Key Takeaways:
Wheat has become a sensitive commodity, where rising prices and tight supplies threaten the once-thriving flour industry. Businesses that mill wheat and produce biscuits, noodles, and animal feed are pressing the government to ease import rules and clamp down on hoarding, warning that failure to do so could push many plants to the brink of closure.
Leaders of the Ethiopian Millers Association, representing over 200 companies, raised alarms. Addressing their complaints to officials of the Ministry of Industry, they cautioned that the survival of many of their members is in the balance, following a 50pc price jump in wheat within two months that brought costs to 6,900 Br a quintal. Several millers have cut production and laid off employees, struggling to cope with diminished supply and soaring expenses.
Manufacturers of flour, biscuits, noodles, and animal feed have also appealed to policymakers to address what they describe as the crushing impact of escalating wheat prices. Directing their misgivings to the ministries of Finance and Industry officials, they pointed to factors such as the value-added tax (VAT) burden, climbing production costs, and dwindling sales.
“It’s an essential commodity,” said the Association’s General Manager, Dereje Tadesse (PhD).
Industry leaders blame hoarding for much of the price increase and shortage. They allege that speculative storage practices have disrupted supply chains, slowed production, and pushed up costs. They say prices climbed dramatically this year, reaching 6,900 Br a quintal as of February.
The annual wheat demand for 14 local manufacturers alone reached three million quintals. Over the past six months, the manufacturers say they obtained barely half their required grain, even though the bulk of wheat and barley should have been collected during the current harvest season. More than 400 flour mills nationwide — small and large — were capable of producing three million to 4.2 million tonnes of wheat flour each year in 2020. One-third of these plants were located in Addis Abeba and surrounding areas.
Industry representatives, including Dereje from the Millers Association, told officials at the Ministry of Industry that artificial shortages have reduced productivity. They urged the government to relax import restrictions and allow import privileges during severe supply disruptions.
Officials at the Ministry of Industry say they are investigating reports of hoarding and price hikes. A task force led by State Minister Hassen Mohammed has requested detailed annual demand figures from millers to understand the scope of the crisis better.
The Ministry plans to bring the wheat issue before a macroeconomic committee chaired by Girma Birru, the Prime Minister's senior economic policy advisor. The committee will extensively research wheat production capacities and market dynamics.
“Their concerns will be taken heed of,” said Tihlahun Abay, head of strategic affairs at the Ministry of Industry.
He also disclosed new strategies under the “Let Ethiopia Produce” initiative, which seeks to help domestic manufacturers use homegrown inputs. These measures, however, have yet to relieve the strain faced by companies like Abat & Mehari Flour Plc. According to its General Manager, Mehari Adane, the plant in Debremarkos, Amhara Regional State, now works at a fraction of its capacity, squeezed by high prices and sporadic supplies.
“[Reported] wheat exports might also have something to do with it.”
Mehari described his company’s predicament as a “whirlpool” of challenges. Prices doubled from 3,000 Br to 6,500 Br, and have sometimes climbed higher, undermining purchasing power and diminishing operational capacity to around one-fifth of normal levels.
“I would have sold my factory if it had been possible,” he said.
With revenue sliding and costs rising, he had little choice but to lay off 30 of its 87 workers.
The situation has been aggravated by tighter bank lending practices, with fewer millers securing the working capital to make large wheat purchases. Daily spending on grain has jumped from one million Birr to 6.5 million Br, making it nearly impossible to stock up for months in advance.
“Banks are not lending money,” Mehari said.
Across the sector, millers report mounting financial pressure. They say rising taxes, customs duties, and stiffer financing terms push many plants toward closure. Leaders of the Ethiopian Millers Association say some mills have already shut their doors, while others struggle to stay open. According to Dereje, the general manager, they documented the closure of four plants recently, describing the sector’s predicament as dire.
Official figures projected wheat production to hit 220 million quintals last year, with a target of reaching 338 million quintals this year. Many are sceptical of these estimates, countering that historical records never exceeded seven million tonnes.
Despite controversies on the national volume, Oromia Regional State, where about 600,000 farmers produce wheat on half a million hectares, accounts for roughly one-third of the country's total output. According to officials, these figures ought to satisfy domestic demand. Yet supplies remain tight, and prices remain elevated at around 6,000 Br a quintal.
At the Ministry of Agriculture, Crop Production Development Head Esayas Lemma says farmers keep much of their harvest for household consumption, with only 29pc going to market. He believes hoarding by intermediaries could compound the shortage, although farmers themselves have seen little in the way of real income growth. Intermediaries and middlemen, he said, may be manipulating the supply to drive up prices.
In Arsi, Bokoji Woreda, more than 10,000 farmers worked about 56,956hcts of land to produce wheat this year. Yet, according to the local agriculture bureau head, Bune Feiyisa, while production figures are solid, consumption has also risen, and most farmers retain a portion of grain to feed their families. Bune attributed part of the shortage to the absence of contract agreements between farmers and plants, which might guarantee supplies and cushion both parties against price swings.
“Seed and fertiliser prices have surged,” he said. “Farmers are becoming victims.”
Fifty-year-old farmer Girma Kebede, a resident of Arsi, agrees. He farms one hectares and harvested 70Qntls a hectare this year. But he said the cost of improved seeds rose to 8,000 Br, four times what it once was, while fertiliser jumped to 9,500 Br.
“We had no choice but to increase our prices,” he said.
Agriculture authorities maintain enough land under cultivation across eight zones, including Arsi, Western Arsi, Bale, and Northern Shoa.
Agricultural economist Shimeles Araya (PhD) says poor coordination between farms and factories has affected the overall volume and quality of industrial output. He doubts the official claim of wheat production, putting the actual figure closer to seven million tonnes.
“The country is still suffering from demand and supply imbalance,” he said. "Shifting consumer preferences have driven more people to rely on wheat as teff grows pricier."
In that environment, he says, traders may find it profitable to create artificial shortages.
“And they are profiting at the cost of industries,” he said.
Shimeles believes millers need a two-pronged approach. He urges them to pursue break-even strategies in the short run, perhaps by importing inputs to keep factories running.
“Producers have to keep on producing,” he said.
For the long term, he recommended stepping up domestic wheat production through contract farming, in which millers would supply farmers with inputs at reduced costs. This arrangement would build a more reliable supply chain and adjust prices according to market rates, ensuring farmers see rewards for their efforts.
“Farmers should be prioritised,” he told Fortune.
PUBLISHED ON
Apr 06,2025 [ VOL
26 , NO
1301]
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