` Development of a Climate Smart Financing Bundle for Wheat in Ethiopia Development of a Climate Smart Financing Bundle for Wheat in Ethiopia AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 1 Authors Peter Wamicwe1, Wondwossen Worku Merbat1, Lennart Heintz1, Ena Derenoncourt1, Richard Newman1, Godefroy Grosjean1, Samaa Mufti1, Bethany Cosgrove1 Lidya Tesfaye2, Mercy Zulu Hume1 AICCRA Global Theme 2 support Evan Girvetz1, Osana Bonilla1 1- Global and regional team 2- In-country team About AICCRA Accelerating Impacts of CGIAR Climate Research for Africa (AICCRA) is a project that helps deliver a climate-smart African future driven by science and innovation in agriculture. It is led by the Alliance of Bioversity International and CIAT and supported by a grant from the International Development Association (IDA) of the World Bank. Explore our work at aiccra.cgiar.org aiccra.cgiar.org aiccra@cgiar.org CGIARAfrica AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 2 Contents ABBREVIATIONS .......................................................................................................................................................... 4 Executive Summary .................................................................................................................................................... 5 1 Background .......................................................................................................................................................... 6 1.1 Context: Wheat value chain as a priority for Ethiopia .......................................................................... 6 1.2 Pocket wheat-producing corridors.......................................................................................................... 6 2 Approach and Methodology .............................................................................................................................. 8 2.1 Study areas and target groups ....................................................................................................................... 9 2.2 Data collection methods ................................................................................................................................ 10 3 Analysis ............................................................................................................................................................... 11 3.1 Farmer unions active in selected wheat producing areas ........................................................................ 11 3.1.1 Hetossa Farmers’ Cooperative Union ............................................................................................... 12 3.1.2 Merkeb Farmer Cooperative Union (FCU) ....................................................................................... 12 3.2 Situation analysis ..................................................................................................................................... 13 3.2.1 Government’s Ten-Year Plan (2021-2030) ....................................................................................... 13 3.2.2 Critical challenges ................................................................................................................................ 13 3.2.3 Access to finance and insurance ....................................................................................................... 13 3.3 Key wheat value chain actors................................................................................................................. 15 3.4 Challenges in the wheat value chain .................................................................................................... 16 3.4.1 Late arrival and sub-standard quality of agricultural inputs ........................................................ 16 3.4.2 Adverse price movements on critical inputs ................................................................................... 17 3.4.3 Market information asymmetry – market linkages ........................................................................ 17 3.4.4 Limited access to mechanization and expensive labor force ....................................................... 18 3.4.5 Land degradation, declining soil quality and Soil acidity ............................................................... 18 3.4.6 Absence of affordable, and innovative financial solutions ........................................................... 18 3.4.7 Low utilization levels on value addition ........................................................................................... 19 3.4.8 Lack of implementation capability .................................................................................................... 19 4 Next steps – addressing the challenges. ........................................................................................................ 20 4.1 Actual and perceived risks in the wheat value chain .......................................................................... 20 Climate Smart Agriculture (CSA) practices and technologies ......................................................................... 22 4.1.1 Superior seeds ..................................................................................................................................... 22 4.1.2 Crop rotation with pulses ................................................................................................................... 23 4.1.3 Mechanization ..................................................................................................................................... 23 4.1.4 The use of digital agriculture – the case of Lersha ......................................................................... 23 5 Conclusion and recommendations ................................................................................................................. 25 5.1 The need for CSA financing .................................................................................................................... 25 5.2 Associated costs and expected benefits .............................................................................................. 26 AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 3 5.2.1 Profitability of the downstream actors ............................................................................................ 27 5.3 Investment entry points and possible loan products......................................................................... 27 5.4 Possible loan products ............................................................................................................................ 28 5.5 Conclusion ................................................................................................................................................ 32 AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 4 ABBREVIATIONS AICCRA Accelerating Impacts of CGIAR Climate Research for Africa CIMMYT International Maize and Wheat Improvement Center CSA Climate Smart Agriculture DBE Development Bank of Ethiopia FBO Farmer Based Organization FCU Farmer Cooperative Union GOE Government of Ethiopia ha hectare KYC Know Your Customer MFI Micro Finance Institutions MNOs Mobile Network Operators MT Metric Ton NBE National Bank of Ethiopia RuSACCOs Rural Saving and Credit Cooperatives SLCC Second Level Land Certificate USD United States Dollar USDA United States Department of Agriculture AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 5 Executive Summary Wheat plays a crucial role in Ethiopia's agricultural development, contributing significantly to household income and food security. The central, south-eastern, and north-western highlands are key wheat-growing regions, with primary production1 in Oromia (58%), Amhara (28%), SNNPR (8%), and Tigray (6%). In the 2021/22 production year, Oromia alone harvested over 2.1 metric tons (MTs) of wheat from more than 669,000 hectares2 using irrigation and Belg (short season) rains. The Government of Ethiopia aims to scale up wheat production, targeting 7 million tons (MTs) per season to achieve self-sufficiency and become a net exporter. Despite the government's push to boost wheat production and attain self-sufficiency, challenges persist across the value chain. These encompass sub-optimal sector coordination, low farm-level productivity resulting from inadequate farm inputs and agronomic practices, weak market linkages, post-harvest losses, and limited access to finance. Farm-level productivity is impeded by factors like limited access to productivity-enhancing technologies, inputs, and financial resources. Challenges in wheat finance, including insufficient collateral identification, meager business track records, financial literacy gaps, high interest rates, and liquidity constraints among financiers. AICCRA undertook a study to enhance climate-smart bundled financial products for wheat farmers in Ethiopia. The study focused on two farmer unions, Hetossa and Merkeb, with memberships of 96,000 and 370,000 smallholder farmers, respectively. Through thorough due diligence and investment case analyses, the study identified critical gaps, including low adoption of improved varieties, inadequate agronomic practices leading to reduced yields, and a heavy reliance on rainfed agriculture. Operational deficiencies in governance and bookkeeping were also observed, collectively posing constraints to accessing financing and jeopardizing the union and its members' future sustainability. The study proposes the following solutions to address the identified challenges: • Climate-Smart Financing Bundle: Develop a climate-smart financing bundle in the form of a loan with integrated risk mitigation measures. • Capacity Strengthening: Enhance the capacity of the unions in governance, management, and accounting. Regarding the climate-smart financing bundle, the study suggests collaboration with various partners, including financial institutions, banks, technical assistance providers, and insurance entities, to co-design tailored financial products. These may include CSA-CIS-bundled agro-input loans for smallholder farmers. The design should incorporate blended finance mechanisms, such as insurance and loan loss guarantee, to de-risk and provide assurance for partner banks to lend to smallholder farmers. The study suggests a pilot implementation of a climate-smart financing bundled agro-input credit scheme involving 500 wheat farmers from the Hetossa Union during the November 2024 planting season. The pilot aims to catalyze a minimum of US$350,000 in financing for a climate-smart agro-input bundle. The average loan size is estimated at US$1400 per farmer, intending to support the cultivation of approximately 400 acres of wheat in 2024. AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 6 1 Background 1.1 Context: Wheat value chain as a priority for Ethiopia In 2021/22, Ethiopia produced a total of 6.7 million MT of wheat from a total area of 2.1 million hectares (ha), of which 1.7 million ha were rainfed and 0.4 million ha were irrigated. The average productivity of rain-fed wheat was 3.0 MT/ha, while the average productivity of irrigated wheat was 4.0 MT/ha. Rain-fed wheat production in Ethiopia primarily takes place during the main rainy season, known as the Mehere (main) season from June to October in the highlands. On the other hand, irrigated wheat production takes place from November to April in the lowlands, specifically along the Awash, Wabe Shebele, and Omo River basins. Currently, Ethiopia is the leading wheat consumer in sub-Saharan Africa with an annual consumption of an estimated 97 million quintals (9.7 MT). The current production levels are the result of an 18% increase in the sown area, mainly dominated by irrigated wheat cultivation, which reached 2.3 million ha against 1.9 million ha previously. 