The characteristics of global value chains create some important opportunities to improve the livelihoods of producers, processors, and traders. Global value chains often cater to quality-sensitive consumers in other countries, creating an opportunity for farmers and other value-chain participants to benefit from improving quality, being more inclusive, and/or demonstrating sustainable production methods. Because global value chains are long, communication between consumers and producers is difficult. However, information and communication technology can help bridge this gap and facilitate coordination of supply and demand. Innovations that increase the output and quality of export commodities in a given country are unlikely to reduce the global price, so farmers and small enterprises involved in trading and processing are more likely to benefit than if the commodity were only marketed domestically. At the same time, these chains present significant challenges. It is necessary to understand the product characteristics that affect consumer demand in destination countries, including quality, color, size, and even production methods, such as the environmental impact. Information on these requirements need to be communicated to farmers and local processors, along with a system for offering a premium for the higher quality. Coordinating harvest & transport of export agricultural products can be difficult, particularly for perishable commodities that may need to arrive within 24 hours of harvest. A major challenge is minimizing the cost and delays in domestic and international transport, including phyto-sanitary inspection. Another challenge is ensuring the benefits of global value chains are shared among disadvantaged 4 groups, including small farmers and women. Because of quality requirements and the advantages of scale, larger and better-connected producers are often at an advantage in producing export commodities. Global value chains are more affected by trade and exchange rate policies than domestic value chains. For example, export commodities are vulnerable to unexpected changes in export taxes and over-valuation of the exchange rate, which reduce the return on exports. WP1 will study the impact of promising interventions that improve the livelihoods of farmers and other participants in targeted global value chains. This work package is being implemented in Bangladesh, Ethiopia, Guatemala, Honduras, and Uzbekistan. The case study in Ethiopia focuses on oilseeds value chains. Oilseeds play an important role in the Ethiopian economy and empirical evidence have shown that there is so much potential in oilseeds that Ethiopia can exploit. A study that considered all value chains to be equally important for the economy prioritized oilseeds, fruits/tree crops, vegetables, tobacco/cotton/tea and cattle value chains in Ethiopia (Benfica & Thurlow, 2017). The most important oilseeds in Ethiopia are sesame, soybeans, and groundnuts. Sesame is the largest exported oilseed: in 2019, sesame exports from Ethiopia were worth US$ 307 million, making it the second-largest agricultural export after coffee. Sesame is primarily an export crop. In contrast, groundnut and soybean are marketed domestically and internationally, and exports are considerably smaller (US$ 85 million combined). About 75% of Ethiopian sesame production takes place in the regions of Amhara (particularly in Gonder) and western Tigray. Smaller amounts are grown in Oromia, Benshangul-Gumuz, SNNP, and Gambella. A large majority of sesame is grown on small-scale family farms, although larger commercial farms account for about 18% of production. Almost all sesame is exported in the form of raw seed and converted to sesame oil, tahini, and other products in the destination countries. This is presumably because sesame oil is relatively expensive and not widely used in Ethiopian cooking. Most vegetable oil for domestic consumption is imported, and 90% of the imported quantity is palm oil. There are several hundred vegetable oil processing plants in Ethiopia. The most common types of oil produced domestically are niger seed oil (72% of processing plants), linseed oil, and groundnut oil (GAIN, 2018). Although some Ethiopian sesame has a reputation for high quality on international markets, the sesame value chain is characterized by low productivity, fragmentation, high transaction cost, and limited information. The Ethiopian Commodity Exchange (ECX) has a grading system for sesame, but traders often grade sesame only after it has been aggregated from multiple farmers, making it difficult to provide a premium to individual farmers. Farmers complain that the informal grading and price determination is not 5 transparent. In addition, the ECX has established various channels for delivering market information to farmers, but access to the information remains a problem. These constraints are undermining the performance of the value chain across all nodes of production and marketing. Addressing the key researchable constraints through bundles of innovations is what the markets initiative is planning to do in Ethiopia. The Initiative is starting its interventions in Ethiopia with a scoping study of the sesame value chain. This report summarizes the findings of the scoping study on the oilseeds value chain in Ethiopia. The overall objective of the scoping study is to identify a limited number of interventions that will be subsequently tested through some form of impact evaluation. In order to achieve this overall objective, the scoping study has three intermediate goals: i To describe the structure and operation of the supply chain, from input markets to primary production, processing, and export of the commodity. ii To diagnose problems in the supply chain, defined as obstacles or constraints which reduce the earnings of participants, limit participation of women and other disadvantaged groups, and/or exacerbate the environmental impact. iii To explore the merits of alternative solutions that may address one or more of these problems, where the evaluation is based on an analysis of secondary data, the views of stakeholders, pilot projects, and experience in other countries. The data and information for the scoping study were generated from literature, secondary data, and stakeholder workshops.
Source Making globally integrated value chains inclusive, efficient, and environmentally sustainable
Published by: CGIAR
Authored by: Kassie, Girma T.; Worku, Yonas; Bachewe, Fantu Nisrane; Asnake, Woinishet; Abate, Gashaw Tadesse
Publication Date: Dec 1st, 2022