For more information about this bulletin, contact VAM Unit: or

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1 D F A J AOD F A J AOD F A J AOD F A J AOD F A J AOD F A J AOD F June 2018 HIGHLIGHTS Inflation: Inter annual inflation stood at 13.7 percent in May 2018, with no change from the previous month. Food inflation, declined from 16.1 percent in April 2018, to 14.9 percent in May. But, inflation and increases in food prices are still high and a main concern for food security of poor households. Seasonally grain prices increase during the June to August lean season. Belg harvest from July on in SNNPR and central Oromia Belg crop producing areas, should temper the rate of cereal price increases. Food Prices: National average wholesale maize prices are stable on a month to month basis but are still at elevated levels, even above the high prices of last year. Some maize markets recorded above 5 percent monthly price increase. Sorghum, an important food crop in drought prone areas, has stable prices, but big price differences across regions. Both wholesale and retail wheat prices continue to rise as the wheat import for the urban subsidy program has not yet materialized. The average nominal price of mixed teff is stable in the past three months. Terms of Trade (ToT): month-on-month and year on-year ToT improved in pastoral areas such as Jijiga, Gode, Awash, Negelle, and Yabello due to improved livestock prices in recent months. However, pastoral ToT are still below normal as livestock production has not fully recovered from recurrent droughts. The labor wage/maize ToT declined compared to last year in monitored markets of Dire Dawa, Hawzein, Wukro (Tigray), and Sekota (Eastern Amhara). For more information about this bulletin, contact VAM Unit: Tsegazeab.bezabih@wfp.org or Alemtsehai.alemu@wfp.org 1

2 Year-on-year food inflation rate decreased from 16.1 percent in April 2018 to 14.9 percent in May 2018 In May 2018, the inter-annual general inflation stood at 13.7 percent, remaining at the same level as the previous month. Food inflation, declined from 16.1 percent in April 2018, to 14.9 percent in May However, cost of food items increased highly compared to last year. Compared to May 2017, price indices for different food groups increased as follows: cereals and bread price indices increased by 20 percent, fruits by 27 percent, meat by 22.3 percent, vegetables by 4.9 percent, oils and fats by 4.8 percent Fig 1:Trends of Food Consumer Price Index (CPI) (December 2011=100) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Food and Non-Alcoholic Beverages Bread and Cereals Meat Oils and fats Month on month, the cereals and bread index showed an increase of 4.5 percent while the index for vegetables shrunk by 6.1 percent during the month. The inflationary pressure has remained in the double digits for the past ten months since August 2017 despite the government s plan to keep it in a single digit. Wholesale prices of major cereals continue to rise, particularly wheat prices Maize Maize takes the highest share of cereal production, about 27% of national cereal production annually. Marketable surplus depends on annual variation in production. CSA data show, maize production and marketable surplus has been growing in recent years. Based on data from 23 markets monitored by Ethiopian Grain Trade Enterprise, nominal wholesale maize prices increased by 23.9 percent in May 2018 from the five years ( ) average, by 3.5 percent from last year and 2.6 percent from last month. Last year maize prices were high, some attribute this to the aggressive market intervention to buy maize for export maize prices are stabilizing at elevated levels. Month to month maize price increase by more than 5 percent was observed in central Oromia in Woliso (9.7 percent), Ambo (5.3 percent), and Ziway (7 percent). On the other hand, markets in Dejen, Bure and Gondar of Amhara region showed more than 3 percent decrease in maize price. 1, Fig 2: Average nominal wholesale price of maize (ETB/Quintal) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average ( ) CY-2018 LY

3 Retail maize prices in deficit areas of eastern Oromia are higher by 12 percent from the national average. However, prices have been decreasing over the past three months in these areas. Decline in retail price was observed in Mechara (-22 percent), Deder (-13 percent), Bedeno (-9 percent), and Chiro (-6 percent) in the period between February and May Sorghum (White) wholesale markets, 13 recorded price increase of more than 15 percent in the past three months. 1,400 1,200 1,000 Fig 4: Average nominal wholesale price of wheat Sorghum is an important food security crop in drought prone areas. Sorghum production in Ethiopia ranks third after maize and Teff (16 percent of national cereal production). The sorghum market is relatively stable in most retail markets. However, as figure 3 depicts, there are large differences in prices across regions, implying that white sorghum markets are not well integrated, which makes sense given sorghum production is less concentrated geographically compared to other cereals Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average ( ) CY-2018 LY-2017 Shoa Robit Alamata Gambela Dire Dawa Wheat Ebinat Sekota Adigrat Adwa Jijiga Figure 3: The retail price of white sorghum in different markets (in Birr), May Wheat is supplied both from local production and imports for food assistance, and government subsidized wheat distribution. Nominal wholesale wheat price continued to increase since the start of this year. In May 2018, average wheat prices were about 34 percent above 2017 May prices. Out of 19 Wheat price increase was observed in retail markets in both surplus and deficit areas. Over the past three months, wheat deficit areas of Sekota, Adigrat, Adwa, Negelle, Yabello and Chiro recorded price increases between 20 to 30 percent. Prices also increased by more than 20 percent in the last three months in surplus areas such as Bale-Robe and Ginir. Increases in wheat price is a food security risk particularly for the urban poor who depend on wheat products such as bread. The wheat supply under the government urban wheat subsidy program is still not imported, exacerbating the supply problem. Teff (Sergegna) Teff is a staple food used for the making of injera Ethiopian flat bread). Sergegna teff (a mix of white and brown Teff), is usually consumed by the middle class urban residents and is cheaper than white Teff. Figure 5 presents the pattern of nominal price change in 2018 compared to 2017 and the five years ( ) average. In May 2018, the average nominal whole price of sergegna teff was 26.7 percent higher than the five years average of the month. Teff prices increased 3