1 To achieve self-sufficiency and become a net exporter by 2025/26, the GoE developed the National Wheat Flagship Program for wheat self-sufficiency and import substitution. The program is designed to expand and promote irrigated wheat production on a total area of one million hectares in 2022/23 season and expand it by 5- 10% annually. 2 According to the United States Department of Agriculture (USDA), Ethiopia’s wheat production has increased between 2013 and 2023 (Table 1), in area, production, and yield. Table 1: Ethiopia wheat production (2018 - 2024) 3 Market year Area (1000 ha) Production (1000 MT) Yield (MT/ha) 2018/2019 1,748 4,838 2.8 2019/2020 1,789 5,315 3 2020/2021 1,829 5,479 3 2021/2022 1,950 5,520 2.8 2022/2023 1,900 5,800 3.1 2023/2024 1,900 5,500 2.9 5-year average 2018/19 - 2022/23 1,843 5,390 2.9 Percent change from 5-year average 3 2 -1 1.2 Pocket wheat-producing corridors The major wheat-producing areas are mostly concentrated in environments ranging from mid-altitude (1900 to 2300 m above sea level) to high altitude (2300 to 2700 m above sea level), with high and reliable rainfall. The highlands of the central, south-eastern, and north-western parts of the country are the main wheat-growing areas. The primary production4 occurs in Oromia (58%), Amhara (28%), SNNPR (8%), and Tigray (6%). More recently, the GOE has also been persuading potential investors to engage in identifying pocket areas in the Awash, Shebele, and Omo River basins. Wheat processors are also increasingly attracting large investments to produce wheat on irrigated lands in these areas. 1 Tigist, Z., Samuel, L. (2022). Review of Wheat Value Chain in Ethiopia. Inter. J. Econ. Bus. Manage. 10(3): 67 2 https://www.afdb.org/en/documents/ethiopia-ethiopia-wheat-value-chain-project-p-et-aa0-020 3 United States Department of Agriculture - Foreign Agricultural Service PS&D Online updated on October 12, 2023 4 Tigist, Z., Samuel, L. (2022). Review of Wheat Value Chain in Ethiopia. Inter. J. Econ. Bus. Manage. 10(3): 67 AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 7 Figure 1: National wheat production landscape5 According to the Central Statistics Agency (CSA), in the 2021/2022 budget year, an average productivity of 3.0 and 4.0 MT/ha under rain-fed and irrigated conditions, respectively, was recorded. 6 The country has a potential of 5.3 million ha of land suitable for irrigated agriculture using surface, ground, and rainwater sources. Thus, the Government has given due attention to irrigated wheat production with an attempt to promote off-season production. Table 2: Wheat production (local), import, consumption, and export (2020-2023) 7 Wheat 2020/2021 2021/2022 2022/2023 Area Harvested (1000 ha) 1900 1950 2000 Production (1000 MT) 5200 5520 5700 Total Supply/ Imports (1000 MT) 7778 7668 7598 Exports (1000 MT) 0 0 0 Total Consumption (1000 MT) 7080 7170 7380 Total Distribution (1000 MT) 7778 7668 7598 Yield (MT/ha) 2.7368 2.8308 2.85 5 https://www.sciencedirect.com/science/article/pii/S2405844023079288 6 Central Statistics Agency for Ethiopia. Agricultural sample survey of area and production of major crops 2022 7 Extracted from Grain and Animal feed report United States department of Agriculture, Foreign Agriculture Service Grain and Feed Annual feed report, report number ET2022-0014 (2022) AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 8 2 Approach and Methodology The team followed a multi-stage approach beginning from gathering information about the climate, geography, and soil conditions in Ethiopia. To understand the key factors that influence wheat production in the country, the team found reliable data sources that provided information on wheat production in Ethiopia as well as on the relevant agricultural departments, research institutions, and international organizations. The second stage was to analyze production statistics and examine historical data on wheat production in Ethiopia. The team looked for trends, patterns, and factors that contribute to fluctuations in production levels, assessed challenges and constraints, and identified the main challenges faced by farmers regarding wheat production. These may include drought, pests, diseases, access to credit, and market conditions. The team also identified potential solutions and strategies to address these issues. The team also engaged in field visits and interviews with farming communities involved in wheat production, analyzed policy and market factors, evaluated government policies, subsidies, and trade regulations related to wheat production and marketing, and examined the impact of these factors on production levels, farmer incomes, and market dynamics. Finally, the possible target areas and relevant institutions for potential scaling of climate smart agriculture (CSA) were identified (Figure 2). Potential project areas and the relevant institutions in the target areas were identified based on the presence of Farmer Based Organizations (FBOs) actively implementing interventions to scale up wheat production and ensure social and economic impacts. These areas include East Gojam, Arsi, and Bale zones from rain-fed wheat growing areas, as well as woredas along the Wabe Shebelle basin in the Somali region engaged in commercial-scale, irrigated cultivation in low-land areas. The profile and appetite of these target actors in the wheat value chain, along with their roles and responsibilities, as well as the enabling environment for sustainable implementation of climate-smart agricultural practices, are discussed in detail in the subsequent chapters. Figure 2: Institution Identification methodology AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 9 2.1 Study areas and target groups Arsi Zone is a wheat-producing corridor. In 2021 alone, out of the 680,000 ha cultivated during the production season in Arsi Zone, 388,000 ha have been cultivated with a cluster farming system. Hetossa Farmers’ Cooperative Union supports smallholder farmers in some of the highly productive woredas such as Hetossa, Munesa, and Digelu Tijo of Arsi Zone in Oromia through its primary cooperatives. Based on secondary data obtained from the Ministry of Agriculture (see Figure 3), the wheat yield in the corresponding woredas exceeds four MT/ha on average. This is above the sub-Saharan Africa average (1.9 MT/ha). Figure 3: Arsi Zone average yield of the 4 predominant wheat producer woredas (Source: Ministry of Agriculture Crop directorate) The West Gojam Zone in the Amhara region is also a major wheat production area. Efforts are being made to take advantage of the potential of irrigated lands for growing wheat. These efforts include projects like Koga and Rib irrigation, as well as the adoption of groundwater harvesting in the Awi Zone, which has a large reserve of groundwater. Farmers in the region use low-cost, easily constructed, operated, and maintained surface irrigation systems such as furrow, border strip, and basin techniques to irrigate wheat. The average yield in some of the woredas in West Gojam Zone such as Bure and Woniberma can go up to 3.9 MT/ha. The overall yield per hectare is depicted in Figure 4 below. Figure 4: West Gojam zone yield data for major wheat-producing woredas in West Gojam zone of Amhara region (Source: Ministry of Agriculture Crop directorate) AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 10 2.2 Data collection methods The study covered high-potential areas from both highland and lowland areas while keeping in mind regional representation, investment readiness of the target institutions, and considering the social and economic impacts of implementing such interventions to ensure food security and reduce poverty. Major wheat producers from Oromia and Amhara regions and FBOs with prior experience in implementing such interventions were identified, selected, and contacted to collect data. For data collection, a semi-structured interview questionnaire was employed, targeting farmers’ union leaders and commercial farmers. Additionally, secondary data was collected to validate yield, climate risk, and biotic and abiotic stresses from selected institutions. Key informant Interviews were conducted in the Oromia region with individuals from the Hetossa farmers’ union in the Arisi Zone, including the general manager, board secretary, and agronomist. In the Amhara region, an interview took place with the Merkeb farmers’ union, specifically with the market linkage officer and the general manager, to understand the ongoing and active implementation of irrigation-based wheat production. AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 11 3 Analysis 3.1 Farmer unions active in selected wheat producing areas Farmer cooperatives and unions can be broadly categorized based on their roles and responsibilities. The types of cooperatives that are associated with the wheat value chain are: ● Agricultural multi-purpose cooperatives ● Seed multiplication and storage cooperatives ● Saving and credit cooperatives ● Irrigation cooperatives There are many reasons why farmer unions should be included in the design and implementation of schemes to scale up wheat production and productivity attempts. Unions are better positioned than primary cooperatives to implement possible interventions. Farmer cooperative unions, being owned and run by the members, also contribute to keeping the production of goods and services close to the needs of the people that they serve. Unions provide a good platform for promoting collective negotiation with the Government, enterprises, financial institutions, and development agencies. Also, it is beneficial to leverage the more organized and effective communication channels of farmer unions, compared to primary cooperatives, in implementing gender- inclusive CSA business models in the wheat value chain as it has the potential to attract private investor capital. Unions have also built economic ties with financial institutions which makes embedding access to finance and insurance easy, scalable, and sustainable. Unions can also play a vital role in deepening gender-responsive Climate Smart Agriculture practices by empowering their women farmers specifically when needed. Putting farmer cooperative unions at the forefront therefore ensures better access to well-coordinated services, such as better access to technology and advisory services—and hence the chance to improve production and productivity at scale. This will also put their members in a better situation to anticipate climate-related events and take preventative action. The unions identified for scaling climate smart agriculture in this sense (also discussed in the methodology part), are near to farmers who are highly experienced in producing wheat but also located in the major wheat producing corridors of the country. The identification process which is partly discussed in the methodology section of this report is also further discussed in figure 5 below. Figure 5: Identification process of the unions AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 12 3.1.1 Hetossa Farmers’ Cooperative Union Established in 1999, Hetossa Farmers’ Cooperative Union (FCU) is an amalgamation of 166 primary cooperatives serving over 96,750 smallholder farmers (24,188 female farmers) in Arsi Zone of Oromia region. The union has two types of primary cooperatives, 154 multipurpose primary cooperatives8 and 12 seed multiplication enterprises (Figure 8). The Union provides its services to its members in seven districts of Arsi Zone (Hetossa, Lode Hetossa, Dodota, Ziway Dugda, Munessa, Xiyo, and Sire.). The Union mainly provides input distribution, grain supply, and mechanization services to its members. Primary cooperative members also aggregate cereal crops such as wheat, malt barley, fava bean, and teff. Hetossa Union owns an up-to-standard warehouse with a storage capacity of 100 MT. Currently, the primary cooperatives collect grain from their members, store it in its warehouse, and supply it to their union. Looking at the historical trends, the volume of grain collected by the unions is estimated to be only 5% of the total amount its members produce and supply to market. Inadequate working capital and inefficiency of financial transactions related to poor record keeping and accounting practices that hinder accurate tracking of transactions and financial reports are among the key challenges limiting the capacity of the Union and its members from engaging in large-scale and economically viable business. 