The Poultry Market System in Ethiopia: Challenges from COVID-19
Following on its examination of COVID-19 and the New Risks to Food Security and Nutrition, the Feed the Future Enabling Environment for Food Security (EEFS) project looks into how the practical challenges currently facing the private sector could negatively impact food systems in developing countries. Throughout the series, EEFS will present feedback from its remote survey of private sector partners operating in Feed the Future countries.
The first installment of the series examined impacts on grain and oilseed systems in Uganda. This second installment shares insights from 16 different poultry enterprises operating in Ethiopia.
The Poultry Value Chain
Before examining the challenges occurring across the system, it’s helpful to revisit the structure of the poultry value chain in Ethiopia. Poultry production is an input-intensive business, and there are multiple stages of production that can affect performance through different market channels.
A critical input in poultry production systems are day-old chicks (DOCs). The production of DOCs in Ethiopia requires the import of parent stock from which fertilized eggs can be raised and hatched. Since raising DOCs to full maturity is capital-intensive with high mortality risks, an intermediary stage of poultry rearing exists to reduce mortality risks for smaller scale egg producers prior to productivity. This involves (often a separate business) raising DOCs for approximately four weeks and selling what are known as “pullets” that are closer to egg-laying age and less prone to mortality.
There are two primary product channels, including chicken meat and table eggs. Broilers for chicken meat are raised for around 45 days before slaughter, while layers are raised for table eggs through a 12 to 18-month production cycle. The breed selection matters for each (or both), as genetics affect poultry resilience, growth rate, and laying capacity. At all stages of production in both channels, the utilization of high-quality feed, vaccinations, and medicines is critically necessary to achieve productive capacity and reduce morbidity or mortality.
Ulric Daniel, Managing Director of EthioChicken, the country’s largest DOC supplier, indicated a substantial initial shock to demand as a result of the COVID-19 crisis, and while the figures have since rebounded, they remain off their highs. Ali Mohammed Amin from Gerado Poultry Farm and Genene Ashami from Hawassa Poultry Farm have also experienced significant declines in end-market demand, which has negatively impacted the sale of DOCs.
An initial challenge in the enabling environment that respondents cited was a variance in transportation/shipping regulations across localities which created logistical challenges in distributing DOCs to rural communities. The Ethiopian government’s declaration of a state of emergency has since helped to settle regulatory inconsistencies across regions.
Additionally, the reduction in international flights arriving in Ethiopia has created a twofold challenge for the DOC supply business. First, with fewer flights arriving from Europe, the import of parent stock has declined, creating a supply challenge. Second, since Ethiopian Airlines is the largest foreign currency earner in the country, fewer flights mean a reduced supply of foreign exchange is available in the financial system. This is not a new challenge for Ethiopia, but the limitation of foreign exchange has grown. As a result, firms’ ability to import critical inputs has declined. Those firms who do not export to generate USD, or cannot access USD elsewhere, are experiencing a limited ability to import parent stock and other poultry input imports. As domestic end-market demand returns, and international flights resume, the root causes of these challenges to DOC suppliers are expected to abate.
Fanta Baji from ELERE Farms also raises the concern that limited foreign exchange has reduced imports of micronutrients for poultry feed. For DOC producers this has had the dual impact of reduced availability of high-quality poultry feed as well as rising prices which will impact the productivity and profitability of producers all along the chain.
Abraham Gebresilassie from Abraham Pullet Growers Farm says that reduced end-market demand has flowed down to their pullet business. Since domestic demand for eggs has plummeted, table egg producers have stopped purchasing pullets until demand returns.
Tigist Kebede from Lumehill Poultry Farm faced similar challenges and has also experienced supply chain disruptions, including shortages of feed and medications which constrains pullet raising.
The few customers continuing to buy pullets are paying lower unit prices and purchasing fewer pullets overall. As a result, pullet growers are losing money on each sale. Gebresilassie, for instance, is now cancelling investment expansion plans and could face bankruptcy.
