlLed. lurLhermore, Lhese aalns
onlv maLerlallze when comblned wlLh Lhe adopLlon of opLlmal farm manaaemenL pracLlces
ln weedlna, Llmlna of planLlna and seed raLes, oLherwlse, aalns are Lvplcallv far less. MosL
lmporLanLlv, as ferLlllzer ls expenslve, economlc reLurns are verv low and llkelv Lo be
neaaLlve for a larae share of farmers noL uslna lL aL presenL. lerLlllzer expanslon should noL
be expecLed or promoLed unless as parL of a compleLe packaae wlLh seeds and aeneral
lmproved pracLlces.
1he evidence is not consistent with o view thot thiopion forms hove become too smo// to
be efficient. Averaae labour producLlvlLv ls no doubL exLremelv low, as ls maralnal labour
producLlvlLv (relevanL for earnlnas, and for arowLh and Lhe LransformaLlon of Lhe economv
vla mlaraLlon). Powever, Lhe evldence on land producLlvlLv, relaLed Lo ploL and farm slze ls
more conLenLlous. A sLandard narraLlve on LLhloplan aarlculLure ls one of decreaslna farm
slzes and commensuraLe lmpacLs on producLlvlLv. AlLhouah surprlslna, Lhe evldence from
Lhe offlclal CSA aarlculLural sLaLlsLlcs would suaaesL LhaL farms are noL smaller now Lhan
Lhev were ln Lhe mld-1990s or even Lhe earlv 1980s, due Lo larae land expanslon.
lurLhermore, Lhe evldence on wheLher Lhese farms are Loo small Lo be efflclenL ls
surprlslnalv confllcLlna. Some sLudles have found LhaL Lhere are lncreaslna reLurns Lo scale ln
smallholder aarlculLure, suaaesLlna efflclencv aalns from land consolldaLlon. We could noL
conflrm such a relaLlonshlp, and Lhe sLandard neaaLlve vleld-ploL slze relaLlonshlp, found
across Lhe world, appears Lo be conflrmed ln LLhlopla as well. Lven lf Lhe former evldence ls
rlahL, slmulaLlons on Lhe arowLh lmpacL from mlaraLlon (allowlna land consolldaLlon) based
on Lhe hlaher esLlmaLes avallable ln oLher sLudles, showed LhaL Lhe lmpacL was exLremelv
small, undermlnlna Lhe economlc slanlflcance of Lhls concern. We recoanlze LhaL Lhls resulL
ls puzzllna and furLher work on undersLandlna Lhe cosLs and poLenLlal beneflLs from land
consolldaLlon would be ln order.
1here moy be scope for encourooino /oroe sco/e commercio/ ooricu/ture, not just os o niche
source of export eorninos, but to stimu/ote commercio/itotion ond tronsformotion of
smo//ho/der ooricu/ture. 1he avallable evldence on reLurns Lo scale ln smallholder
aarlculLure ls noL offerlna lnslahLs on wheLher larae scale commerclal aarlculLure could be a
proflLable source of lnvesLmenL wlLh pavoffs also for producLlvlLv lncreases and
commerclallzaLlon of smallholder aarlculLure. CurrenLlv, larae scale commerclal aarlculLure
ls laraelv kepL separaLe and does noL focus on cereal crops. 1here ls conslderable scope for
explorlna dlfferenL modallLles for sLlmulaLlna larae scale commerclal aarlculLure
lnvesLmenLs, noL [usL Lo boosL ouLpuL, lncludlna of cereals, buL more lmporLanLlv for Lhelr
poslLlve exLernallLles on Lhe LransformaLlon and commerclallzaLlon of smallholder
aarlculLure. lor example, 'lslands' of laraer commerclal farms for cereals or hlah value crops
could be offered lncenLlves Lo have subsLanLlal lnLeracLlons wlLh smallholder aarlculLure
such as vla ouL-arower (conLracL farmlna) schemes, and markeLlna arranaemenLs. Powever,
Lhe avallable evldence also shows LhaL sLaLe lnLervenLlons ln Lhese areas Lvplcallv lead Lo


