Dairy value chains during the COVID-19 pandemic in Ethiopia: Evidence from cascading value chain surveys before and during the pandemic
We combine in-person survey data collected in February 2018 with phone survey data collected in June and September 2021 to study how dairy value chains in Ethiopia have coped with the COVID-19 pandemic. Focusing on the major dairy value chain connecting farmers in North and West Shewa as well as peri-urban and urban producers in and around Addis Ababa to consumers in Addis Ababa, we applied a cascading survey approach in which we collected data at all levels of the value chain: dairy farmers, rural wholesalers, and urban retailers. In June and September 2021, we see little evidence that the pandemic is exerting a negative effect on the dairy value chain actors. Nine percent of the dairy farmers exited the business between February 2018 and June 2021, but these exits were not caused by the pandemic. Milk yields have increased considerably between 2018 and 2021, particularly among cross-bred cow types. Meanwhile, sales patterns and sales destinations among farmers have remained similar since 2018. In 2021, farmers are processing more and the decision to process or not seems to be formed by the changes in the relative prices of liquid milk and processed dairy products. We see suggestive evidence of a decline in credit availability and access to extension services. Same is true for the availability of daily workers, though not many farmers hire external help. Among farmers, by far the main concern relate to surging feed prices that increased since the onset of the pandemic and June 2021 by 80 to 100 percent. As a result, farmers report purchasing less feed and this is reducing milk yields, and thus farmer incomes. Rural traders also seem unaffected by the pandemic. The turnover among liquid milk traders is high with 36 percent of the milk wholesalers interviewed in February 2018 reported to have stopped trading dairy products by September 2021. However, only few reported that the pandemic was a factor in their decision to quit the business. The turnover among butter traders was smaller with 4 out of 30 traders quitting between February 2018 and September 2021. We see no dramatic changes in procurement and sales destinations between 2018 and 2021. Traders report that the competition in their sector has increased since February 2020. Meanwhile, the availability of labor at the midstream segment of the value chain has remained the same over time. The main concern among at this segment of the value chain relates to limited supply of milk and butter from rural areas. The impact of the pandemic seems also minimal at the retail level. About 29 percent of the retail traders had quit the business since February 2018, mostly because their business was no longer profitable. Eight out of the 49 retailers that exited the sector attributed their exit, at least partly, to the pandemic. Comparison of the data collected in 2018 and 2021 reveals that the traded quantities have increased in the dairy retail sector. However, when asked to compare to the situation just before the pandemic was declared, most traders report selling less and having fewer clients now. We see little change in labor use at the retail level across the survey years. Shortage of dairy coming into Addis Ababa was highlighted as the main concern among retail traders. In line with the high general inflation in Ethiopia over the past years, prices of liquid milk have increased considerably in the last three years. However, when expressed in USD terms, prices of milk have remained surprisingly stable (0.92 USD/liter in 2018 and 0.91 USD/liter in 2021). Comparing the farmgate and retail prices reveal that farm share (i.e., the share of the final retail price that is received by the farmer) increased slightly between 2018 and 2021. Finally, we see no evidence that increases in post-harvest losses. The physical quantities wasted seem very low, which is in line with the more careful analysis conducted by Minten, Tamru, and Reardon (2020). If anything, these losses at the wholesale and retail level have gone down during the pandemic. However, it is important to note that we did not assess losses in terms of value or quality. On the latter, it is encouraging to see that testing the milk quality with lactometers and alcohol tests have become more common since 2018, particularly at the mid and downstream segment of the dairy value chain.
Photo credit: USAID