Broiler and Table Egg Producers
Alema Farms PLC, one of the largest diversified poultry producers in Ethiopia, reported significant challenges as a result of the crisis. Alemayehu Amdemariam from Alema indicated that the closure of hospitality businesses led to a collapse in demand for broiler meat and a loss of 40M Ethiopian Birr (approximately $1.17M) for the company.
SW Poultry Farm and FW Agro-Production Processing, two broiler producers in Oromia, have experienced an approximately 90 percent reduction in demand as a result of hotel and restaurant closures. As a result, cold storage has reached capacity, and they are unable to purchase live broilers from smallholder outgrowers until demand returns and their cold storage inventory can be drawn down. Additionally, both enterprises process poultry feed for own use but currently lack foreign exchange to import premix for quality feed.
Abebe Poultry Farm, a small-medium scale table egg producer (5,120 layers), has experienced a 75 percent reduction in orders from supermarket customers. Abebe has also been unable to source vaccines, medicines, vitamins, and feed additives, since his suppliers lack the foreign exchange to import these products.
Alema Koudjis PLC is one of the largest commercial poultry feed producers in Ethiopia, widely known for its high-quality feed products, reportedly produces 120,000 quintals  poultry feed per year. Geerten Wasnick from Alema Koudjis indicated that their sales declined over 20 percent, and they are expecting an additional 25 percent drop in sales. Wasnick estimates that broiler production has fallen by 75 percent, and small-scale producers lack cash flow to continue their business as feed prices rise and end-market prices for poultry products decline.
Bruk Yemane from Ethio-Feed PLC has also seen reduced demand for poultry feed products along their distribution channels. Wholesalers, rural-agro dealers, and franchisees are experiencing limited demand from producers and have therefore reduced their feed inventory accordingly.
The cost and availability of raw materials have also presented challenges for feed suppliers. Wasnick reports that domestic travel restrictions have reduced delivery of raw materials for feed, such as second grade maize from region to region. Fanta Baji from ELERE Farms has experienced decreased supply and rising prices of by-products from domestic processing facilities such as oil cake, wheat bran, and defatted soy. Nasser Mohammed from Addis Alem Feed PLC has been unable to import premixes to improve the quality of feed. These challenges are ultimately expected to reduce the quality of feed and raise feed prices, reducing the productivity and profitability of poultry producers throughout the system.
Diversified Input Providers
Suppliers of diversified inputs, including equipment, feed premix, and animal health products, are also facing similar challenges. According to Dr. Hailu at Gasco Trading PLC, an importer and distributor of poultry equipment and feed premix, the import of various products has been hampered by a sharp rise in freight costs and prolonged delivery times.
Samual Paulos from Al-Impex, an importer and distributor of Zoetis animal health products, reports that as broiler and layer production declines, the demand for their vaccine products for DOCs has decreased by approximately 50 percent.
Abebe Tadie from Genesis Vet Drug Store also reports a 50 percent decline in demand and has faced challenges importing animal health products. In addition, Genesis has been unable to deliver extension services to their customers, potentially limiting the performance of smallholder producers.
The poultry market system demonstrates the breadth of the economic impact from the COVID-19 crisis in Ethiopia. The reduction in end-market demand, the reduced supply of foreign exchange, and increased domestic logistical constraints have influenced the profitability of agribusinesses up and down the chain. Given the contribution of the poultry market system to both economic growth and nutritional outcomes, these impacts need to be well understood and closely considered by policymakers to shape potential interventions going forward.
The Feed the Future Enabling Environment for Food Security (EEFS) project is a pre-competed Blanket Purchase Agreement (BPA) for USAID Missions and Operating Units to access evidence-based analysis of how legal/regulatory and institutional factors influence agricultural market system performance, food security, and nutritional outcomes. For further information on how USAID can access EEFS’ expertise, please contact the Chief of Party, Adam Keatts, at [email protected].
 Ethiopian Meat and Dairy Industry Development Institute Feasibility, “Study for the Establishment of Chicken Meat Production and Processing Industry,” June 2017. http://emdidi.org/wp-content/uploads/2016/12/Feasibility-study-for-the-establishment-of-Chicken-Meat-Production-And-Processing-Industry.pdf.