17

fallure, aL besL aovernmenLs can offer a clear and LransparenL framework Lo enable
lnvesLmenL.
4.2 lood prices ond internotiono/ morkets

nioh cereo/ prices offer o strono encourooement for formers to boost yie/ds ond
commercio/ite ooricu/ture, but the f/oor offered by export prices is /ow. lor farmers, vleld
lncreases are onlv worLhwhlle lf Lhev LranslaLe ln hlaher economlc reLurns. ln facL, evldence
from across Lhe world suaaesLs LhaL producLlvlLv arowLh vla lnnovaLlon and adopLlon
requlres subsLanLlal economlc reLurns Lo Lake off and spread. As an open economv wlLh
conslderable LransacLlons cosLs Lo reach lnLernaLlonal markeLs, cereals are effecLlvelv a non-
Lradable aood for a broad ranae of prlces. uomesLlc markeL prlces wlll flucLuaLe beLween
hlah lmporL parlLv prlces, when harvesLs are poor, and low exporL parlLv prlces, when
harvesLs are hlahlv successful. Should cereal prlces fall Lo Lhese low exporL parlLv prlces,
lncenLlves requlred for Lhe adopLlon of aarlculLural Lechnoloales and lnpuLs are unllkelv Lo
be sufflclenLlv sLrona. llaure 1 and 2 show Lhls clearlv for wheaL and malze, wlLh cereal
prlces flucLuaLlna beLween lmporL and exporL parlLv prlces excepL for ln perlods of forelan
exchanae scarclLv or lmporL resLrlcLlons (ln recenL monLhs, or ln 1999). 1he floor offered bv
exporL parlLv prlces ls low, and was hlL for malze ln 2001/02. Plah fuel and LransporL cosLs
wlden Lhls band, such as ln Lhe lasL vear, pushlna exporL parlLv prlces even furLher down.
6rowth in urbon demond is then crucio/ to stimu/ote ooricu/turo/ tronsformotion. lL ls
Lherefore essenLlal for aarlculLure Lo be faced wlLh arowlna urban demand, whlch ln Lurn
lmplles a dependence on arowLh ln Lhe non-aarlculLural secLor. 8umper harvesLs, such as for
malze ln 2001/02 depressed prlces conslderablv, and evldence suaaesL conslderable
hardshlp faced bv farmers ln LhaL perlod, dlscouraalna aLLempLs Lo boosL vlelds. 1he process
of boosLlna urban arowLh ls bevond Lhe scope of Lhls sLudv, buL cannoL be looked aL
lndependenLlv from arowLh ln aarlculLure.
nioh cereo/ prices moy he/p ooricu/turo/ orowth but wou/d hinder urbon orowth, so o
bo/once hos to be found. Clven Lhe sLrucLure of Lhe LLhloplan economv, hlah urban food
prlces hlnder arowLh and LransformaLlon. A balance has Lo be found beLween Lhe upward
pressure requlred for aarlculLural LransformaLlon and Lhe downward pressure needed for
non-aarlculLural arowLh. Cne kev mechanlsm ls Lo brlna down LransacLlons cosLs ln food
markeLs. LfforL should be made Lo encouraae a narrowlna of Lhe band beLween exporL and
lmporL parlLv prlces, Lherebv beneflLlna boLh farmers and urban consumers. ln facL,
producLlvlLv arowLh and Lhe reducLlon of LransacLlons cosLs, vla producLlvlLv aalns ln
markeLlna and LransporL, bove Lo ao hand ln hand Lo be susLalnable. 1o maxlmlze Lhese
lncenLlves, cereal lmporLs and exporLs should be freelv allowed, and acLlvelv encouraaed
when prlces hlL Lhe parlLv bound, as Lhev offer a floor and roof Lo prlces. ln Lhe lasL 12
monLhs, hlah cereal prlces cannoL [usL be blamed on lnLernaLlonal prlces, as Lhev have
moved well above lmporL parlLv prlces.


