Ethiopia Agribusiness Report Q4 2012

BMI View: Ethiopia''s food security situation is relatively stable for now, with local prices well below
2011 peaks in most regions. High global commodity prices and government support are likely to
encourage Ethiopia''s farmers to plant more in the coming years. However, in the short term, and as long
as the sector remains fragmented and use of fertiliser is low, the country''s agricultural sector will be
vulnerable to weather patterns. As such, grain output will drop in 2011/12 on the back of weak ''belg''
rains.
Key Views
􀂃 Corn production growth in 2011/12: -8.3% to 4.4mn tonnes. Production will remain high by
historical standards but fall on the back of weak rains during the start of 2012.
􀂃 Coffee production growth to 2016: 14.0% to 7.0mn tonnes. This will mainly come from high
coffee prices, which are likely to spur plant rejuvenation programmes and increase the area
dedicated to coffee.
􀂃 Sugar consumption growth to 2015/16: 23.9% to 526,440 tonnes. Coming from a low base,
consumption of sugar will expand along with our expectations for strong economic and
population growth.
􀂃 Real GDP growth: 7.8% in 2012 (down from 8.8% in 2011; predicted to average 6.9% from
2011 until 2016).
􀂃 Consumer price inflation: 22% year-on-year (y-o-y) in 2012 (down from 25.2% y-o-y in
2011).
Key Developments
We have substantially revised upward our historic and forecast data for coffee production in line with
official estimates, which were raised in the past months. In 2011/12, production is expected to increase, as
we assume the crop will be able to withstand recent drought. Long-term growth will come from high
coffee prices, which are likely to encourage plant rejuvenation programmes and increase the area
dedicated to coffee. Ethiopia is one of the world''s largest producers of arabica coffee but will remain well
behind Brazil in coming years.
Grains production will drop in 2011/12 on the back of unfavourable weather. The ''belg'' rain (when the
belg crop is planted) was delayed and came in below expectations in 2012, hampering corn and wheat
output. In the longer term, the consolidation of the sector is expected to lead to yield improvements and
support growth. The development of a commercial feed industry could also encourage higher production,
as only residues and by-products of consumed grains are fed to livestock currently.
Ethiopia Agribusiness Report Q4 2012
© Business Monitor International Ltd Page 6
After a decade of virtually stagnant sugar production, we see Ethiopia''s output growing significantly in
2011/12 on the back of an increase in area harvested. Public investment by the state-run Ethiopian Sugar
Corporation and growing foreign private investment could lead to a significant increase in area
dedicated to sugar production. Specifically, the country announced the building of 10 sugar plants in
several regions and has earmarked 4mn hectares of land for firms seeking to invest in agriculture,
including those within the sugar industry. Production will be also backed by strong consumption
expansion, driven by high economic and population growth.