Agriculture in Ethiopia is projected to grow at a CAGR of 5.4% during the forecast period (2021-2026).
As an impact of COVID-19, the Ethiopia agriculture sector faced major challenges, like with the harvesting process, labor scarcity has affected the supporting infrastructure around the agriculture sector, movement across state borders has been heavily restricted, which has blocked the movement of agri-produces and consequently affected the sales of the produced agri-commodities, lockdowns in major economies across the country have caused delays and backlogs in supply chains, exports faced transport and logistics problems, more stringent customs restrictions, etc.
The favorable government policies encouraging the private sector and the favorable agro-climatic conditions are the two major drivers behind the growth of the market studied. Agriculture in Ethiopia is the largest component of its economy and employs the majority of the Ethiopian population. The majority of these are smallholder farmers practicing subsistence farming on less than one hectare of land. These farmers, whose output is predominantly cereal crops, account for 95.0% of the agricultural production in Ethiopia.
Key Market Trends
Favorable Government Policies Encouraging the Private Sector is driving the market
The key component of Ethiopia’s Agriculture Policy is expanding the primary and processed agricultural products. As a result, the government of Ethiopia has identified two of its crucial areas, which are increasing the productivity of small-hold farms and expanding the large-scale commercial farms. To spur the economic growth of Ethiopia in the future, the government has initiated the Second Growth and Transformation Plan (GTP II), in order to make the agro-processing sector a single entity by encouraging private sector investments within the country. The government of Ethiopia has started working with international partners to enhance agriculture productivity by collaborating with different private sectors in many possible ways. The government of Ethiopia has established the Agricultural Transformation Agency (ATA), in order to address the problems of the agriculture sector in Ethiopia. The establishment of the society is meant to enhance the capability of the Ministry of Agriculture and Livestock Resources (MoALR), as well as it is public, private, and non-governmental implementing partners.
Production of Cereals in Ethiopia
Production of cereals accounts for the second-largest share in the economic contribution of the agricultural sector in Ethiopia. More than 80.0% of agricultural land is used for the production of cereals, which makes use of 60.0% of the rural workforce. Despite the huge availability of fertile land for agriculture, the country fails to produce high yields of cereals, due to low infrastructure, backward technology implementations and lack of machinery and irrigation facilities. According to FAOSTAT, the area under cereals cultivation was 10,390,466 hectares in 2018 which has increased by 0.8% and reached 10,478,217 hectares in 2019.
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