The Future of Smallholder Farming in Eastern Africa - Uganda ...

(1999b) reviewed the market systems and stressed, among other things, the need to create a
conducive and enabling environment, train grain market operators and entrepreneurs, and
improve grain market information systems.
In general, most of the grain market studies seem to have focused on the impact of
liberalization and on price integration between the different market centers of the country.
The results, though conflicting in some cases, confirmed that market integration and
efficiency improved during the post-liberalization period. At the same time, the studies tend
to suggest high spatial and seasonal price differentials. The general consensus is that there is
room for further reduction of costs.
The importance of the Addis Ababa central market (Ehil Berenda) has been underscored in
many of the grain market studies conducted so far. For instance, Gabre-Madhin (1998), in her
descriptive analysis of the market structure, observed the radial structure of roads in Ethiopia
(with the capital city at the center) and showed that the regional markets cannot trade directly
with each other without physically passing through the capital city, Addis Ababa. The central
market of Addis Ababa serves as a national clearinghouse of grain, with sellers bringing in
grain and buyers coming to acquire grain. Transaction and transport costs are therefore very
high, implying wide a margin between farmgate and consumer prices in food-deficit areas.
1.3. Purpose and objectives
The volume of grain marketed falls sharply in years of poor harvest, and as a result prices rise
considerably. On the other hand, grain prices are seriously depressed in good years and
immediately after harvest. Low prices immediately after harvest and high seasonal price
fluctuations have discouraged investment in inputs such as fertilizers and improved seeds.
Inefficient and underdeveloped output markets result in low and variable prices, thereby
reducing the profitability of new technologies for farmers, discouraging business people from
investing in processing activities, and deterring wholesalers, retailers, and transporters from
investing in improved market and transport services. In addition, the distribution system may
be inadequate and expensive for final consumers. The purpose of this research is to shed light
on how the Addis Ababa central grain market operates. It will contribute to the understanding
of factors hindering improvement and modernization of the market.
The objective of this study is to examine the competitiveness and efficiency of the Addis
Ababa central grain market. A more efficient, responsive, and modern central market could
bring substantial welfare gains to producers, consumers, processors, and other participants all
over the country. More specifically, the research will
• investigate and describe the role of brokers, grain sellers, and buyers in the process of
price discovery;
• provide insights into the structure, conduct, and performance of the brokerage, wholesale,
and retail markets;
• assess the effectiveness of the different channels through which consumers buy grain;
• examine the role of associated public and private institutions and transaction costs in the
performance of the marketing system; and
• derive policy implications that will help policymakers understand the factors hindering
improvement and modernization of the Addis Ababa central market.