18



I|gure 1: Import and export par|ty, and who|esa|e pr|ces for wheat (Add|s Ababa), Ianuary 1998 to November 2008

I|gure 2: Import and export par|ty, and who|esa|e pr|ces for ma|ze (Add|s Ababa), Ianuary 1998 to November 2008


4.l 1he functionino ond performonce of product ond foctor morkets
Output morkets function reosonob/y we// in terms of morket inteorotion, but moroins
between formoote ond consumer prices remoin hioh. LsLlmaLes of farmaaLe prlces relaLlve
Lo urban consumer prlces suaaesL LhaL farmers recelve noL more Lhan half of Lhe consumer
prlce, even Lhouah llLLle value addlLlon Lakes places beLween leavlna Lhe farm and selllna
Lhe producL. 1o reduce Lhese LransacLlons cosLs, producLlvlLv lncreases aL hlaher levels of
Lhe value chaln are essenLlal, ln facL, we could deLecL room for cosL reducLlons vla scale
economles ln parLlcular Lradlna acLlvlLles.
4pporent hioh costs ond non-competitiveness of tronsport ond morketino reouire
ottention. Whlle bulldlna and malnLalnlna road lnfrasLrucLure remalns lmporLanL Lo brlna
down cosLs, our analvsls shows LhaL boLh hlah fuel cosLs and perhaps non-compeLlLlve


19

markeLs for LransporL acLlvlLles lmplv LhaL Lhese lnfrasLrucLure lmprovemenLs have noL been
sufflclenL Lo brlna abouL producLlvlLv aalns ln LransporL. lncreaslna compeLlLlveness wlll
requlre addresslna enLrv cosLs, lncludlna vla credlL and slmpler procedures, buL Lhe
apparenL presence of non-compeLlLlve pracLlces bv lncumbenLs also requlres closer scruLlnv.
8educlna Lhe cosL of moblle phone use, lncludlna vla encouraalna compeLlLlon could have
larae beneflLs Lo lmprove lnformaLlon flows and Lherefore compeLlLlveness. 1rade credlL,
noL leasL Lowards smaller Lraders, and explolLlna scale economles aL Lhe lower levels of Lhe
markeLlna chaln should provlde oLher means of explolLlna scale economles.
lnnovotive mode/s of who/eso/e ond retoi/ morkets, ond of ooricu/turo/ production con
he/p commercio/itotion ond orowth of ooricu/ture. Lncouraalna lnvesLmenLs Lo sLreamllne
Lhe markeLlna chaln could have larae beneflLs, alven Lhe experlence ln oLher counLrles.
Cpenlna up Lhe markeLlna chaln aL Lhe wholesale and reLall level Lo supermarkeLs has been
shown Lo creaLe larae producLlvlLv lncreases ln markeLlna and beLLer farmaaLe prlces ln
manv developlna counLrles. 1hls occurs ln parL because Lhe provlslon of dlrecL ouLleLs for
hlah-value crops rewards lmprovemenLs ln quallLv and ln levels of commerclallzaLlon bv
farmers. neverLheless, Lhe developmenL of supermarkeLs Lends Lo requlre urban lncome
arowLh and a arowlna mlddle class. ConLracL farmlna arranaemenLs are anoLher example
bv whlch commerclallzaLlon can be fosLered.
Morkets for modern inputs ore sti// functionino re/otive/y poor/y. Lven Lhouah enLrv ls leaal,
boLh ferLlllzer and seed markeLs are characLerlzed bv llmlLed conLesLablllLv: lncumbenLs
(prlvaLe and publlc) appear Lo have conslderable advanLaaes lncludlna on credlL, maklna
enLrv or expanslon bv oLher plavers dlfflculL, boLh aL Lhe wholesale and reLall levels. As
ferLlllzer prlces remaln a serlous consLralnL on proflLable adopLlon of modern lnpuLs,
producLlvlLv lncreases ln Lhe handllna and markeLlna of ferLlllzer remaln an lmporLanL facLor
Lo lncrease lncenLlves Lo farmers. lncreaslna conLesLablllLv, bv, for example, measures LhaL
allow new enLranLs Lo use ferLlllzer as collaLeral for Lrade credlL mav help.
4 rethinkino of ruro/ credit provision is essentio/, ond shou/d not be ionored. 8ural credlL
provlslon has become dvsfuncLlonal as formal or mlcroflnance rural credlL markeLs are
dwarfed bv Lhe lnpuL loan svsLem. 1he laLLer ls lncreaslnalv falllna, noL leasL alven lLs llnks Lo
Lhe realonal sLaLe publlc flnances, and lLs dlsappearance appears now llkelv. neverLheless,
across Lhe world, worklna caplLal credlL, such credlL for lnpuLs, has alwavs been a kev parL of
rural LransformaLlon, and Lhe vacuum lefL bv Lhe llkelv dlsappearance of Lhe currenL lnpuL
loan scheme ls boLh a danaer, buL also an opporLunlLv Lo fosLer beLLer models of rural credlL
dellverv, ln anv case unconnecLed Lo publlc flnances.
1here is scope for innovotive schemes offerino insuronce to formers, offerino incentives to
enoooe in more risky, hioh return ooricu/turo/ technioues ond crops. lnsurance markeLs are
underdeveloped, whlle aarlculLure ln LLhlopla ls amona Lhe mosL rlskv ln Lhe world.
lurLhermore, adopLlon of new Lechnlques and lnpuLs carrv conslderable rlsks for farmers.
Whlle crop lnsurance for smallholder aarlculLure ls unllkelv Lo be a susLalnable opLlon, lL ls