3.1.2 Merkeb Farmer Cooperative Union (FCU) Merkeb FCU is a multipurpose union established in June 2009 with an initial capital of 1,472,000 Ethiopian birr (ETB)9 comprising 19 primary cooperatives. Currently, Merkeb has 375,747 (73,497 female) individual farmer members, 706 general assembly members running the union, advising on major decisions, and a board with 11 members (1 female), drawn from the 141 all multipurpose primary cooperatives. The Union has ten male members of the management team looking after finance, marketing, procurement, human resources, the feed processing plant, flour processing plant, input (seed, fertilizer, and chemicals) distribution, mechanization, planning and budget, and a deputy manager. Merkeb also distributes agricultural inputs such as seeds, fertilizer, pesticides, and consumer goods to its members through the primary cooperatives. It has a strong financial base as it is also a shareholder of Abay Bank and Amhara Rural Saving and Credit Cooperatives (RuSACCO) federation. The FCU also actively participates in other community development activities, such as the construction of schools and clinics. Merkeb requires its member primary cooperatives to buy a share of a minimum 20,000 ETB (362 USD at the current prevailing rate) to access membership benefits. Each share has a value of 2000 ETB. Merkeb aggregates teff, maize, haricot bean, rice, and other commodities from its members. The Union also trades soybean and red kidney beans at the Ethiopian Commodity Exchange and runs seed multiplication activities through its member primary cooperatives. One of the primary cooperatives running a commendable seed multiplication business is Edget Behibret Cooperative, which is specialized in multiplication of an improved wheat variety ‘pickaflor’, known locally as ‘Kekeba’. Kekeba was developed by the Ethiopian Institute for Agricultural Research and has good performance in plant height, panicle weight, and resistance to diseases, especially to the yellow rust fungus – factors that contribute to higher yields of up to 3.7 ton/ha 33% more. Merkeb has its own building to run its operations managing businesses, including a wheat flour factory (80t per day capacity), an animal feed processing plant, and more than 11 warehouses in different towns, with a storage capacity of 650,000 MT. It provides mechanization services (7 tractors and threshers) to its members. 8 Farmers’ organizations established according to the law of the country to address social and economic problems of their members whose activities are performed by unpaid elected leaders from among the members. 9 Current Exchange rate 1 USD = 56.41 ETB AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 13 Merkebe’s members benefit from the Koga Irrigation and Watershed Scheme, enabling 10,030 farmers to develop over 7,000 ha of land. Merkeb has access to credit from the Abay Bank but has difficulty securing a large enough credit line to cover its operating expenses. The required loan capital the union requires to available finance to its member primary cooperatives hardly covers their financing requirement. In the current budget year, Merkeb secured 105 million ETB (1.9 million USD) from Abay Bank on 12% interest but has already settled it in less than six months. Merkeb, lends its members non-collateralized, interest free loans as working capital, mostly for aggregation businesses. 3.2 Situation analysis 3.2.1 Government’s Ten-Year Plan (2021-2030) The GoE has prioritized increasing irrigated lowland wheat production as a key strategy to achieve national food security. In 2019 a plan was put in place to cultivate wheat on about 500,000 ha of available irrigable land along the Awash, Wabe Shebele, and Omo rivers basins in the coming five years. More recently, the Government has re-announced its commitment to initiate small- and commercial-wheat irrigation schemes. The Government’s Ten-Year Development Plan (2021-2030) identifies sustained and quality agriculture programs to accelerate economic progress and ensure national food security as its central national strategy. In this plan, the government has recognized the importance of investing in large-scale irrigation infrastructure in the lowlands, alongside other factors such as enhanced seed quality, increased fertilizer supply, and the utilization of mechanization in wheat farming. 3.2.2 Critical challenges Though there is enormous potential to increase Ethiopia’s wheat production if a series of challenges are overcome. Some of the challenges are institutional, behavioral, and market systems-related failures hindering production and productivity. These include the low adoption of new technologies and costly and limited availability of inputs. Other challenges are weather and climate-related, such as several abiotic (acidity, heat, drought) and biotic stresses (virulent pests and diseases such as yellow rust, stem rust, septoria, fusarium)10 at different levels of intensity across both rain-fed and irrigated production systems. These are exacerbated by changes in the climate, such as rising temperature (heat), less and erratic rainfall (drought) or sometimes excessive rainfall (flooding), and the emergence of virulent pests and diseases 11. These challenges are further discussed. 3.2.3 Access to finance and insurance The finance and insurance industries are critical to scaling up initiatives to achieve improvements in production and productivity and strengthening farmers’ ability to bounce back when shocks of any sort happen. Agricultural finance plays a vital role in the development of agriculture in Ethiopia, as it helps provide farmers with the necessary resources and capital to enhance their productivity, expand their operations, and improve their livelihoods. This section reviews the range of institutions providing agricultural financial and insurance services. Development Bank of Ethiopia (DBE): The DBE is a government-owned financial institution that specifically focuses on providing financial services to the agricultural sector. It offers credit facilities, loan programs, leasing services, and savings products to farmers, cooperatives, and agribusinesses. Commercial Banks: Commercial banks also provide agricultural financing through various loan products, lines of credit, and other financial services tailored to the needs of farmers and agricultural businesses. Some banks also offer specialized products for farmers, such as warehouse receipt financing. 10 https://ensembles-eu.metoffice.gov.uk/IPCC/rev_archive/SOD/Ch05.pdf 11 Negassa A, Shiferaw B, Koo J, Sonder K, Smale M, Braun HJ, et al. The Potential for Wheat Production in Africa: Analysis of Biophysical Suitability and Economic Profitability AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 14 Microfinance Institutions (MFIs): MFIs have an important role in providing agricultural finance to smallholder farmers and rural communities in Ethiopia. They offer microcredit, savings, and insurance products to help farmers gain access to capital for farm inputs, equipment, and other agricultural needs. Agricultural Insurance: To mitigate risks associated with agricultural activities, Ethiopia has introduced agricultural insurance schemes. These insurance products protect farmers against risks related to weather, pests, diseases, and other unforeseen circumstances, ensuring the sustainability of agricultural production. Rural Saving and Credit Cooperatives (RUSACCOs): In Ethiopia cooperatives play a significant role in providing financial services to rural communities. These cooperatives are member-owned and operated, aiming to improve the economic conditions of their members. RUSACCOs are established to serve the financial needs of rural communities, including savings, credit, and other financial services. They aim to enhance financial inclusion and promote economic growth at the grassroots level. RUSACCOs follow the cooperative business model, where members are both owners and clients. Members have a say in decision-making and share in any profits generated by the cooperative. RUSACCOs typically offer various financial products and services, including savings accounts, loans for agricultural and non-agricultural purposes, money transfers, and insurance (in some cases). RUSACCOs have an extensive presence across rural areas, serving farmers, small-scale businesses, and low-income individuals. They contribute to poverty reduction and financial empowerment by providing access to financial resources and promoting financial discipline. While RUSACCOs have contributed to rural development, they still face challenges. These challenges include limited capital, inadequate infrastructure, governance issues, and access to financial technology. The National Bank of Ethiopia (NBE): All financial institutions in Ethiopia are regulated by the National Bank of Ethiopia (NBE). The NBE sets regulations to ensure their financial stability, transparency, and compliance with relevant laws. Value Chain Financing: In recent years, there has been a growing emphasis on value chain finance in Ethiopia. This approach supports all participants in the agricultural value chain, from input suppliers to farmers, aggregators, processors, and distributors. It helps to address the financing gap across the entire value chain and promotes the integration of smallholder farmers into lucrative markets. Government Initiatives: The Ethiopian government has implemented various programs to support agricultural finance. For instance, the Agricultural Transformation Institute (ATI) works towards increasing access to finance for smallholder farmers through partnerships with financial institutions and the development of innovative financing models. One of these initiatives is the Input Voucher System, currently supporting farmers to secure fertilizer. The fertilizer input voucher system is a government initiative aimed at improving agricultural productivity and ensuring food security. It provides subsidized vouchers to smallholder farmers, which they can use to purchase fertilizers and other agricultural inputs at designated retailers. The objective of