4 by 8.2 percent compared to last year and by 3.7 percent over the past three months. 2.5 Fig 6: Shoat to maize TOT in selected markets 2,500 2,000 Fig 5: Average nominal wholesale price of mixed teff ,500 0 Jigjiga Gode Yabello Awash 1, ,369 1,356 1,430 1,447 1,428 1,456 1,489 1,528 1,551 1,562 1,517 1,473 May 2018 May-17 5 years May average ( ) - Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec Average ( ) CY-2018 LY-2017 Terms of Trade (ToT): Purchasing Power Shoat to maize: In May, the Terms of Trade between shoat (sheep and goat) and maize improved in most monitored markets, compared to last year and to that of the previous month. ToT improvement was observed in Jijiga, Gode, Awash, Negelle, and Yabello. Livestock prices are improving; in Jijiga, an average sized sheep or goat can buy 34 percent more maize compared to last month. In Yabello, an average sized sheep or goat could fetch 20 percent more maize in May 2018 compared to the previous month. The improvement in the body condition of the animals following the better rains this year and increased demand both locally and for the international market are the factors behind the recovery of the livestock market. However, as depicted in Figure 6, the shoat to maize TOT is still below the five-year average in almost all monitored markets, as the livestock market has not fully recovered from the recurrent droughts. Wage to White Sorghum: As depicted in figure 7, the purchasing power of daily labourers decreased compared to last year in Dire Dawa, Hawzein, Wukro, and Sekota. A casual labourer who was able to buy 17.9 kg of white sorghum in May 2017 in Hawzein could buy only 9.4 kg in May 2018, a reduction of 8.5 kg in one year. In Sekota, the wage to white sorghum ToT deteriorated from 6.8 kg in May 2017 to 5.3 kg in May The deterioration in TOT is primarily due to the increase in the price of white sorghum while the labour wage remained relatively stable in the monitored markets. 4

5 Figure 7: Wage to White Sorghum ToT Diredawa Hawzein Wukro Sekota Years May Average May 2017 May-18 5

6 Table 1: Retail prices by market and month-on-month price Changes-May 2018 Lowest Price Price (ETB/Kg) Month to month Change (%) Highest Price Price (ETB/Kg) Month to month Change (%) Market Market White Maize (per Kg) Shewarobit % Wukro % White Maize (per Kg) Assossa % Babille % White sorghum (per Kg) Assossa % Bedeno % Godere (Meti) 7.20 White Sorghum (per Kg) Gode White wheat (per Kg) Bedessa % Diredawa % White wheat (per Kg) Girawa % Yabello % 6% 0% 6

7 ANNEX 1: Commodity prices by market and trend of price changes (May 2018) Price Change (%) White Maize (Wholesale in 100 kg) Price (ETB) 1 month 3 Months 1 Year AA 718 8% 7% 7% Bahirdar 700 0% 11% 12% Bure 610-3% -2% 6% Dessie 693 1% 4% 4% Gonder 708-6% 6% 17% Jimma 625 4% 4% -10% Mekelle 713 2% 5% 3% Nazareth 700 5% 8% 9% Shashemene 726 3% 11% 1% Wheat (Wholesale in 100 kg) Addis Ababa % 18% 30% Assela % 15% 32% Bale Robe % 14% 36% Debremarkos % 18% 40% Dessie % 13% 35% White Maize (Retail in 1 kg) Alamata 8.4 0% 10% 20% Asayita Awash 6.9 0% 1% 13% Awassa 0.0 Bedenno % -9% 23% Ginir 9.0 0% 6% 28% Jijiga % -25% 0% Kobo 0.0 Korem 8.0 0% 0% 6% Negelle 8.0 3% 6% 0% Shashemene 8.0 2% 15% 13% Sikela % -3% Turmi % 20% 0% Yabelo % -10% 10% White Sorghum (Retail in 1 kg) Abaala % 15% Abi Adi % 21% Abomsa Kobo Korem % 15% 7

8 Sekota % 41% Turmi % -9% Wekro % Price increase above normal (above 5% within one month, above 10% within three months, and above 15% within one year) Normal Price change (±5% within one month, ±10% within three months, and ±15% within one year) Price decrease below normal (Below -5% within one month, below -10% within three months, and below -15% within one year) 8