20

lmperaLlve Lo develop schemes LhaL offer proLecLlon and lnsurance when harvesLs fall,
bevond safeLv neLs. lloLs LhaL creaLlvelv Lake forward ldeas on lndex-based lnsurance and
oLher models LhaL lnvolve llmlLed LransacLlons cosLs should be acLlvelv encouraaed, and
become parL of an lmproved overall lnfrasLrucLure for rural credlL provlslon.
ueve/opino innovotive risk monooement schemes ore specifico//y re/evont to foster the
deve/opment of ruro/ credit morkets. 8lsk and Lhe lack of lnsurance and oLher rlsk
manaaemenL mechanlsms are a kev reason whv prlvaLe rural credlL markeLs do noL easllv
develop, noL leasL ln areas dependenL on hlah rlsk, ralnfed aarlculLure. 1he kev reason ls
LhaL as poor weaLher evenLs Lend Lo affecL a larae number of pollcv holders, banklna ln such
condlLlons ls hlahlv rlskv as defaulL raLes are hlahlv covarlaLe. Lncouraalna Mlls or oLher
lnsLlLuLlons Lo enaaae ln banklna operaLlons for rural lnpuL credlL provlslon ls Lhen noL
wlLhouL rlsks for Lhe susLalnablllLv of Lhese lnsLlLuLlons. As lnpuL credlL ls cruclal, plloL
proarammes on dlfferenL opLlons for lnsurance of farmers' credlL and relnsurance of loan
porLfollos ln rural seLLlnas are Lhen uraenLlv requlred.
Prooress on /ond tenure security is encourooino but reouires ropid conso/idotion. Much
proaress has been made on lmprovlna securlLv of Lenure ln LLhlopla, even Lhouah Lhe
schemes sLlll fall well shorL of fullv Lransferable and collaLerallsable land rlahLs.
neverLheless, land cerLlflcaLlon appears Lo have brouahL beneflLs, and lL wlll beneflL farmers
lf lL ls consolldaLed evervwhere. lL wlll be lmperaLlve Lo develop and Lo conLlnuouslv updaLe
land realsLrv svsLems and Lhe opporLunlLles of modern Lechnoloav for area measuremenL
and recordlna could offer furLher securlLv. AL Lhe same Llme, commerclallzaLlon efforLs ln
aarlculLure wlll requlre mechanlsms Lo aeL access Lo rural land for lnvesLmenL, Lhese
mechanlsms should be clear and LransparenL, wlLh reasonablv fasL, leaallv enforceable and
conLesLable procedures.

