WFP Ethiopia Market Watch, November 2021

HIGHLIGHTS

• Inflation: Headline inflation which was recorded as the highest in a decade hitting 34.8 percent in September, slightly declined to 34.2 percent in October 2021. The food inflation that was standing at 42 percent in September, the highest in ten years, slightly reduced to 40.7 percent in October. The measure of change in price of cereals and bread, fats and oils, registered a significant increase in October 2021, far above the food inflation in the month. The domestic price increase for these essential household commodities is in part driven by the depreciation of Birr against US Dollar.
• Exchange Rate: Over the past 12 months (October 2020 – October 2021), the official exchange rate of the Birr has lost its value by 25 percent against US dollar. In October alone, the Birr has been eroded by 0.03 Birr per day against USD on average. The difference between the official exchange rate and the parallel markets has been around 28 percent in September and October. The Government of Ethiopia continues to call for the Ethiopian diaspora to transfer remittances through the legal channel to overcome the impending forex crunch.
  Market dynamics in Conflict-affected Areas of Tigray and Amhara: Markets in Tigray and Amhara continue to operate below normal with the escalation of the blocking off road network due to insecurity and thereby affecting supply chain – as such, retail prices of common food commodities have increased. The price of teff has increased by 39 percent in the last six-week period due to limited supply to the Dessie market. Significant price increase has been observed on industrial processed food commodities in Dessie market such as rice, sugar, and vegetable oil which are very high in the conflict-affected markets when compared with Addis Ababa markets. Wheat grains are far cheaper in the conflict affected markets of Tigray and Amhara, reflecting the increased availability of this item which may be attributed to the sale of in-kind food, being provided for the response.
• Food price trends in surplus producing areas: Prices of key staples, after reaching record high levels in the previous months between July and August, showed slight decline in October in most of the surplus producing areas of the country. The availability of these food items is also improving seasonally with the new harvest becoming available in the market. However, underpinned by the macro-economic challenges the country is facing and the ongoing conflict that impede agricultural and trading activities, prices are still far above the previous year and five-year average for the month
• Terms of Trade (TOT) (Shoat to wheat flour): In the dry season of Hagaya between July and September, the ToT dipped and the downward trend continued through October. This is attributable to the poor performance (below average) Deyr rains that limited the availability of pasture in Somali region. The ToT of shoat to rice, which indicates how much imported rice a pastoralist can buy after selling an average sized goat/sheep, plunged in July and early August mainly due to the fact that Birr lost value against US dollar in the parallel market which showed slight recovery in September and October.
• Market and food security outlook: Prices of cereals may continue decline in the upcoming months until the new harvest becomes available in the market. The possible reduction in the yields from meher harvest in connection with the ongoing conflict may drive the prices of staples in affected areas upwards. The wide differential of the Birr against USD in the parallel market means imported staple cereals (pasta, rice, wheat flour) in Somali region will remain expensive. This will continue to jeopardize the food security status of poor households that rely on markets to access food and other essential needs.

Source: World Food Programme