the voucher system is to make fertilizers more affordable and accessible to farmers, particularly those with limited financial resources. By providing subsidies, the government aims to increase the adoption of fertilizers and promote sustainable agricultural practices. The beneficiaries of the fertilizer input voucher system are typically smallholder farmers who meet certain eligibility criteria set by the government. The vouchers are distributed through various channels, including agricultural extension offices and cooperatives. The system operates on a seasonal basis, with the issuance of vouchers timed to coincide with the planting season. Farmers can redeem their vouchers at authorized retailers, who accept the vouchers as a payment method for fertilizers and other approved inputs. To make wheat self–sufficiency a reality, Ethiopia follows a two-pronged approach: (1) bridging the yield gap in traditional highland wheat growing areas through developing and scaling climate-resilient high-yielding varieties AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 15 and associated crop management practices; and (2) expanding wheat production in new frontiers, such as irrigated systems in both lowland and highland areas12. A critical intervention for the success of AICCRA’s initiative will be creating a financing mechanism that can sustainably meet the capital requirements of wheat smallholder farmers, their cooperatives, and processors and support climate-smart and gender-sensitive investments. These investments should aim to boost wheat production and productivity through the development of small and large-scale irrigation systems, financing agricultural inputs, promoting cluster farming, and reducing post-harvest losses. Additionally, de-risking strategies such as crop insurance should be implemented to further support these efforts. The proposed solution is to bundle to improve the service provision speed, quality, inclusion, and innovation beyond access to conventional financing mechanisms and focusing on production. 3.3 Key wheat value chain actors The wheat value chain in Ethiopia encompasses producers, local aggregators, grain traders, agro processors, wheat flour wholesalers and retailers, and consumers. Wheat producers in Ethiopia include smallholder farmers and a few state-owned commercial seed farms. 95% of staple crops are produced by smallholder farmers. Small aggregators are full- or part-time traders or farmers who collect grain from small rural markets. Primary cooperatives also participate in the aggregation business through financing support from their unions. Grain wholesalers include the Ethiopian Grain Trade Enterprise, private companies, and the regional grain merchants in both surplus and deficit areas. Wheat grain millers (processors)include factories with large and medium capacities. Wholesalers of processed wheat, especially wheat flour and spaghetti products, obtain their supplies from domestic flour mills and supply the same to retailers and bakeries. They mostly operate in large towns. Most consumers buy wheat products from conveniently located outlets and retail shops. Consumers prefer to buy domestic wheat products like spaghetti and Macaroni, because imported spaghetti and macaroni are more expensive. However expensive it may be, imported spaghetti and macaroni still have many consumers in standard hotels and restaurants around Addis Ababa. The growing market demand for imported wheat products indicates that some customers are willing to pay more for better quality. The major problems in pasta production include shortage of durum wheat, marketing problems, and absence of standards and quality control. Generally, regardless of its potential opportunities and climatic suitability for wheat growing Ethiopia continues to produce sub-standard quality pasta. This is forcing households in the major cities to consume imported pasta. CIAT documented the actors in the wheat value chain and mapped the value chain as shown in Figure 6. 12 Tadesse et al., 2022 AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 16 Figure 6: Generalized wheat value chain actors in wheat-producing areas 3.4 Challenges in the wheat value chain In Ethiopia, wheat production is challenged by diseases (mainly rusts), terminal drought stress, use of marginal land, inefficient agronomic practices, lack of improved varieties, and the high cost of inorganic fertilizers. This is coupled with the absence of well-developed agro-climate advisory content and services and limited access to.13 3.4.1 Late arrival and sub-standard quality of agricultural inputs Late arrival and sub-standard agricultural inputs provided by both the Government and agro-dealers is identified as a key risk. Union leaders in all the study areas indicated that access to timely and quality inputs such as improved seeds, fertilizer, and pesticide usually arrived late, resulting in many farmers missing the early rains. Similarly, several cases in Oromia were mentioned where poor-quality fertilizers were supplied late or in insufficient quantities, which affected crop productivity. In addition to the late supply of inputs, poor-quality planting material, that either failed to germinate or yielded far less than expected were problems. The late supply of NPK fertilizer is a major cause of low production. 13 Hodson D., Jaleta M., Tesfaye K., Yirga C., Beyene H., et al. Ethiopia's transforming wheat landscape: tracking variety use through DNA fingerprinting. Sci. Rep. 2020 Retailing, sorting, levelling, selling to final consumer consumers Wholesaling, storage, Supplying to retailers Collecting, loading and unloading, transporting to wholesalers Buying from member Farmers, price, quality Information Producing, harvesting, Transporting to roadside Supplying inputs (fertilizers, seed, chemical. Etc) Consuming Functions Direct actors Farmers Cooperatives and Unions Agricultural offices Small holder farmers Farmers marketing cooperatives Bakeries & restaurant Retailers of wheat powder Urban consumers Supporters and Influencers MoA Unions/ Primary cooperat ive Trade offices Resear ch institut es Wheat mill factories Wholesalers of wheat grain Wholesalers of Wheat powder Large scale farmers AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 17 The dominant role of the state in the distribution of inputs appears to have reduced the incidence of quality variability. Though some respondents cited rising prices of inputs as a problem, the reported number affected was low and referred mainly to fertilizer price risk. Limited access to credit for purchasing inputs posed a much more important challenge to farmers which in turn reduces the financial performance of the cooperatives and associated unions. Both Hetosa and Merkeb Unions were addressing the shortage of quality seeds by launching seed multiplication initiatives with individual farmers on a contract basis. While these initiatives generated production of high- quality seed, the overall experience was discouraging: a portion of the seeds did not pass the quarantine examination and the unions fell short of producing their desired volume of seed. The profit for producing self- pollinated crop seed was too low to continue incentivizing seed production among participating farmers. As a result, farmers abandoned their multiplication efforts and instead sold the wheat seed as grain during the off- season when the grain is in short supply and prices were high. 3.4.2 Adverse price movements on critical inputs All the interviewees mentioned the dramatic price hikes of planting materials. Fluctuation of input prices was identified by the interviews as a factor that in one way or another affects their overall productivity and profitability. All interviewees in all three regions identified higher prices (over 60%) of planting materials as affecting their targeted output, and worse still, most of the planting materials supplied through government programs cannot be re-propagated, so they solely rely on government supplied planting materials. Constant changes in prices of inputs such as fertilizers, pesticides, and improved seeds affect the planning and implementation of their farming activities. Subsequently, many cooperative member farmers are not able to afford all the required inputs. Further, the absence of affordable and inclusive access to both financial and non- financial services is hindering farmers, especially women, from purchasing inputs. 3.4.3 Market information asymmetry – market linkages One of the critical weaknesses of the value chain is the lack of effective and efficient linkages between producers and other value chain actors to promote inclusivity and attractive business cases from production to final consumption. The flow of wheat as a commodity is highly intermediate with many levels of aggregation to the end buyer or consumer. The unions indicated that there is still a significant amount of grain aggregated by rural retailers or primary assemblers that aggregate from farm gates, brokers or commission agents, rural wholesalers, urban wholesalers and distributors, and urban retailers. Cooperatives are active in output marketing, but generally play a relatively minor role relative to traders. This is partly because of the market information asymmetry and the market linkage between the upstream and downstream actors the cooperatives/unions cannot create by themselves. This information asymmetry and absence of market linkage across the wheat value chain can be witnessed in downstream agribusinesses that are struggling to keep pace with demand, to source adequate quantity and quality of raw materials. Agro-processors – wheat millers, and feed producers -- are experiencing low levels of capacity utilization due to the inconsistent and unreliable supply of wheat. Merkeb has developed an incentive and financing scheme to aggregate wheat grain from farmer members. The primary cooperatives aggregate wheat and other grains from their members at a 7-10% higher price than the prevailing market price. The union rewards primary cooperative members based on aggregation performance. To provide innovative, more affordable, and additional sources of finance for the downstream value chain, the Hettosa Union has implemented Collateralized Commodity Finance, contract farming and other innovative interventions to facilitate grain trade availing the required finance. However, in general, the absence of a digitally enabled market information system that can make real-time market information available to all is the missing link underlying the information asymmetry. This may require strengthening linkages between farmers, traders/cooperatives, and processors, and an awareness creation effort. AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 18 3.4.4 Limited access to mechanization and expensive labor force The access and utilization of mechanization is heterogeneous and is mostly concentrated in the major wheat- producing areas. Strong spatial patterns in mechanization are concentrated largely in the Arsi/Bale wheat belt corridor. The most common mechanization services offered are tractor plowing and combine harvesting practices. For example, the Hetossa Union has taken a unique approach by using a cutting-edge mechanization hiring service platform called "Lersha." like the popular ride-hailing service "Uber”, for agriculture. Lersha is a private-owned digital agricultural platform that offers a comprehensive range of services including input supply, mechanization, and agro climate advisory support to smallholder farmers in Amhara, Oromia, SNNP, and Somali regions. 