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

Table 6.1: Storage capacity of the companies (quintals)
Ethiopia
Capacity Hawas Ambassel EGTE Amalgamated Guna
Own store 60,000 0 8.3 million 40,000 400,000
Rented store n.a. 60,000 0 92,000 50,000
Note: n.a. means not available.
All the companies buy their stocks from surplus-producing areas without going to the central
grain market in Addis. They buy directly from producers, traders, or agents in the different
rural markets. Some of them also float tenders to buy grain. Two companies, EGTE and
Ethiopia Amalgamated, were involved in importing wheat. Wheat and maize, the major crops
handled, are sold to donors such as the World Food Programme (WFP), Euro Aid, and
various nongovernmental organizations (NGOs). The Disaster Prevention and Preparedness
Commission (DPPC) also gets some of its supplies from the companies. Other major
customers are the Ministry of Defense and flourmills. The grain is cleaned, graded, and
fumigated in some cases. Since teff is mainly bought by urban households and there are no
large-scale processing or milling factories, the trading companies have minimal interest in the
crop.
Grain trade is the major activity for EGTE, whereas the other companies undertake other
activities as well, including merchandise trade, fertilizer trade, and export of pulses and
oilseeds. The companies enter the grain trade in response to tenders or requests from the
major buyers. These companies may carry out no purchase in some years or in most parts of a
given year. For instance, only one company (Ambassel) bought maize in 2001/02. The
quantity of grain handled is also smaller in some years. Even EGTE has sharply reduced its
food grain purchases in recent years and diverted its resources to purchasing oilseeds and
pulses for export. It has been reported that maize and sorghum are exported in years of
bumper harvests. For instance, Guna exported about 200,000 quintals of sorghum and maize
to Sudan in 2000/01.
Contract enforcement is a major problem of the trading companies. Three of the five
companies had faced disputes in the preceding three years. One of the companies (EGTE)
lost 104 million birr over the same period, while the other (Hawas) lost 1.7 million.
Grain prices at the central market start to increase whenever one or more of the companies
are about to buy grain. On the other hand, prices decline if they are staying out of the market.
The volatility of the market is partly induced by the occasional involvement of the
companies. It appears that large-scale wholesalers operating on a more permanent and
consistent basis would have a stabilizing effect on the market.