Abstract

In Ethiopia, smallholder commercialization and integration into the market has been one of the policy directions. Though Ethiopia managed to raise economic growth recently, there is languished pace of agricultural commercialization. This study investigates malt barley commercialization process through contract farming scheme, and its experience, effect and prospects in Ethiopia. A systematic review system was employed. Now contract farming is evolving in Ethiopia, while the motives for promoting contract farming may vary by actor, this study focuses on the role of contract farming scheme in malt barley commercialization. Foreign investors took up the beer companies and upgraded their working capacity leading malt demand by 83%. Malt barley contract farming scheme was introduced by Heineken brewery to ensure local sourcing of malt. Recently, Heineken managed sourcing malt barley from 10,200 contracted farmers in Arsi Zone and later on, Diago and Dashen breweries joined malt barley contract farming. Current malt demand is 50,000 ton while local sources cover only 50% of it. Contracted famers gained a 10% high price advantage than the non-contracted counterparts. Given barley gene pool resources and favorable production agroecology, booming beer industries and growing malt demand imply malt barley production prospect is promising and attractive. However, the innovative firm-farmer integrations need to curb the following challenges: side selling, late payment, limited access to improved varieties, weak capacity of cooperatives and unions in discharging proactive intermediary roles. Therefore, public agencies and private partners need to work towards scaling out and up malt barley innovations and commercialization to realize sourcing all required raw materials from local sources.

Key words: Malt barely, commercialization, contract farming, economic growth, Ethiopia.