3.4.5 Land degradation, declining soil quality and Soil acidity Land degradation regardless the cause is a prominent cause challenging farmers in Ethiopia. However, what is so boldly stipulated as the most suppressing problem is also soil acidity. The Merkeb Union leaders in the Amhara region identified soil acidity as a major challenge as it limits productivity. These acidic soils, which cover an estimated 41% 14 of the arable land in Ethiopia, are inherently infertile and exhibit aluminum (Al) or manganese (Mn) toxicity. These are generally considered to be the major limiting factor for plant growth in acidic soils. 15 The declining soil fertility mainly due to soil acidity affects the livelihood of 3.6 million people. Lime application to reduce acidity is becoming practical in most parts of the country. Field studies in Ethiopia have found consistent benefits of lime application, including the expected reduction of acidity, a 90–130%+ increase in yields on treatment plots, increased nutrient availability, and indications of sustainable yields for soy- wheat rotation, and malt barley production in acidic soils using lime in conjunction with N, P, and K (NPK). Regardless of the benefits of lime to cure soil acidity, smallholder farmers struggle to overcome these challenges. This is partly due to their limited access to modern agriculture technologies and practices as well as financial resources to invest in proven remedies such as liming. 3.4.6 Absence of affordable, and innovative financial solutions Bottlenecks in wheat finance remain significant. Challenges such as lack of property identification mechanisms for collateral, business track record coupled with lack of risk mitigation solutions and underlying trust and financial literacy gaps, lack of assets for collateral, high interest rates, financier liquidity constraints, and the absence of sophisticated finance and risk instruments hinder access to finance for producers and small-and- medium-sized farmer families and their respective cooperatives/unions. Exceptionally, Merkeb finds it challenging to secure loans of sufficient size to satisfy its members’ financing needs. While the common bottlenecks are the current liquidity problem of commercial farms, lengthy assessment processes coupled with cumbersome requirements are also some of the critical challenges. On the supply side, the lack of liquidity among banks to provide short-term finance arising, inter alia, from the National Bank of Ethiopia (NBE) bond repurchase requirements, coupled with the recent directive from the central bank which caps credit expansion at 14% to fight inflation and the narrow array of funding options available to banks are fundamental problems. MFIs are better positioned catering financial services to smallholder farmers. Most MFIs provide individual or joint liability-based loans to smallholder farmers. 14 Ethiopia Institute of Agricultural Research (2019) 15 Takala, Bikila (2019), Soil Acidity and Its Management Options in Western Ethiopia: Review, Vol.9, 10.7176/JEES/9-10-04 https://www.omicsonline.org/open-access/progress-of-soil-acidity-management-research-in-ethiopia-2329-8863-1000377-104085.html AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 19 3.4.7 Low utilization levels on value addition Both unions own and manage flour processing plants but both plants' utilization capacity is very low. This is highly pertinent in the context in which miller capacity utilization levels stand at less than 50%. Installed national production capacity across factories featured in the Ethiopian Millers Map (2017) is 16,058 MT/day with actual production at 7,460 MT/day. Accordingly, average capacity utilization stands at 47%. It is also observed in practice that there are relatively wide divergences in capacity utilization – from a high of 59% in Addis Ababa to a low of 40% in Amhara. In the feed sector, the capacity utilization stands at 54% for the private sector, and 66% for cooperative-operated feed plants. 16 3.4.8 Lack of implementation capability Farmer union management requires capacity building on business development and management. Farmer union and leadership capacity building to conduct thorough market research to understand the local business environment, consumer behavior, and market trends to shape and identify potential opportunities and challenges is needed. This can be coupled with networking skills by actively participating in local business events, conferences, and trade shows, attending industry-specific gatherings, engaging with key industry stakeholders, and joining relevant professional associations and chambers of commerce to expand their connections. Coaching is critically important to enable farmer-based organizations to understand partnership opportunities, identify potential local partners who can complement their business strengths, and help them navigate the local market. Establishing strong partnerships and alliances can provide valuable insights, local expertise, and access to resources but the skills to do so are missing at the union level. Farmer unions lack the skill to develop marketing strategies and to adapt where needed, especially generating business models and strategies to fit the local market dynamics. Being responsive to local sensitivities and market demand will increase the chances of success. The other missing link is the absence of continuous learning where the platform to keep farmers updated with industry trends, emerging technologies, and best practices. Attending workshops, seminars, and online courses or seeking mentorship to continuously enhance their business development skills can help. 16 EAFIA 2017 AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 20 4 Next steps – addressing the challenges. The report addresses the key weather and climate risks associated with wheat production through financial intervention. Scaling previous attempts requires financial solutions. As such bundling credit products that are deliberately designed to finance inputs bundled with agriculture insurance to mitigate potential climate risks debilitating farmer’s resilience, can make sense to most financial institutions interested to cater such services since insurance can lend a hand to de-risk the credit. Bundling in a nutshell can provide meaningful package to farmers to build their financial resilience and as such scaling climate smart agriculture can be possible. 4.1 Actual and perceived risks in the wheat value chain Identifying and prioritizing risks is an important first step in designing a comprehensive climate smart intervention scheme. Some sort of prioritization must take place to understand the key risks in terms of frequency of occurrence and degree of impact (severity). Given the data constraints, it is important to note that this list is not exhaustive. However, the Platform for Agricultural Risk Management report on “Agricultural Sector Risk Assessment”17 and the ranking of risks. which also apply to the wheat value chain as corroborated by on- the-ground interviews and consultations. is pretty much aligned with on-the-ground facts. At the national level the top risks are listed in Figure 7: Figure 7: Scoring of agricultural risks in Ethiopia18 Color Key High Medium Very low The findings aggregated after consulting the leaders of the target farmer’s cooperative unions and the solo commercial investor indicate that the various range of major risks accumulated across the wheat value chain from pre-planting through to postharvest identified in this report include: 17 Platform for Agricultural Risk Management | Managing risks to improve farmers’ livelihoods, Holistic approach to risk management: new opportunities for investment in agriculture Final Report September 2019 18 Source: Data from EM-DAT, FAOSTAT, CSA AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 21 Weather Risks - Precipitation-related risks affect crop and livestock production; these include drought, floods, and un-seasonal/erratic rainfall. Among the natural hazards cited by respondents consulted in this study, drought ranks as the most important shock in the Somali region, while erratic/unseasonal rainfall and flooding are likely to happen in both Amhara and Oromia regions. Pest and diseases are common risks in all the regions. ● Drought –Every three years on average, some level of rain shortage is observed at the beginning of planting seasons, that causes complete loss of yield. West Gojam Zone in Amhara has never witnessed drought, but the Merkeb Union leaders are concerned that the duration of the dry season is gradually increasing. This affects crop production by delaying the planting season and drying up crops and seedlings in the early stages of growth. In the Somali region, the commonly known La Niña19-induced droughts in the last forty years. Four consecutive failed rainy seasons since late 2020 triggered catastrophic crop and livestock losses. ● Floods – The West Gojam Zone in Amhara and Aris area in Oromia are not known for river floods. However, the interviews in Arsi indicated flooding to be one of the main climate hazards that the member cooperatives face. In the Somali region, flooding is very common in the catchments of the Wabe Shebelle River. The flooding occurs twice annually, mainly between May and June as well as between Mid-August to October following floods in the highlands. ● Excessive rainfall -Though not a frequent occurrence and not affecting all woredas covered in this study, excessive downpours are identified in both Amahra and Oromia regions as risks that significantly affect crop productivity. Heavy rains are associated with other adverse weather conditions such as strong winds and hailstorms. In the Amhara region, excessive rainfall was identified by farmers in hilly areas as a considerable risk, mainly because when it occurs most plots suffer greatly from landslides, soil erosion, and the creation of gullies that make their land uncultivable and washes away crops. ● Plant pests and diseases - Pest and disease attacks are identified in all three regions as the primary and most common risk or cause of losses in agriculture. Most of the diseases identified across all regions are rather similar. Some of the most prominent diseases and pests identified in this study include yellow smut, stem rust and blast disease. The losses from pests and diseases not only affect yields but also the expenses they incur negatively impact the targeted revenue. Pests and diseases are ranked very high because the average annual severity may be medium for both, but the frequency is high, and the impact of the worst-case scenarios can be quite severe in all three target regions. Wheat rust (fungal) diseases, notably stem (black) and stripe (yellow) rust, are the most important biotic constraints to wheat production in Ethiopia. Flooding is indicated as the next debilitating risk hampering wheat production and productivity. Rising temperatures as well as declining and more variable rainfall are expected to become more common occurrences. In conclusion, based on the interviews, the probable impact/severity of these risks on production and overall profitability is assumed to be between moderate (30-49% loss or damage) and no impact (less than 9% loss or damage). The frequency of such risks is extremely remote but possible (2-9%) to happen (20-49% chance). Considering the impact/severity and frequency/likelihood of such incidents to happen, one should consider the possible risk mitigation mechanisms to be taken. Table 3 demonstrates the risks and possible risk management measures that can be taken if any of the perceived and actual risks discussed above are set to happen. 