Agency Turns to Shareholder Farming in Bid to Reshape Rural Economy

Nov 22 , 2025. By YITBAREK GETACHEW ( FORTUNE STAFF WRITER )

A sweeping federal initiative is underway in the agricultural sector, targeting the transformation of how millions of farmers grow and market their crops. Developed by the Agricultural Transformation Institution (ATI), the plan seeks to organise as many as 15,000 clusters into 50 new private agribusiness companies, backed by 128 million dollars from international partners and the government.

A federal agriculture agency sets an ambitious plan to transform the agricultural sector, creating private agricultural business companies across cluster farming areas.

Developed by the Agricultural Transformation Institution (ATI), the plan seeks to reshape how farmers grow, market, and benefit from their crops, offering a glimmer of hope to millions who have long relied on traditional, subsistence farming. Part of the Agricultural Commercialisation Clusters (ACC2) project, it carries a clear mandate to end the dominance of intermediaries in agricultural markets and introduce a commercial model that links farmers directly to buyers, markets, and sources of agricultural inputs.

The first phase of the ACC, launched six years ago by former President Sahlework Zewde, marked a turning point in the sector’s strategy. Backed by a 128 million dollar funding package, most of it secured from international partners such as Denmark, with additional support from the African Development Bank (AfDB) and the European Union (EU), the ACC2 plan is expected to impact as many as 6.5 million of the 18 million farmers in the coming years, according to government projections.

According to the Agency's officials, the federal government will cover the lion’s share of each company’s costs, but farmers should put up at least 10pc of the initial capital. These shares, contributed primarily in land and sometimes in cash, will make participating farmers shareholders, entitled to dividends proportional to their contributions. To buy in, each farmer would provide at least a quarter hectare of land at the national level. At national level one household has 0.8hc on average. The cluster is expected to run from 15hct to as much as 200hct.

The target is to fold about 15,000 of the 99,120 existing production clusters into 50 new Farmers’ Production & Agri Business Companies (FPABC) that will serve as the commercial backbone in as many districts.

Senior ATI officials see the new companies as more than market hubs. They will operate across the full value chain, from supplying inputs to aggregating produce, offering collateralised financing to their members, and, crucially, acquiring licenses to import and export.

“Every farmer should buy shares,” said Dagnachew Lule (PhD), ATI's senior director for the clusters. “This is a win-win for jointly financed companies.”

The hope is to allow farmers to sell their products directly through these companies, without the costly intermediation of dealers that have long sapped incomes and created instability.

For years, farmers have struggled to add value to their products, held back by fragmented supply chains, poor infrastructure, and limited market access. Cluster farming, which began on 600,000hct, now covers 12 million hectares. However, Dagnachew believes, much remains to be done.

“We’re at 2.43 million hectares, but at the regional and ministerial levels, there’s more progress,” he said. "Persistent shortages of seeds, fertiliser, and mechanisation are still a drag on productivity."

According to Dagnachew, while production in many regions is high, marketing remains elusive for many farmers due to poor roads and non-existent markets.

“If you want to improve agriculture, it needs financing," he told Fortune. "Otherwise, there is no benefit."

Private companies are expected to fill these gaps, serving as the focal point for the aggregation, processing, and marketing of key commodities such as maise, white grains, barley, mango, avocado, and honey, each company limited to the commodities produced within its cluster area. Once operational, the companies will be authorised to handle input procurement, agro-processing and exports. They will also be allowed to participate in the import of fertilisers.

"But much will depend on whether they are permitted to take part in the import sector,” Dagnachew said. “We need to reduce the gap observed in the market that we currently have.”

The rollout is tied to broader efforts to commercialise agriculture and make it a driver of economic growth and food security. A total of 115 million dollars in finishing funds is projected to be needed to complete the project over five years. The emphasis is beyond production and on integrating farmers into national and international markets, with each FPABC designed as a one-stop shop for the cluster farmers it serves.

The ACC2 program is expected to provide particular relief to roughly 300,000 internally displaced people, especially those in the Somali Regional State, who are expected to be among the first to benefit.

Gebru Tafesse, a veteran from Gurage Zone’s Abesheke District, grows mainly maise but has branched out into fruits and vegetables in recent years. He faces the same obstacles that have dogged generations of Ethiopian farmers. Most of his land, about 80pc, is planted with maise, with the rest devoted to avocado, mango, and sugarcane. Once the maise is harvested, he plants onions. In a good year, he brings in 700Qtls to 800Qtls of maise. Oftentimes, less, depending on the weather.

But for Gebru and his neighbours, market volatility is the defining challenge.

