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Open Market Challenges

Commercializing agriculture—and creating a “new farmer” as the government aims to do—depends on several factors: improving farmers’ skills; giving them more and better technology, such as modern seeds, fertilizer, and irrigation; and opening up the market to the farmer. Our research shows that farmers are willing to innovate and take risks only when the environment is right. Inputs have to be available, knowledge must be transferred through private actors or non-governmental organizations (NGOs), and markets have to be able to absorb the production.

© International Food Policy Research Institute / Fetene AregaEthiopia learned the hard way that improving production alone would not transform farmers’ lives. Some four years ago, a combination of good rains and efforts to get farmers to increase fertilizer use led to two consecutive record harvests. Farmers increased their production by 20 to 40 percent. Instead of having the effect of increasing their income, however, the surplus led to the collapse of farm prices—in some places by almost 80 percent. Without a market to absorb their surplus, increased production only translated into increased debt for farmers who had bought expensive fertilizers. The next year, farmers’ use of fertilizers dropped tragically by nearly 30 percent, undermining Ethiopia’s progress to modernize its agriculture.

The need to improve markets is a daunting challenge in a country where both the roads and telecommunications structures are among the weakest in the world. The private sector too is just emerging after being nearly eliminated by the previous socialist regime.

Both Ingida and Getachew have been beneficiaries of the government’s efforts to help farmers get a better deal in the market through the establishment of marketing cooperatives. But, even while these farmers acknowledge that the cooperative has helped them, the cooperative system is not without its challenges. While helping farmers to bulk up their produce and gain market power through collective bargaining, the cooperative still has to face the market. If the market is weak, the trader is unreliable, or the co-op itself is not market-savvy, then the farmers may not be better off.

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