MSU Agricultural, Food, and Resource Economics
Ethiopia is one country where fertilizer use has increased dramatically since the early 1990s. This success has been largely attributed to aggressive promotion of a high- input farm technology package first promoted through the Sasakawa/Global 2000 (SQ) Program and later incorporated on a much larger scale into the government's New Extension Program (NEP) (accounting for roughly 76 percent of imports and 30 percent of rural households in 1998).
Qualitative and quantitative survey work in 1998 revealed that it is questionable whether extension, credit, and input markets were sufficiently developed to sustain long- term productivity gains in maize production. The NIEP acts as a surrogate for the credit and input markets-often compromising the development of the improved seed and fertilizer open markets, and private initiatives to extend smallholder credit.
There were signs in 1998 that there was an unmet demand for credit and administrative delays in issuing credit led to delayed fertilizer deliveries. The quality of extension was also suspect. A household fixed effects yield model revealed that quality extension (timing and appropriate interaction between inputs) is an important component of using the high-input technology efficiently. However, in 1998 the number of farmers per extension agent in the NEP far exceeded the ratio under the SG program, thus likely hindering the quality of extension.
Another concern regarding long-term production of high-input technology is whether the input market in 1998 forced many farmers to pay artificially high prices for fertilizer. Institutional change by introducing more competition in the retail market is one avenue for developing a lower-cost fertilizer market. A hedonic fertilizer price determinates model revealed that fertilizer prices are significantly higher in areas of the country where governments appointed markets relative to regions where a fertilizer auction was implemented. It is also possible to reduce costs through changes in the organization of importing and wholesaling by taking advantage of the seasonal price trends for fertilizer on world markets, as well as in domestic transport rates. Simulated farm budgets revealed that the proposed cost-reducing changes can reduce the risk and improve the profitability of adopting the high-input technologies.