Concluding rmarks: som cross-cutting tbms

uont /ook ot smo//ho/der ooricu/ture in iso/otion. ConcepLuallv, buL also emplrlcallv, our
analvsls has almed Lo show LhaL looklna aL aarlculLure ln lsolaLlon ls hlahlv mlsleadlna. 1hls ls
Lrue ln aeneral for anv secLor: arowLh ls abouL flndlna Lhe approprlaLe allocaLlon of all
producLlon facLors ln Lhe economv, and Lhe avallable Lechnoloav Lo aLLaln Lhe fasLesL
posslble rouLe Lo wealLh creaLlon, lrrespecLlve of Lhe secLor ln whlch producLlon facLors are
Lo sLarL wlLh. 1he currenL secLoral allocaLlon should bv no means be Laken as opLlmal, and lL
ls an undlspuLed facL LhaL developmenL across Lhe world has lnvolved Lhe larae movemenL
of labour ouL of Lhe rural secLor. Cne Lroubllna feaLure of Lhe pollcv debaLe on AuLl, onlv
parLlv addressed ln ASuL, ls LhaL smallholder ralnfed aarlculLure appears Lo be LreaLed ln
relaLlve lsolaLlon, wlLh a relaLlvelv narrow focus on boosLlna producLlon per se. Cur analvsls


21

has emphaslsed Lhe speclflc relevance of cereal producLlon, vla lLs lmpacL on real waaes and
urban food prlces ln Lhe economv buL also Lhe llmlLs on Lhe role plaved bv lnLernaLlonal
cereal markeLs. 1he lmpllcaLlon ls LhaL anv efforL Lo boosL cereal producLlon has Lo Lake
place ln con[uncLlon wlLh urban demand and lncome arowLh, wlLh lLs lmpllcaLlons for food
prlce formaLlon. Slmllarlv, low farmaaLe prlces as a share of overall crop prlces requlre LhaL
Lhe consLralnLs posed bv hlah LransacLlons and markeLlna cosLs are addressed
slmulLaneouslv wlLh aLLempLs Lo boosL vlelds, Lo ensure sufflclenL economlc reLurns Lo
farmers. lurLhermore, oLher forms of aarlculLural oraanlsaLlon, such as larae scale
commerclal farms are LreaLed as a nlche secLor, wlLhouL anv expllclL LreaLmenL of Lhe
lnLeracLlons wlLh smallholder aarlculLure, whlle Lhere mav be scope for subsLanLlal
exLernallLles.

lnvest in science ond innovotion, not on/y domestico//y, but with donor ond privote
foundotions he/p, internotiono//y. Whlle noL sclenLlsLs Lhemselves, Lhe auLhors of Lhls
sLudv found lL sLrlklna how hard lL was Lo flnd Lop lnLernaLlonal sclenLlsLs worklna on crops
and crop breedlna problems wlLh speclflc relevance Lo LLhlopla. LLhlopla has a sLrona bodv
of domesLlc researchers, buL Lhelr apparenL relaLlve lsolaLlon from fronLler work, such as
bloLechnoloav, ls sLrlklna. 1here ls currenLlv an lncreaslna lnLeresL ln applvlna Lechnoloav Lo
address aarlculLural problems ln Lhe developlna world, buL ln pracLlce, mosL Lop level
research, such as on aeneLlc modlflcaLlon buL also oLher forms of bloLechnoloav ls focused
on crops of relevance Lo rlcher economles. Cne kev reason ls LhaL such research ls
lncreaslnalv Laklna place ln prlvaLe research faclllLles or LhaL publlc or unlverslLv research
lnvesLmenL has Lo be proven Lo have commerclal beneflLs Lo secure publlc fundlna.
8esearch on crops and problems of relevance Lo LLhlopla does noL offer Lhese requlred
economlc reLurns.
neverLheless, as medlcal research lnlLlaLlves have shown, Lhere ls currenLlv a masslvelv
lncreased aoodwlll Lo push research on Loplcs Lo address developlna counLrv problems.
lurLhermore, creaLlve fundlna soluLlons can be deslaned Lo overcome Lhe absence of
lncenLlves for prlvaLe research when Lhe purchaslna power ls noL presenL ln Lhe poor
seLLlnas lnvolved. 1hese fundlna arranaemenLs can aL Lhe same Llme overcome Lhe
sLandard concern LhaL modern Lechnoloales such as CMC crops necessarllv need Lo lead Lo
monopolv power and explolLaLlon bv mulLlnaLlonals. Cne model would be a larae 'prlze'
pald bv donors for a larae-scale successful adopLlon of an lmproved seed bv aL leasL 100,000
farmers, afLer whlch Lhe lnnovaLlon becomes a publlc aood. Clven lLs hlsLorv and Lhe naLure
of Lhe problems lL faces, LLhlopla would be exLremelv well placed Lo fosLer and beneflL from
such schemes.



