Production:

Wheat production for MY13/14 is lowered to 3.6 million metric tons, which is down roughly 600,000 metric tons from the official USDA figure. Similarly, the wheat production estimate for MY14/15 is revised downward to 3.8 million metric tons, down almost 600,000 metric tons from the official USDA estimate. Area harvested for both marketing years is also lowered from 1.8 million hectares to 1.6 million hectares. These new figures for production and area harvested are based on Post's tabulations of regionally-reported grain statistics. Further, rising wheat prices along with reported shortages, suggest that production was not as high as was originally estimated.

While wheat production figures are lowered, year-over-year growth is apparent. Specifically, the increase in production from 3.6 million metric tons in MY13/14 to 3.8 million metric tons in MY14/15 is attributed to good rainfall, national and international efforts to combat wheat stem rust outbreaks, and the rising use of improved seed and fertilizer. In addition, the government's extension package continues to have a positive impact on production. The extension services among other activities provides for the distribution of improved seed and fertilizer, education on the optimal application of inputs (e.g. seed) and other agronomic techniques. Further, USAID, in partnership with its implementing partner, ACDI/VOCA, are working in the wheat value chain to increase productivity and quality, while reducing post-harvest losses. This USAID-funded program is known as the Agricultural Growth Program-Agribusiness and Market Development.

The outlook for wheat production in MY15/16 appears as though it will continue its upward trajectory with production estimated at 3.9 million metric tons. However, this estimate assumes that wheat stem rust will have a nominal impact on production. If there is a spike in rust prevalence, production would, of course, decline. At present, the rust situation, while a concern, appears to be under a control. The Ministry of Agriculture along with outside partners are working together to address the situation. According to CIMMYT, one of the international leaders working to halt the spread of wheat rust, 'replacement of the highly susceptible wheat cultivars is now the highest priority for Ethiopia.'

Consumption:

In light of the reductions to production, consumption figures for MY13/14 and 14/15 are both lowered to roughly 4.6 million metric tons and 4.7 million metric tons, respectively. With demand for wheat-based products expanding, wheat consumption is forecast to climb slightly in MY15/16 to 4.8 million metric tons. However, wheat and bread shortages will likely continue to pop up sporadically as demand for wheat-based products, particularly in urban areas, continues to grow.

Wheat is used to make important staple foods like bread, porridge (genfo), local beer (tela), roasted grain (Kolo) boiled grain (nifro), pasta, and different confectionary products. High wheat flour prices force some consumers and businesses to substitute or blend other grains with wheat in making some of these foods. Pasta demand is growing fast. However, as previously alluded to, some of this demand goes unsatisfied, since there are insufficient supplies of pasta-quality wheat. Given these constraints, the Ethiopian pasta industry, which is currently made up of 20 manufacturers, is obliged to work below their collective production capacity. As a consequence, Ethiopia imports sizeable volumes of pasta from Europe, mainly Italy.

Wheat is an important staple food crop and the third highest source of grain-based calories behind corn and sorghum. It accounts for a little more than 20 percent of the total calorie supply. According to the Central Statistical Agency's (CSA) crop utilization survey, 60 percent of production is used for household consumption, 20 percent is sold to the market, while the balance is used for seed, in-kind wages, animal feed and other uses. Wheat bran from commercial wheat millers is used as one of the ingredients in commercially-produced, compound animal feed.

Per Capita Calorie Supply from the Five Main Grains

Grain Type

Urban

Rural

National

Percentage

Teff

601.7

196.69

254.13

18.2

Wheat

200.9

309.79

294.3

21

Barley

38.16

144.58

129.48

9.3

Maize

107.53

435.99

389.4

28

Sorghum

94.72

366.21

327.7

23.5

Total

100

Trade:

Wheat imports are revised to take into account the above-mentioned changes to production. Specifically, imports for MY13/14 are raised to 985,000 metric tons, slightly above the USDA official estimate. The import estimate for MY14/15 is held unchanged at 900,000 metric tons. Of this amount, approximately 400,000 metric tons is from the Black Sea region and India. Meantime, MY15/16 wheat imports are expected to hold steady at 900,000 metric tons. This estimate could climb higher depending on grain production and food assistance needs in MY15/16.

Wheat is imported into the country by way of government purchases or food assistance. With respect to government purchases, the GOE, through its state trading arm, the Ethiopia Grain Trade Enterprise (EGTE), buys and distributes subsidized wheat to select millers. Only small volumes of commercially-purchased wheat enter the country outside these two channels. Even though international wheat prices are lower than domestic prices, local millers are generally reluctant to purchase directly from international suppliers since they worry about the possibility of being undercut if the government releases subsidized wheat stocks into the marketplace.

In MY14/15, the EGTE sold the subsidized wheat to 280 millers at a discounted price of USD $275 per metric ton. The mills distributed flour from this wheat to more than 5,000 targeted bakeries at a price of USD $398 per metric ton. The bakeries used the flour to make and sell bread at a fixed price of 0.07 cents per 100 grams. The growing cost of maintaining this subsidy has led the GOE to evaluate whether to continue this support in the future.

Stocks:

Ending stocks for MY13/14 and MY14/15 are revised down from the official USDA estimate to 350,000 metric tons and 300,000 metric tons, respectively. Ending stocks in MY15/16 are largely unchanged from the previous year at a little more than 280,000 metric tons.

Of the total amount of MY14/15 wheat stocks, the Emergency Food Security Reserve Administration's (EFSRA) is believed to hold 50-60 percent of the total. Specifically, the EFSRA reserve is assessed somewhere between 160,000-180,000 metric tons, but this figure could actually be lower since the GOE may not have replaced some of the reserve after using it to address earlier-identified needs. In addition, the current size of the reserve is lower than EFSRA's target amount of 200,000 metric tons, which is the projected base amount needed to feed the country's vulnerable population for three to four months.

All withdrawals from the EFSRA reserve are subject to strict rules. Well-established, reputable relief agencies, such as the World Food Program (WFP) can borrow grain from the reserve and replace the grain within an agreed timeframe. During large-scale humanitarian crises and times of widespread shortage, other food security programs, such as government social safety nets and price stabilization programs, can withdraw from the reserve.

The Ethiopian Grain Trading Enterprise is believed to hold about 5 percent of total MY14/15 stocks to hedge against possible wheat shortages. Millers and private traders hold about 25 percent of total wheat stocks, while farmers retain about 10 percent of the total.

Production, Supply and Demand Data Statistics

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

Oct 2013

Oct 2014

Oct 2015

Ethiopia

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

1,750

1,550

1,800

1,580

0

1,600

Beginning Stocks

370

370

424

350

0

302

Production

4,254

3,617

4,400

3,790

0

3,850

MY Imports

900

985

900

900

0

900

TY Imports

670

1,235

1,000

950

0

950

TY Imp. from U.S.

137

212

0

120

0

150

Total Supply

5,524

4,972

5,724

5,040

0

5,052

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Feed and Residual

500

300

500

310

0

310

FSI Consumption

4,600

4,322

4,900

4,428

0

4,460

Total Consumption

5,100

4,622

5,400

4,738

0

4,770

Ending Stocks

424

350

324

302

0

282

Total Distribution

5,524

4,972

5,724

5,040

0

5,052

1000 HA, 1000 MT, MT/HA