Project Duration: 2008
MOTIVATION
In 2006, Ethiopian cereal prices were rising sharply and threatened food security, especially for net cereal purchasers. To develop research-based evidence to inform policy responses to the price spikes, IFPRI conducted a set of studies that examined agricultural production, markets, and prices within the country.
RESULTS
In addition to conducting surveys of consumers, farmers, and traders, the research teams developed a model to simulate regional grain markets and how they interact. IFPRI’s research in Ethiopia dispelled the commonly believed causes of cereal price hikes: cross-border trade, increased demand for consumption, diversification into high-value crops, and speculative hoarding. IFPRI found that high prices were instead caused by a combination of overestimation of yields and macroeconomic policies.
OUTCOMES
- Some stakeholders believed Ethiopia’s new Productive Safety Net Program had injected too much cash into the rural market, increasing rural cereal demand and driving up prices. IFPRI’s research showed that safety net payments did not significantly raise grain prices. Ultimately the government increased the payments so recipients could afford the more expensive grain.
- When prices spiked, the Ethiopian government forbade the World Food Programme (WFP) from buying grain from local markets for its relief programs, believing its involvement in the market would only exacerbate the problem. Eventually, after the research results were released, the WFP was once again allowed to buy from local markets.
- IFPRI’s research revealed that the government’s crop-forecasting procedures—which produced the data used to devise food security policy—could be strengthened. This led the EC and others to provide grants to Ethiopia’s Central Statistical Agency to improve its production forecasts.
- IFPRI’s findings from its research on cereal prices, along with its assessment of Ethiopian agriculture, led to the creation of the Ethiopian Agricultural Transformation Agency (ATA) in 2010. The ATA is the government agency focused on helping accelerate the growth and transformation of the agriculture sector. Today, IFPRI continues to provide technical assistance to the agency.
For more information on IFPRI's work in partnership with the EC, please go to this brochure.