22

thiopio needs o more octive competition po/icy to foster competition ond contestobi/ity,
os port of o roodmop for the deve/opment of sustoinob/e morket institutions. ln our sLudv,
we found suaaesLlve evldence of serlous compeLlLlon problems ln a varleLv of markeLs. ln
mosL markeLs relevanL for aarlculLure, such as for seeds, seed mulLlpllcaLlon, ferLlllzer, Lrade
ln produce, or commodlLv LransporL, Lhe prlvaLe secLor ls allowed Lo enLer. neverLheless, we
found manv examples of speclflc advanLaaes Lo lncumbenL flrms or rules affecLlna
compeLlLlon. Cverall, manv of Lhese beneflLs or reaulaLlons Lo lncumbenL flrms were ln
response Lo real problems wlLh Lhe funcLlonlna of Lhese facLor markeLs, and ln manv cases
Lhev flxed parLlcular problems. Powever, Lhev rlsk undermlnlna Lhe proaress Lowards Lhe
sLaLed aoal of developlna well-funcLlonlna prlvaLe markeL lnsLlLuLlons ln all markeLs. ln each
of Lhese markeLs, more efforL should be made Lo encouraae enLrv, or aL leasL Lo avold
hlnderlna enLrv bv offerlna speclflc advanLaaes Lo lncumbenL (publlc or prlvaLe) flrms or bv
reaulaLlons LhaL make enLrv Loo cosLlv.
Lxamples lnclude Lhe enLrv cosLs ln Lhe ferLlllzer lmporL markeL, where ferLlllzer could noL
be used as collaLeral for lmporL loans and where reaulaLlons push up Lhe amounL of caplLal
requlred Lo operaLe. Slmllarlv, cosLs of enLerlna seed producLlon could be reduced aaaln bv
lmprovlna access Lo flnance and bv a clear reaulaLorv framework wlLhouL excesslve cosLs
relaLed Lo quallLv conLrol. ulscreLlonarv advanLaaes Lo veaeLable and flower farms mav be
[usLlfled Lo offer lncenLlves for enLrv of new flrms wlLh an exporL focus, buL Lhls focus
effecLlvelv reduces lncenLlves for prlvaLe flrms Lo enLer lnLo seed producLlon or oLher hlah
value crops wlLh dlrecL exLernallLles for smallholder aarlculLure. 1he LLhloplan CommodlLv
Lxchanae offers proaress for Lhe funcLlonlna of ouLpuL markeLs, buL lL cannoL be expecLed Lo
address all lnefflclencles ln commodlLv Lradlna. lor example, desplLe masslve road
lnfrasLrucLure lnvesLmenL, Lhere ls evldence of some producLlvlLv aalns ln LransporL, buL
LransacLlons cosLs are sLlll slmllar now compared Lo 2002. Lona-haul LransporL requlres
conslderable enLrv cosLs resulLlna ln a small number of lncumbenLs, buL Lhe resulLlna scale
economles need Lo be LranslaLed ln lower cosLs, noL monopolv renLs.
ln aeneral, llcenslna, reaulaLlons and dlscreLlonarv beneflLs Lo parLlcular companles mav
well have been lnLroduced ln vlew of solvlna speclflc problems, buL Lhese lncrease Lhe cosL
of enLrv, and reduce Lhe lncenLlves for producLlvlLv aalns for lncumbenLs, and have lona-
Lerm lmpllcaLlons for Lhe developmenL of well-funcLlonlna markeLs. A comprehenslve
revlew of lncenLlves for producLlvlLv aalns aL varlous parLs of Lhe value chaln Lhrouah an
anale of conLesLablllLv and compeLlLlon pollcv would be Lhe nexL sLep.

