Agricultural development in Ethiopia is threatened by vulnerability of farming households to various risks as a result of which investments in long term development can be undermined by considerations of short term shocks and expectations of disasters. To achieve the Government of Ethiopia’s ambitious developmental targets for the agricultural sector, it is therefore important to include initiatives for better management of agricultural risks as part the strategic approach to supporting sectoral development.

In Ethiopia, PARM has been working on a Risk Assessment Study to identify and prioritize the risks facing smallholder farmers. In order to share the draft conclusions of this study with national stakeholders, a workshop was organized in Addis Ababa on 16-17 December 2015.

Objectives and programme of the workshop

The main objective of the National Stakeholder Workshop on Agricultural Risk Management jointly organized by PARM, ATA and NEPAD was the presentation and discussions of the Risk Assessment Study. More specifically, the two day workshop aimed to contribute to:

• A common definition and understanding of risk and understanding of holistic approach
• Review of results of the RAS undertaken by PARM experts
• Through a participatory approach, prioritization of the main risk that, in Ethiopia, affect the agriculture sector, with a special focus on smallholder farmers
• Sharing experience on existing ARM initiatives and tools and experiences in three areas: financial services; market risk tools; and innovations on information systems.
• Recommendations on some integrated studies to manage prioritized agricultural risks, which will be submitted the National Steering Committee (including an information system analysis)
• Recommendations on transformational deliverables to include in the agricultural transformation agenda

In addition, participants heard from different stakeholders who currently implement some risk management tools.  They identified the most relevant agriculture risks affecting both farmers and other stakeholders, to define related transformation deliverables, and to guide future decisions about national strategies and programs/investments.  The discussions also contributed to the identification of some ARM tools for to additional analysis, as well as to the identification of capacity building interventions.

Main outcomes

Participants identified specific areas for further action to mainstream risk management on agricultural initiatives and investment plans, with a special focus on three areas: insurance services (to underwrite weather risks to farmers/pastoralists and to support credit), enhancing market services towards more structured markets, and innovations on information systems.

However, the workshop also pointed to additional risks that are not addressed through these tools.  For example market risks do not only emanate from weak markets but also from government interventions (e.g., subsidies on wheat) and international price movements.  Similarly, risks related to weak services and a degrading natural environment are also important but would be addressed through regular agricultural development programs. The workshop also highlighted that different initiatives may affect one another in unanticipated ways.

Risk Prioritization

From their discussions on the prioritization of risks, participants were able to highlight a number of risks that smallholder farmers in Ethiopia face. These include:

• Weather related risks that are exacerbated by Climate Change. They mainly include frequent floods and less frequent but more damaging droughts. Climate risk often come in combination with pests and diseases increasing the severity of the impacts. A distinction between extreme events and smaller fluctuations in rainfall and temperature may be required when identifying risk management strategies.
• Crop and livestock pests and diseases. These are high frequency risks with potential high losses as well.
• Price and market risks. Both seasonal price variability and inter-year price uncertainties, and policy driven risk are important depending on each commodity. Price risk generate high food prices for households but also low income for farmers and dis-incentives for the adoption of yield enhancing technologies.
• Land degradation and loss of water resources exacerbate all production risks and constrain potential risk management strategies
• International trade can be a source of risk but also contribute to stabilize prices.
• Policies and institutional arrangements: important government initiatives such as safety nets, subsidies on agricultural products (wheat), support to credit systems, promotion of commercial farming, etc. create residual risks because they are not always stable and also influence the effectiveness of market-based ARM tools.

Potential areas for risk management policies and tools

As the logical follow-up of their discussions on risk identification and prioritization, participants then looked at potential tools for agricultural risk management. They identified three policy areas that could respond adequately to these risks.

1. Financial services, which were the main focus during the discussions in the Policy Forum in 2014. The limits and potentialities of insurance were presented by experts and insurance companies. The discussions alerted about the potential excessive costs of premium insurance subsidies, and the need to think of insurance as one among other financial and risk management tools.
2. Managing market risks. Contracts with the downstream industry can serve to stabilize prices, or at least, the access to buyers. The commodity exchange contributes to stabilize and structure markets, but it has mainly focused on exporting commodities. The strengths and weaknesses of commodity reserves were also discussed.
3. Innovations and information systems were signaled as a key risk management tool for all risks along the two days of the workshop. Innovative ways of providing agro-meteorological advice to farmers and the use of mobile technologies were also discussed. Finally the preliminary findings of a comparative study of agricultural risk management information systems in Ethiopia and other African countries were presented.

Further needs

Participants also agreed that all risks could not be covered under one specific policy area. Indeed, discussions in the workshop underlined that Agricultural Risk Management is an innovative approach to policy making, a way of thinking about agricultural management and strategic approaches that can overcome some of the barriers for successful investments and policy initiatives in agriculture. The lack of risks management tools are often main impediments for the uptake and success of agricultural policy initiatives in different areas: from the supply of inputs, to productivity improvements, integration in value chains and sustainability. The occurrence of a risk that is not well managed, can lead to a failure of a whole programme. Risk management includes not only sophisticated financial tools but also climate smart agriculture or simple strategies such as diversification.

Three priority needs were also agreed upon, namely:

• Further work on the prioritization of risks and tools and finalization of the risk assessment study and the study on information systems,
• Once risks and risk management tools are prioritized, further definition of interventions that can leverage significant change to better manage risks,
• Consultations, particularly with regional stakeholders for broad alignment on intervention areas.

Next Steps

Feedback from the participants will be integrated in the Risk Assessment Study to be published shortly. In the meantime, PARM has published a comprehensive workshop report on the National Stakeholder Validation Workshop. The next step for PARM will be the organization of the first Capacity Development Seminar in the country, planned for mid-2016.

Resources

Ethiopia RAS Validation Workshop Report – Volume I: Main Report

Ethiopia RAS Validation Workshop – Volume II: Presentations