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Market approach recasts often-hungry Ethiopia as potential bread basket

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There are 10 million farmers in Ethiopia, a country of 80 million, growing mostly cereals such as wheat, maize, sorghum, barley, sesame, and an Ethiopian grain called "teff." Yet, few farmers travel more than 12 miles from their homes in their lifetimes, so they have very little information about what their food would be worth if they did decide to sell it. When they do sell, they sell to a local trader, who then sells to another trader, and another, adding cost to the food when it finally reaches the consumer in large cities like the capital, Addis Ababa.

"The farmer doesn't know the price – he might get five cents here, but on the other side of the country, where there's a drought, he might get three times the price," says Gabre-Madhin. "So let's imagine the farmer goes to a warehouse where you have constant updates with the latest market prices. Now the farmer starts thinking nationally, not locally."

Similarly, traders in Addis Ababa would never buy product unless they saw the quality themselves. This is understandable. Some farmers have a nasty habit of adding dust and stones to their grain to increase the weight – and, thus, the value – of each sack sold. Under Gabre-Madhin's plan, each warehouse would have an independent neutral party that would test and grade the farmer's harvest, allowing traders in Addis Ababa, and potentially outside Ethiopia, to place bids on food, sight unseen.

Convincing farmers and traders to abandon the only system they've ever known will not be easy, of course. But by making the process of buying and selling food more transparent and predictable, everyone should benefit.

"As an investor, I need stability, and only a commodity market can offer that," says Guruprasad Rao, an agricultural commodities broker from Dubai, on a recent trip to Addis Ababa to buy sesame seed. "Whenever you have a lack of information, nobody knows the size of the crop. If everyone knows the size of the crop, they can predict prices better, and they can make better decisions."

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