1he recent rise ond fo// of internotiono/ fue/ ond food prices offer conf/ictino incentives for
investment in ooricu/ture, but strenothens our focus on reducino tronsoctions cost ond
urbon income orowth. 8ecenLlv, due Lo rlslna alobal fuel needs, Lhe decllne ln fossll fuel
sLocks, and Lhe scope for blofuel Lechnoloales, cereal and fuel prlces have sLarLed Lo co-
move. ln Lhe lasL few vears, Lhls resulLed ln rapld lncreases, currenLlv, a downward splral ls


23

Laklna place. 1hls suaaesLs Lwo llkelv scenarlos for Lhe fuLure: elLher hlah fuel cosLs and hlah
cereal prlces whlch make LLhlopla a closed economv ln pracLlce, and dependenL on
domesLlc cereal producLlon Lo keep food prlces sufflclenLlv low, or low fuel cosLs and low
cereal prlces whlch make LLhlopla more able Lo Lake advanLaae of lnLernaLlonal markeLs Lo
keep urban prlces low. ln Lhe flrsL scenarlo Lrade volumes wlll be low, or even non-exlsLenL,
and exporL poLenLlal wlll be resLrlcLed Lo hlah-value, low bulk crops, ln well slLuaLed
producLlon areas. Cereal producLlon for Lhe domesLlc markeL wlll be proflLable, wlLh hlah
cereal prlces noL lnduclna lmporLs. As a resulL, ln Lhls scenarlo, domesLlc markeL access
would be a sLrona drlver of commerclallzaLlon, causlna areas closer Lo urban cenLers Lo
experlence more arowLh. Clven hlah LransporL cosLs, more remoLe areas, even lf of hlah
poLenLlal, are unllkelv Lo be proflLable.
under Lhe second scenarlo cereals can be lmporLed lnLo LLhlopla qulLe cheaplv, provldlna
llmlLed lncenLlves for lnnovaLlon ln cereals. Powever, Lhe producLlon of hlah value-added
crops ln aarlculLure would provlde posslblllLles for Lhe rural secLor, whlle urban arowLh can
be fed bv low-prlce cereal lmporLs. As Lhe cosLs of LransporLlna Lo domesLlc markeL cenLers
would also be low, commerclallzaLlon would be drlven Lo a areaLer exLenL bv aarlculLural
poLenLlal, and noL slmplv bv markeL access. LlLher scenarlo would suaaesL a raLher dlfferenL
locaLlon and focus of lnvesLmenLs. 8oLh are posslble, and, as aL presenL, we mav well
experlence rapld realme shlfLs (from hlah Lo low prlces), maklna sLraLealc lnvesLmenLs more
dlfflculL Lo be proflLable ln a susLalned wav. locuslna on land producLlvlLv lmprovemenLs
makes mosL sense when lnLernaLlonal prlces are llkelv Lo remaln hlah, as ln LhaL case
domesLlc producLlon can offer an alLernaLlve Lo expenslve lmporLs, Lrvlna Lo push prlces
below lmporL parlLv, whlle ln bumper vears and as lona as urban demand ls lacklna,
relaLlvelv hlah exporL parlLv prlces wlll offer decenL lncenLlves Lo farmers vla exporLs when
domesLlc prlces are low. 8uL Lhls sLraLeav can qulcklv hlL Lhe rocks lf lnLernaLlonal prlces are
low, so LhaL lmporLs are cheap, exerclslna downward pressure on prlces, whlle bumper
harvesLs could noL be proflLablv exporLed aL low exporL parlLv prlces.
1he resulL ls a oecessltv Lo complemenL anv pollcv focuslna on land producLlvlLv lncreases
wlLh oLher measures, sLrenaLhenlna Lhe kev araumenLs made ln Lhls paper. SLronaer urban
demand would avold food prlces dropplna Lo exporL parlLv prlces. lL ls also essenLlal Lo
affecL parlLv prlces dlrecLlv bv reduclna LransacLlons cosLs, such as vla beLLer markeLlna
lnfrasLrucLure, porL lnfrasLrucLure, and a more compeLlLlve or aL leasL conLesLable lona-haul
LransporL secLor.



