I’ve been puzzling for a while about why food prices are rising here in Ethiopia. Teff, the local grain, has trebled in price from about 400 Birr per quintal to about 1,200 Birr for the same amount. There is almost no global trade in teff, so it does not seem to be an effect of rising global teff prices. Teff production has been at high levels for four years, according to Ethiopian government statistics (which may be inaccurate); and there is no obvious reason why overall food demand should have increased enough to cause such a sharp increase in prices.
A few weeks ago, Javier Blas in the FT, offered one possible explanation. He said that the problem was abnormally high demand, driven by substitution effects:
United Nations’ agriculture and food aid officials said that record prices of imported food have prompted a substitution effect, boosting the demand – and the price – of indigenous staples such as yam, sweetpotato, sorghum, cassava, millet or teff in Africa, Latin America andparts of Asia.
I’d be surprised if the price of teff would treble as a result of the rising price of substitute products, though I suppose this is theoretically possible.
Yesterday, Barney Jopson, also in the FT, apparently reporting from here in Addis, offered a different explanation:
The crisis has been magnified by local factors – drought, hoarding, and a splurge of public infrastructure investment that has left the finances of the country’s cash-strapped government under strain.
Unfortunately, Jopson doesn’t offer us any evidence for any of this. Who are these people “hoarding” teff, and where is it? In which parts of the country has drought caused a reduction in teff production, and by how much has the supply of teff fallen, overall? I’m particularly at a loss to understand Jopson’s thought that investment in public infrastructure would lead to rising food prices (though I can see why it has made it more difficult for the Government of Ethiopia to use subsidies or tax cuts to offset the effects.)
I’d like to see some more thorough reporting of teff production. My hunch is that food production figures have been flattered by official statistics in recent years, possibly to bolster GDP growth figures (agricultural production being a substantial share of GDP), and that the government has run down domestic teff reserves to make up the difference between actual and reported production. Now that the reserves are running low, the tightening of supply is leading to the increase in prices. But I have no more evidence for this than Jopson’s theory that it is because of hoarding.