“We produce well despite the challenges, but the market is the engine,” he said. “Sometimes we're forced to sell our produce at a very low price.”

Despite opening a shop in his kebele to sell fruit, he has rarely turned a profit. Even when he manages to sell as much as 50,000 Br worth of produce, he sometimes ends up dumping out unsold goods. In a good year, he can fill four freight trucks, each with 200Qtls of onions, for the market in Addis Abeba. But last year, market swings and poor roads cost him more than 100,000 Br.

Gebru is hopeful that the new companies will shield farmers from such losses, but he remains cautious.

“It'll help, but what about the infrastructure?” he said. “My neighbours and I are willing to cooperate, but if the solution doesn’t address the real problems, our losses will continue.”

Since 2023, Gebru has watched the prices of nearly everything rise, even as farmers’ incomes declined. Fertiliser prices, late deliveries, and the absence of improved seeds remain a major bottleneck.

“Farmers need fair prices, not price increases on everything,” he told Fortune.

He warned that if the costs of seeds, fertiliser, and chemicals keep climbing, farmers’ livelihoods could be severely threatened.

Officials in the Central Ethiopia Regional State see the same problems and the same potential. According to Usman Surur, head of the regional agriculture bureau, commercialising agriculture is critical for improving farmers’ incomes and fixing the market-linkage gaps that persist across Ethiopia. He pointed to the first phase of the program, which he saw brought real, if incomplete, change.

“Success never comes without problems,” he said, predicting that the next phase will bring new opportunities and fresh challenges.

According to Usman, clustering has made post-harvest handling easier and reduced waste. In the Gurage Zone alone, more than 36,000hct of maise are planted in clusters, yielding an average of 83Qtls a hectare. In Kebena, a district within the zone, 8,000hct of maise are clustered, and another area boasts 2,000hct of wheat. For Usman, such a scale enables farmers to form their own companies, transforming the agriculture sector.

“Agriculture isn't only ploughing and seeding, but it should also be productive,” Usman said. “In the past, farmers had no opportunity to grow by selling their products adequately. This system helps solve that problem.”

Usman believes that by giving farmers ownership stakes in the new companies, the initiative will create more sustainable market links and improve farmers’ ability to access domestic and export markets, as well as vital agricultural inputs. The first phase saw 2,800 farmers come together to establish eight milk-processing units. The next phase will introduce farmers to new technologies, from maise processors to potato chip plants and other commodity-specific ventures.

“There are real changes in our region, along with challenges,” Usman said. “Clustering has made post-harvest handling easier and reduced waste.”

He cited limited awareness among farmers, persistent financial constraints, and weak infrastructure (roads, telecom, and electricity) as critical constraints. Logistics, cold-chain storage, and transportation remain major concerns. Despite a record harvest of 115 million quintals last year, he hopes to realise an increase of up to five times that figure in the future by irrigation farming.

For Addisu Arega, the minister of Agriculture, the project is about more than boosting yields. He believes the initiative is a necessary shift from subsistence and fragmented farming to a coordinated and value-chain model capable of underpinning the country's food security and economic future.

Experts agree that the new model represents progress, but warn that the transition will be anything but simple. Yemengist Tesfahun, who leads Agricultural Business & Value Chain Management at Gondar University and has spent over a decade working with farmers and cooperatives, characterised agricultural commercialisation as “complex and requiring strong organisation.” Farming, she argued, remains primarily focused on short-term consumption rather than the business of agriculture.

For Yemengist, the main challenge lies not only in resource constraints but also in deep-rooted infrastructure gaps and poor market linkages.

“Farmers have no experience of surplus production from feeding themselves to markets,” she said. “It requires practical work, not theory.”

Without clustering, she warned, “some products meant for export fall apart before they even reach the market,” making the cluster-farming approach all the more vital. For her, the biggest bottlenecks are land fragmentation, which makes mechanisation difficult and drives up costs. Agricultural extension services are not enough, and unresolved land policy questions still loom large.

“Development agents alone aren't enough,” Yemengist told Fortune. “We need people at the grassroots level with practical expertise to guide farmers.”

In her view, clustering holds out the best hope for consolidating small plots and moving farmers toward profitable modern practices.

“There is more land covered with grass than with grain,” she said, arguing that the approach could move farmers away from outdated traditions and into wider markets.

She believes farmer-owned companies will be key to building stronger value chains and raising capacity, but infrastructure remains the most critical concern. Yemengist cautioned that the government’s bold ambitions must be matched by serious, sustained investment in roads, storage, and market access. Across the country, she obserevd, fruit and vegetables often go to waste for lack of transport and reliable buyers.

PUBLISHED ON Nov 22,2025 [ VOL 26 , NO 1334]