24

Paprs and Background Nots Prpard for tb Study
Core apers
Adenew, 8erhanu 2009. A reLrospecLlve sLudv on Lhe performance of LLhloplan aarlculLure" aper
prepared for a sLudv on AarlculLure and CrowLh ln LLhlopla.
uercon, S. and ZelLlln. A. 2009. 8eLhlnklna AarlculLure and CrowLh ln LLhlopla: A ConcepLual
ulscusslon." aper prepared as parL of a sLudv on AarlculLure and CrowLh ln LLhlopla.
uercon, S. and Plll, 8.v. 2009, CrowLh from AarlculLure ln LLhlopla: ldenLlfvlna kev ConsLralnLs".
aper prepared for a sLudv on AarlculLure and CrowLh ln LLhlopla.
8ackground Notes and apers
Allen, 8.C., 2008, LLhloplan aarlculLure ln a world-hlsLorlcal conLexL. 8ackaround noLe prepared for a
sLudv on AarlculLure and CrowLh ln LLhlopla.
8ernard, 1. 2008. CooperaLlves for Smallholders' Craln CommerclallzaLlon ln LLhlopla." 8ackaround
noLe prepared for a sLudv on AarlculLure and CrowLh ln LLhlopla.
LberhardL, M. 2008, Cereal producLlon ln LLhlopla - a brlef hlsLorlcal overvlew of land under
culLlvaLlon and vlelds. 8ackaround noLe prepared for a sLudv on AarlculLure and CrowLh ln
LLhlopla.
uelnlnaer, k. 2008, Land ollcv erspecLlves. 8ackaround noLe prepared for a sLudv on AarlculLure
and CrowLh ln LLhlopla.
PoddlnoLL, !., 2008, 1houahLs on Lhe sLudv of arowLh and aarlculLure ln LLhlopla. 8ackaround noLe
prepared for a sLudv on AarlculLure and CrowLh ln LLhlopla.
CLsuka, k. 2008. SLraLeav for aarlculLural arowLh ln LLhlopla." 8ackaround noLe prepared for a sLudv
on AarlculLure and CrowLh ln LLhlopla.
ark, A. 2008. AarlculLural developmenL ln Chlna: Lessons for LLhlopla." 8ackaround noLe prepared
for a sLudv on AarlculLure and CrowLh ln LLhlopla.
8ashld, S. and uorosh. . 2008. 1he lnLerplav of ubllc ollcv and Craln MarkeL 8ehavlor ln
LLhlopla." 8ackaround noLe prepared for a sLudv on AarlculLure and CrowLh ln LLhlopla.
8l[kers, 8., Sderbom, M., and 1eal, l. 2008. 8ural non-farm enLerprlses ln LLhlopla: Challenaes and
prospecLs." 8ackaround noLe prepared for a sLudv on AarlculLure and CrowLh ln LLhlopla.
Sevoum 1affesse, A. 2008. uecomposlLlon of arowLh ln cereal producLlon ln LLhlopla." 8ackaround
paper prepared for a sLudv on AarlculLure and CrowLh ln LLhlopla.
Splelman, u. 2008. Lncouraalna economlc arowLh ln LLhlopla: erspecLlves on aarlculLural lnpuL
markeLs, aarlculLural exLenslon and advlsorv servlces, and aarlculLural educaLlon and
Lralnlna." 8ackaround paper prepared for a sLudv on AarlculLure and CrowLh ln LLhlopla.
Woldehanna, 1assew, 2008, 8ole of urbanlzaLlon and non-aarlculLural secLor for aarlculLural
developmenL. 8ackaround noLe prepared for a sLudv on AarlculLure and CrowLh ln LLhlopla.