19 La Niña is also sometimes called El Viejo, anti-El Niño, or simply "a cold event." La Niña has the opposite effect of El Niño. AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 22 Table 3: Risks in wheat value chain and risk management measures Risks Examples of risks Risk management measures ● Market/ price risk ● Cyclical and seasonal price fluctuation of wheat grain ● Market based price instruments. ● Contract farming ● Back-to-back trading ● Warehouse receipt finance ● Market information services ● Crop/Weather risk ● Major climatic events, flooding, and frosts ● Traditional crop insurance ● Farm level risk management ● Area yield Index Insurance ● Production risk ● Lack of irrigation ● Loss, theft damage of equipment ● Speared of pest and diseases ● Portfolio diversification ● Drought – resistant varieties ● Linking with insurance providers ● Crop insurance ● Financing irrigation ● Input suppliers and equipment financing ● Leasing Climate Smart Agriculture (CSA) practices and technologies Productivity growth in the wheat value chain can achieve short-term gains in income, particularly among poor farmers. More input use, improved technologies, better transportation and storage infrastructure, and more market information can all contribute to higher farm-household incomes and other indicators of well-being, e.g., higher consumption, asset growth, improved nutrition, and poverty. Better technologies supported by markets and training, including irrigation, mechanization, and soil mapping, not only confer direct benefits in terms of reduced input and labor costs but also amplify the benefits of seed and fertilizer inputs. Transportation infrastructure, in addition to connecting rural producers to larger markets, can also ease access to critical inputs such as fertilizer. Better roads allow perishable goods to travel longer distances with less spoilage and loss. With better storage options, producers can ease the seasonal glut of harvest and its attendant downward pressure on prices. Storage also boosts producer sale price prospects by allowing sellers to consider higher offers in the future. 4.1.1 Superior seeds Adoption of climate-resilient (heat- and drought-tolerant, early maturing, disease-resistant) improved varieties seems to secure an uptake in all the three target areas. Several improved verities are already introduced in the market and farmer’s uptake on such interventions is encouraging. Efforts to develop, distribute and regulate superior quality seeds that are higher yielding, more climate- resilient, and more nutritious, optimized for a location’s soils and climate, can have a variety of impacts. The GoE, through both national and regional seed enterprises, has attempted to create a formal seed system; currently, 87% of all wheat varieties grown in Ethiopia are CIMMYT-derived. The most common and widely cultivated improved wheat varieties cultivated by smallholder farmers have an impact on productivity (increasing yield and revenue), and adaptation as they increase responsiveness to unpredictable weather patterns. These local varieties present greater resistance to diseases and heat stress, for higher yield, drought- or flood-resistance, or enhanced nutrient content. The most widely multiplied, distributed, and planted improved seed varieties by both cooperative unions in the Oromia and Amahara regions are Kekeba and Ogelcho. But other varieties planted widely in Amhara and Oromia include Dendea, Lemu, king bird, Diglu, Huluka, Hidase. (Table 4). AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 23 Table 4: Most common improved wheat varieties in Ethiopia Variety Altitude (m) Rain fall (mm) Days to maturity Yield/ha/(Q/ha) Research Farmers Kekeba 1500- 2200 500-800 90-120 33-52 25-47 Dendea 2000- 2600 >600 110-145 33-55 25-50 Lemu >2200 800-1100 140 55-65 45-50 king bird 1500- 2200 500-800 90-95 40-45 30-35 Diglu 2000-2900 >550 128 40 31 Huluka 2200-2600 500-800 133 45 39 Hidase 2200-2600 >500 121 44-70 35-60 Hogena 2200-2800 800-1200 121-175 43-68 28-53 Ogelcho 1600-2100 400-500 102 28-40 22-35 4.1.2 Crop rotation with pulses Crop rotation and diversification widely used CSA practices in both Arsi Zone of Oromia and West Gojam Zone in Amhara. Faba bean, barley (malt) and potato are the most common crops farmers cultivate in rotation with wheat. Crop rotation is widely practiced in Arsi, South Gondar, and West Gojam Zones where Hetossa and Merkeb Unions are actively operating. Legume-wheat, potato-wheat, or oil crops-wheat rotations have been widely practiced improving soil fertility by fixing atmospheric nitrogen, enhancing water use efficiency, and disrupting the sequence of insects, pests and disease, weeds. 4.1.3 Mechanization There are around 400 mechanization service providers in Ethiopia but there is a significant mismatch between the demands for such services and the supply. The use of machinery has been restricted largely to primary soil cultivation and to harvesting grain with combines. Both unions own and operate tractors and combine harvesters. However, the demand for mechanization unions is getting from members and the supply capacity of the unions is mis-matched. Hence members currently access mechanization services offered by service providers, who might be individuals owning machinery, or companies. Brokers, so-called “delalas”, typically aggregate the demand by smallholders for a specific mechanized service and contact service providers. In return, mechanization service providers pay commissions for the brokers. Several challenges are associated with this system, including market inefficiencies through increased transaction costs, information asymmetries, and little say of smallholder farmers on which service provider will get the job done, with no possibility to give feedback on the service quality. In many cases, the technology used is not only unsuitable for agricultural conditions but is also outdated and of poor quality. Furthermore, the number of technical training courses available for agricultural technology is limited. The efficiency and quality of mechanization services are therefore also low. 4.1.4 The use of digital agriculture – the case of Lersha Access to advanced agricultural knowledge and information dissemination technologies is constrained due to weak digital infrastructure and facilities in the country. The digitalization of agriculture in Ethiopia still needs to overcome several challenges. Inaccessibility of inputs, tools, mechanization services, and advisory services are among the main challenges of Ethiopian agriculture. All interviewees indicated the use of the ‘’Lersha’’ platform, a digital agriculture platform that integrates both mobile apps and a call center. “Lersha’’ is a one-stop digital service that guarantees same-day delivery for placed orders. AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 24 The Lersha Digital Agriculture Platform operates in Arsi, West Arsi and Bale Zones of the Oromia region, facilitating the transaction of farm input, mechanization service, and agro-climate advisories for smallholder farmers and commercial farmers. In this project, Lersha will provide a mechanization service to smallholder malt barley growers in selected woredas of Arsi and West Arsi Zones. Lersha is also operational in Amhara, Southern Nations, and Somali regional states. The Lersha Platform uses agents as a bridge to register farmers, aggregate mechanization services demand, and facilitate service provision. Lersha agents are trained and demonstrate an effective operational and communication capability in providing mechanization services. The Lersha agents use a Lersha mobile application and 7860 call centers to register farmers, their farmland coordinates, crop type and other details. The details are used to aggregate harvesting services and map to a service provider who is willing to operate in a specific area. Farmers pay 5% of the mechanization service fee as a commission at the completion of the service, and they can provide feedback about the service quality directly for the Lersha agent to be captured in the mobile application. A Lersha backend portal generates reports regularly concerning farmers, Lersha agents, and service providers with respective feedback from farmers. Through a virtual platform on a mobile phone, the Lersha agent can easily speak with the farmer about what is needed or discuss issues. For the farmer without a smartphone or internet, the Lersha agent forwards the order to a nearby Farm Service Center. From there, the order is sent by motorbike or truck to the designated location. Most importantly, the Platform also provides agro climate advisory services along with early warning messages in case of catastrophic events likely to happen coupled with extension services including weather forecasts, that can help farmer’s decision-making. AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 25 5 Conclusion and recommendations The fundamental financing gaps both cooperatives and unions identified can be attributed to three major factors: • Value chain weaknesses, • Storage and processing weaknesses, • Structural challenges within the financial system. Value chain weaknesses include the availability of wheat and the ability to aggregate supply, minimal or ad hoc quality standards, constraints in access to electricity and water, and the cooperatives’ lack of capacity to market their wheat-based goods and secure financing for further business development. Storage and processing weaknesses include poor warehousing conditions such as insufficient accessibility and the cooperatives’ low capacity to effectively manage warehouses. Several financial solutions can be used to address the challenges outlined here utilizing both private and public sector funding. Such financing to implement and scale CSA practices can promote more effective operations, through building capacity amongst value chain actors, and encouraging lending to the agricultural sector. 