Addis Fortune (Addis Ababa)

3 February 2013

Ethiopia: Excess Production Chops Onion Prices

The number of farmers engaged in harvesting onions reached close to one million in the 2011/12 fiscal year, up by 11pc compared with the previous year. The farm area covered by onions also increased by 38pc to 30,478ha in 2011/12, according to a survey conducted by the Central Statistics Agency (CSA) in September 2012.

Kefeni Deyasa, 50, is a farmer in the East Arsi zone, Borie Wereda, 270Km from Addis Abeba. He has been farming his two hectares for the last 26 years, whilst tilling additional land that he leases from other farmers.

He shifted to onions in 2004, seeing how other farmers were profiting from it. In 2011/12, Kefeni covered four hectares of land with onions, an additional two hectares to previous years, on the notion that the earlier year's harvest was selling for 10 to 11 Br a kilo; a four Birr difference from the previous month.

The market had a shock for him, however, for by the time of the new harvest, the price of onions had rapidly declined. When Fortune talked to him on the phone on Tuesday, January 29, 2013, he was selling one kilo for 1.65 Br. Two days later, prices went even lower, to just 1.25 Br a kilo.

The price of onions is rapidly decreasing in the market. Retail prices at Atkilt Terra, in Piazza, are now three Birr a kilo, down from six to seven Birr a month ago. At Shola Market, the second largest vegetable market in Addis Abeba, they are selling for four Birr, down from up to eight Birr, just a month ago.

Other vegetables, such as tomatoes and potatoes, have also seen slight decreases over the past two weeks, according to Fekede Gebre, who has been selling vegetables in Atkilt Terra for the past 12 years.

"The price change of onions is very surprising. It is the first time for me to see such a decrease in my business experience," he said.

Fekede buys his onion from farms in Shewa Robit, Shashemene and Meki, paying between 1.40 Br and 1.70 Br a kilo. The onions from Shewa Robit are the best quality, followed by Shashemene and Meki, according to Fekede.

He pays 3,000 Br for transport, from Shewa Robit, in an Isuzu truck, which carries 50 quintals. He hires labourers to collect the onions.

Kefeni has collected 370 quintals from his four hectare farm, which is about the same as the national average yield of 107qt a hectare, for 2011/12, according to the Central Statistics Agency (CSA).

Last year he harvested 160qt from two hectares, less yield than the latest crop, but much higher in terms of monetary value.

He puts his costs at 40,000 Br a hectare for the entire harvest period - 5,000 Br for land he rented from other farmers and 60 Br a day for labourers. He also buys 10 litres of gas for his water pump, every three days for three months, four quintals of urea for one hectare, and 15Kg of seed, each at 300 Br a kilo, of which he needs 15 Kg a hectare.

Fekede then sells his onions for two Birr a kilo, he told Fortune.

"The price is changing, not only in days, but also in hours," Fekede says. "Yesterday the price was 2.50 Br in the morning, but by that night it was two Birr."

The drop in price has come as a result of a surplus in the supply of onions at the market.

In the three neighbouring Shashemene kebeles of Dunguni, Koya and Lafto, where Kefeni lives, 201 farmers are engaged in onion faming, according to Shalo Guluma, deputy manager of Bona Farmers' Union.

While the price of onion was 10 Br to 12 Br, for the last year season, the current price of the onion is two Br to three Br a kilo in Atkilt Terra, due to a fruitful season.

"All our hard work is coming to a loss," said Abraham Negash, who is farming two hectares of land for which he says he is paying 6,000 Br in rent.

Abraham left his job with the Ethiopian Revenue and Customs Authority (ERCA) to take up farming onions.

The interest in onion farming has been such that the total land covered by onions at national level grew from 22,035ha, in 2010/11, to 30, 478ha last year. The production of onions for 2011/12 is 3.3 million quintals, compared to the 2.4 million quintals of the previous year, according to the CSA. One million farmers participated in onion farming, for the 2011/12 fiscal year.

Kuba Tirfe, agriculture market consultant and previous director of the Tendaho Sugar Factory, argues that the reason for the price decrease is due to the gap between the demand and supply in the market. Demand is low, whilst the supply, created by farmers in the country producing onions at the same time, is high.

There is also a great information gap between producers. There is no communication between the market and the farmers. The farmers only follow the market, and they do not forecast the future, argues Kuba.

"When prices increase, farmers increase their production and vice versa," he says.

The Ethiopian Horticulture Producers & Exporter Association points its finger at Unions and cooperatives for the gap between the demand and supply, saying that they failed to exchange information between themselves and do not train their farmers sufficiently.

"Unions do not conduct market analyses, which is their basic responsibility," Tilaye Bekele, Executive Director of the association, claimed. "They are also not well organised in working for the farmers"

The Association supports farmers by providing training and, three years ago, created websites for unions in Meki and Ziway. But they cannot utilise it, Tilaye told Fortune. The Association also gave Adame Tulu and Meki Unions pack house machines for 8 million Br and freezers for their onions, according to Tilaye. But the unions are not using them.

"We are in talks with government officials to take the machines back, since they are not using them," Tilaye says. "Unions are losing sight of why they were formed."

But the lack of such machines is one reason farmers are also selling at such low prices, for otherwise their onions will perish.

"I have no alternative other than this," Kefeni says.

The traders too are incurring losses, although not as much as the farmers, says Fekede.

Ayelech Wondimu, another trader at Atkilt Terra, says that the farmers also have fewer options with prices.

"We have the opportunity to increase prices, based on the price we pay for the goods, but the farmers cannot do that," Ayelech says.

Kuba urges for the development of the food industry, whereby perishable goods could be packaged and stored. He says the Ministry of Agriculture should learn from the experiences of other countries, for the development of the industry.

"I believe it would be a good lesson for the government to examine its policy," Tilaye says. "There should be a national guidance for the product."

Tilaye forecasts that the price of onions will increase sharply in the coming one or two months.

"This is because supply will go down as the price decreases," he says. "But it is possible to produce onions in different cycles, since most farmers use irrigation instead of waiting for seasonal rains."

Still, Kefeni says he may not sow onion on more than half a hectare for the next season.

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