5.1 The need for CSA financing Access to appropriate forms of agricultural finance can be an important driver of value chain upgrade and integration. For producers, access to finance can drive increased use of inputs such as superior seeds and fertilizer, while also supporting more rewarding approaches to post-harvest and marketing activities. For other value chain players, finance drives volume and efficiency of aggregation, supports trade, and enables investment in plants, infrastructure, and technology. CSA needs to integrate gender-sensitive practices with technological developments (Table 5). Women should be enabled to access growth interventions for their farming practices. Women should be targeted beneficiaries in such financial interventions. At least 50% of this intervention will address the financing needs of women farmers. Table 5: Possible financing intervention areas Technology Potential positive outcomes Financing need Knowledge smart: Improved crop varieties, seed, and fodder banks (use of superior seed varieties resistant to heat, drought, pests) • Productivity: Increases in yield and income. • Adaptation: Increased responsiveness to unpredictable weather patterns. Local varieties such as Kekeba and Ogelcho can present greater resistance to diseases and heat stress. • Mitigation: Reduces emissions intensity per unit of product. • Working capital to finance the procurement of improved seeds, linking farmers to banks and markets (at least 50% women farmers will benefit from this) • Invest in crop rotation and biocontrol products and precision applicators enable farmers to minimize the inputs they use for crop protection in their responses to increase plant health threats driven by climate change. Weather-smart: ICT-based weather forecasts and crop advisory, Yield index crop insurance, climate analogues • Interventions to provide services related to income security and weather advice to farmers, crop- specific insurance to compensate income loss due to vagaries of weather. • Finance (either equity or debt financing) to scale the capacity of digital platforms such as Lersha that bundle together climate- smart advisory services bundled with crop insurance products and smart premium subsidies AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 26 5.2 Associated costs and expected benefits Table 6 indicates the estimated costs and potential profits from farmers adopting CSA practices and technologies. Several assumptions are made in estimating the profits and the analysis is developed based on prevailing market prices. 1. The average land size of smallholder farmers is 0.8 ha and assumes the total land size is covered by wheat. 2. The average yield per hectare in a good season is estimated to be 28 quintals (28 bags each weighing 100 kgs). 3. The current market price per quintal is assumed to be 5,100 Birr at the farm gate which brings the total gross income to ETB 113,332 (2,038 USD). 4. Total costs of production based on rain-fed crops with mechanization (use of combine harvester and tractors) amounts to ETB 62,520 (1,104 USD). 5. Fertilizer loan from MFIs at 18% declining interest rate includes a services charge. Considering the above assumptions, a smallholder farmer owning at least 0.8 ha can reach a net profit margin of about 29%. This demonstrates the potential of wheat to enhance the smallholders’ income levels provided the risks and challenges involved in cultivating the crop are addressed. Table 6 presents a cost-revenue breakdown of the wheat farmer’s revenues, costs, and net earnings. Table 6: Cost structures and profitability at farm gate Cost items Unit (quantity/unit /ha) Unit cost (ETB) Total cost Total cost (USD) 20 Seed/ improved (quintal) 2 9,500 19,000 342 Fertilizer (quintal) 2 4,000 8,000 144 Farming (plowing, disking, and sowing (tractors/ hr) 3 4,500 13,500 243 Chemicals palace (liters) 1 6,000 6,000 108 Chemicals roxido (liters) 3 4,900 14,700 264 Pesticide (liters) 1 1,500 1,500 27 Harvesting (combine harvester) (hours) 30 200 6,000 108 Labor - estimated lump sum (daily) 1 5,010 5,010 90 Transport (rounds) 30 100 3,000 54 Subtotal 76,710 1,380 Interest and service charge on loan @ 23% (interest) +3% service charge 19,945 359 Insurance premium (6% of the total cost of production) -76,710 ETB 4,603 83 Total cost of production/ha including the cost of financing and insurance 101,258 1,738 Total cost of production/ 0.8 ha 81,006 1,391 Average qt produced per ha (28 Q*0.8) 22 Revenue from wheat @ 5100 ETB/Q 112,200 2,018 Revenue from wheat straw (assumed at 1 %) 1,122 20 Total Revenue (B) 113,322 2,038 Net Profit (B-A) 0.8 ha 32,316 581 Net profit margin % 29% Considering the main/Meher season the cost of production is divided into the relevant activities within the crop calendar. Figure 10 demonstrates where major investment is required during the main seasons. 20 Exchange rate - USD to ETB @ 55.6) AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 27 Figure 8: Mehere season crop calendar and financing requirement January February March April May June July August September October Nov Dec Farming (ploughing, disking, and sowing (tractors/ hr) = 13,500 ETB Improved seed and fertilizer = 27,000 ETB Chemicals = 22,200ETB Machination, Labor, and transport = 14,010ETB Planting Mid-season/ growing Harvesting 5.2.1 Profitability of the downstream actors Table 7 considers other actors in the value chain and estimates their profitability based on their activities. The table reflects the associated costs and profitability of the wheat business per actor. The profitability analysis for cooperatives and unions is developed based on the prevailing market prices and nationally acknowledged data points. The current grain price at the farm gate is taken as the aggregation cost for cooperatives at 5,100 ETB/quintal. Both the unions and primary cooperatives earn small margins while the farmers and processors amass a significant proportion of the profit. Table 7: Profitability of cooperatives and unions Lists of average costs Primary cooperative (PCs) Union Processers Purchase price 4700 5100 5400 Processing cost 270 Sack price (PP Bag -100Kg) 34 34 34 Loading unloading 20 20 20 Transportation 0 100 0 Storage - warehouse rent 0 7 0 Margin left by the other buyer 47 Total cost 4801 5261 5724 Selling price 5100 5400 7500 Net profit 299 139 1776 5.3 Investment entry points and possible loan products Climate smart wheat value chain development is an investment that contributes to the Sustainable Development Goals (SDGs), particularly SDG1 (no poverty), SDG2 (zero hunger), SDG 5 (gender equality), and SDG 13 (climate action), and offers the potential to achieve financial returns. Investment in climate-smart wheat production and enhanced productivity can happen at several points along the value chain (see Figure 9). Debt financing is the most suitable instrument to provide funding for activities such as upgrading input systems, input financing, and purchasing equipment. Therefore, it is recommended to implement value chain financing, Total Cost of production = 76,710 ETB AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 28 a type of debt financing that is developed along the value chain and can be either internal or external. Internal value chain financing refers to financing that is provided by actors within the value chain, while external value chain financing is an arrangement where a loan is given by a formal financial institution. Agricultural value chain finance has been successful in many developing countries and offers the opportunity to reduce cost and risk in financing smallholder farmers in the value chain. Financial cooperatives and microfinance institutions (MFIs) are the two major sources of rural finance in Ethiopia. However, these institutions are hesitant to lend to farmers because of the risk involved in having a portfolio made up of small loans exposed to agricultural cycles and risks. Figure 9: Actors in the wheat finance supply chain Pre-Harvest Finance Inventory Finance Trade Finance Figure 9 shows all the potential types of actors in the wheat value chain and the nodes where financing could be provided. Input suppliers for smallholder farmers, primary cooperatives and unions engaged in trading, marketing and distribution activities, and their associated subsidiaries in processing are all identified. Specific financial instruments can cover pre-harvest loans, inventory financing, and trade financing, and reduce transaction costs and perceived systemic risks. These risks and transaction costs apply to all actors along the supply chain but are much more pronounced in the case of financing farmers. Wheat producers are not risk-diversified. Most farmers in Ethiopia tend to engage in production activities that are highly exposed to similar perceived risks such as drought, production, and market prices that have a large impact on profitability and repayment capacity. Such risks, in particular weather and price risks, are systemic, where the entire agriculture finance portfolios can be susceptible, creating significant losses at individual, farm- level income levels, and for investor agricultural portfolios. Risk mitigation mechanisms, such as crop insurance are a more recent phenomenon, with trifling uptake, but attempts to build the insurance culture are promising. Crop insurance products have been introduced by a few insurance companies. They provide a means of risk sharing that could incentivize banks to extend lending to farmers. Farmers’ access to financing, insurance, and farm input products remains challenging. These low financial services in agriculture are mainly attributable to the low profitability of smallholder farmers operating below optimal size of land (lack of economies of scale in land use), use of outdated farm practices, and the multiple risks involved (including production, market, institutional and financial risks). But investing in agriculture remains a major task to ensure food security. 5.4 Possible loan products Access to finance in Ethiopia, regardless of the purpose of the loan, is constrained by the cumbersome collateral requirements of financial service providers. Collateral is the most significant challenge for farmers to become eligible for credit provision from any financial institution. The Second Level Land Certificate has revolutionized perceptions, as 11 MFIs are currently providing credit related services across Amhara, Oromia, SNNPR and Tigray regions. This alleviates the credit needed by farmers since the ticket size is better than the joint liability lending AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 29 methods), as it provides farmers, higher credit ticket size of (up to 200,000 ETB), credit good enough to cover the critical inputs needed to plant most field crops. The other issue is the credit required by farm-based organizations. Unions in this case indicated the need for working capital to aggregate output from individual farmers through their multipurpose primary cooperatives. Apart from the working capital needed for output aggregation, unions also require finance to procure machinery for their mechanization service provisioning and other capital investment required in their processing plants and future investment expansion plans. Below we present two possible loan products covering different financing needs: 1. Farm input loan (working capital) – bundled with crop insurance either through MFIs or Lersha (direct lending) 2. Capex and working capital - debt financing for cooperative unions. Working capital loan bundled with crop insurance - direct lending to farmers – through MFIs/ RuSACCOs There is a gap in working capital finance for wheat smallholders to cover the cost of inputs necessary to cultivate the crop and build resilience to withstand climate-related shocks. These include certified seeds, both organic and inorganic fertilizer, and labor for planting, weeding, and harvesting. Bundling climate risk insurance with the proposed working capital finance facility can address some of the risks of lending to smallholders. The first lending model could be the use of Second Level Land Certificates (SLCCs)21, bundled with insurance channeled through MFIs (Figure 10). Interlinking credit with crop insurance can achieve a lasting impact. Direct lending can enable farmers to access sizeable loans (up to 200,000 ETB) better than the small ticket size loan secured through more conventional joint microcredit lending methods (the Grameen model). Bundling credit with insurance can be a direct and feasible lending model, ensuring income enhancement and thereby bringing a lasting impact on farmer’s livelihood. The direct lending model allows the MFI/bank to attract deposits as well, which lowers funding costs and facilitates more effective asset/liability management. One of the proposed lending methods is described in Figure 10. The risk-based premiums to be paid by the wheat smallholder farmers could be incorporated into the cost of funds. This will indemnify smallholder farmers against the loss of produce due to unforeseen climate-related events. To provide further comfort to the bank, the use of SLCCs, widely available in the country, can be used as collateral. Table 8 shows the recommended general terms of the loan product to be negotiated with the selected partner financial institutions. Land certificate-backed credit is becoming a very common practice by most MFIs in Ethiopia. SLLC loans provide farmers with to access credit individually, with a better ticket size credit compared to the credit secured through the conventional group lending methods. 21 Second Level Land Certificates (SLLCs) are at parcel level, land use right certificates accompanying maps with more detailed spatial data and are registered digitally with the provincial government. AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 30 Addressing the entire combined union (Merkeb and Hetossa) consisting of 472,497 individual farmer members and applying the rough estimation of the cost production from section 7.1. needed to harvest 0.8 ha of land (76,710*0.8 ha), there is a need for 28.9 billion ETB (about 521million USD) of funding per season. A portion of this could be covered by farmer equity / advance savings but a large share will need to be financed. These estimates require a more detailed analysis and constant updating for the price movement encountered every season. Figure 10: Direct lending model - bundling credit with insurance through SLLC Certificate as collateral (extracted from interviews with cooperative leaders) Table 8: Indicative features of individual farmer loan product through MFIs/ RuSACOS Features Details Borrower Wheat smallholder farmers be it in cluster farming or not, farmers who own Second Level Land Certificate can have access to such loan. Credit facility Working capital loan to cover the purchase of farm inputs, mechanization, other administrative expenditures, and labor costs Loan Amount Based on a rough estimation and data points collected during the interview process, three options can be available: 1. 100% of the estimated cost of production – ETB 76,710 2. Cost of basic inputs (seeds, fertilizer, and chemicals – 49,200 ETB) Interest rate Current MFI lending interest rate is between 17-23 % Loan Tenor Loan tenor for both options will run for 1-year maximum beginning in March to two months after the harvest period in January/ February Loan Repayment Structure To be negotiated with the selected partner financial institution. But likely options however applicable in most cases is bullet payment of both interest and principal after harvest and sale of the produce. Other Loan Charges Loan application fees – 2% of approved loan amount. Area Yield Index Insurance premium – to be negotiated with the selected insurance provider. Current practices are premium rate is 6% of the sum insured which is the total/partial cost of production. AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 31 These are high-level indicative terms that will be refined in more detail through consultation with selected financial institutions. Bundling credit with insurance through the Lersha platform Product: Land Certificate-backed credit - Leveraging the already existing SLCCs as collateral, or Lersha’s preferred lending mechanism and its agreement with the banks on the use of the credit assessment on a digital platform will be shared with the banks and mobile network operators (MNOs) while the approved credit will be disbursed to the applying farmer through the wallet account opened by the Lersha agents on behalf of the farmers. Lersha platform is currently negotiating with commercial banks and MNOs to disburse credit bundled with insurance digitally. The services can be used to tailor input loans for individual farmer needs. The key features of this model include: Personalized credit score - pre-identified assessment parameters, credit ticket size is determined based on the market value of basic inputs such as fertilizer, improved seed varieties, and pesticides and herbicides that are likely the cost of production for the main Meher season. These are not the only costs a farmer needs to invest in but the critically needed inputs. Incorporating the total cost of production may make the insurance coverage super expensive and lending to cover only these critical inputs can enhance affordability of the insurance product. Insurance protection - The cost of production per hectare is also the insured sum to be considered in premium calculation. Insurance protects the farmers from climate risks. Basically, if the banks are the preferred distribution channels, then they have the right to become master policy holders providing insurance, earning commissions for farmer enrolment, and be eligible for payout and hence the chance to reconcile outstanding debt and reduce potential default risks. E-KYC (Know Your Customer) – Based on digital farmer profile along with the collection of activity level data points of farmers, the Lersha app will build a strong KYC necessary for accessing commercial loans. Collateral - SLLCs are a successful case in rural land sector development. The SLLC-backed credit was successful in four regions of the country (Tigray, Amhara, Oromia and SNNP) benefiting, 6.1 million households with 14 million parcels in 140 woredas. The Lersha app could leverage these parcels as collateral. Ticket size - The individual financing need is determined based on up-to-date market data on basic farm inputs of major food crops allocated to the farm size and parcel number on each plot of land. The platform can offer attractive interest rates on both credit and savings and be used to insure the farmer. Timely and objective loan assessment process and account opening activities by the Lersha agent fosters inclusion, where the wallet account opened on behalf of the banks enables farmers to access financial services easily. It enables farmers to access finance while aggregated data can be used for credit scoring and generating loan assessment reports on behalf of the financial institutes. Interlinking with Farm Service Centers and mechanization service providers, credit assessments will be shared with farm service centers to allocate required inputs and mechanization service providers, coupled with attractive interest rates for both credit and savings. Regardless, ticket size depends on the appetite of the financial institutes which is also subject to the availability of funds, the interest in investing in agriculture, and infrastructure related to the availability of outreach facilities near farmers. Financing farmer-based organizations - indirect lending model through FBOs FBOs play a vital role to connect farmers with markets, inputs, and technology and advisory/extension services. Financing is an important input that could be extended through FBOs; however, it requires a comprehensive and practical design to ensure inclusivity, affordability, and commercial viability with supply-side funding actors. AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 32 In situations where there is practical specialization (output aggregation, input distribution, irrigation, etc.), value addition, and high levels of adoption in mechanization and specialization, channeling the finance through unions and cooperatives integrating major actors in the formal input business and agro-climate advisory services providers can support a robust and thriving ecosystem. This is practically true for both Hetossa and Merkeb Unions as both have high levels of adoption of value addition, widely available distribution channels, and experience in aggregating outputs, marketing inputs, and educating farmers. This indirect lending approach, also known as a wholesale model, which is based on a bank lending indirectly to smallholders through an aggregator organization such as a farmer-based organization or primary cooperatives and/or unions, offers a solution. Table 9: Term sheet - cooperative/union loan Features Details Credit facility 1. Working capital loan for aggregation 2. Work capital loan for input financing (as a package, improved seeds, fertilizer, and other chemicals) 3. Working capital loan for solar powered Irrigation systems 4. Working capital loan for mechanization equipment Loan amount Based on a rough estimation and data points collected during the interview process, three options are available: 1. Working capital loan for aggregation (average annual PC loan requirement @ 2 million ETB*166 PCs – 332,000,000 ETB (5.9 million USD) for both Merkeb and Hetossa 2. Work capital loan for input financing (as a package, improved seeds, fertilizer, and other chemicals) – requires further investigation. 3. Capex for unions - loan for solar powered Irrigation systems and for mechanization equipment’s - requires further investigation. Interest rate Current commercial banks’ cooperative lending interest rate is between 18-23% Loan tenor Loan tenor for all options will run for about 6 to 12 months in the case of cooperatives/unions Loan repayment structure To be negotiated with the selected partner financial institution. Other loan charges Loan application fees 1 - 3% of approved loan amount. Area Yield Index Insurance premium – to be negotiated with the selected insurance provider. Current practices are premium rate is 6% of the sum insured which is the total/partial cost of production. 5.5 Conclusion Financing climate smart agriculture can alleviate the financial challenges of the target groups, primarily individual farmers, and their organizations. The proposed financial products will enhance farmers’ access to the improved seeds, appropriate technology, and advisory services necessary to scale CSA on the wheat value chain. Scaling Climate Smart Agriculture practices on the wheat value chain and specially through farmer unions will contribute to increased wheat productivity and production which will also greatly contribute towards the national goal of self-sufficiency and increased incomes and improved livelihoods for wheat value chain actors. The envisioned impacts are: (1) increased wheat production and productivity through the engagement of unions scaling up the adoption of Climate Smart Agriculture practices (improved seeds/inputs, early warning systems and agriculture insurance for diseases, pests, drought, and floods), and extension services while financing the and enabling farmers access to such inputs; and (2) institutional capacity strengthening for effective implementation, coordination, results tracking and management of cross-cutting issues. After several considerations, the initial pilot will commence with Hetossa Union. The project will benefit member of the Hetossa union (at least 50% women farmers) small scale farmer households (or 96,750 smallholder (24,188 female farmers members and additional 24,187 nonunion members) and deliver the following impacts: AICCRA CGIAR REPORT |DEVELOPMENT OF A CSF BUNDLE FOR WHEAT IN ETHIOPIA– THEME 2 33 (i) Increased wheat productivity to 4.0 MT/ha. (ii) Contribute to increased national wheat production to 294,120 MT (96,750 (0.76 (average land size)* 4 tons per year. (iii) Increased area under wheat production in the project areas aiccra.cgiar.org info@cgiar.org CGIARAfrica