Ethiopia’s sharp currency depreciation is driving up fertilizer and fuel prices, threatening to erode gains from a record wheat harvest,
The report says the birr has lost about 107 per cent of its value against the US dollar since the government introduced a market-based exchange rate system in July 2024, weakening from 75 birr to 155 birr per dollar by February 2026.
That decline has sharply increased the cost of imported agricultural inputs at a time when Ethiopia is aiming to harvest 7 million metric tons of wheat in the 2026/27 season. Fertilizer prices have risen by 60 per cent, while fuel costs are up 56 per cent, putting heavy pressure on smallholder farmers and transporters.
The USDA report says the devaluation has filtered through every stage of the production chain, from field preparation to transport and milling. Fertilizer, which remains essential for Ethiopia’s cluster farming model, has become increasingly difficult for many farmers to afford.
Fuel prices have added another layer of strain, raising the operating cost of tractors and sharply increasing transport fees for moving grain from rural producing areas to urban markets. As a result, the higher production outlook is not translating into lower consumer prices.
Wheat prices have climbed by 28 per cent in one year, with the retail price rising from 6,450 birr to 8,250 birr per 100 kilograms. That creates a striking contrast: record output on one side, and rising food costs on the other.
The pressure is also changing consumption patterns. Many households are cutting back on expensive teff and blending it with other grains, while more families are turning to relatively cheaper wheat-based foods such as bread and pasta.
To meet domestic demand, Ethiopia is expected to import 1.4 million metric tons of wheat from Russia, Ukraine and Romania in the coming year. The imported grain is estimated to be about $45 cheaper per ton than locally produced wheat.
However, domestic flour mills are operating at only about half of their capacity, weighed down by shortages of foreign currency and high taxation, limiting their ability to absorb local harvests efficiently.
The report suggests that Ethiopia’s agriculture is facing a familiar policy dilemma: stronger production targets are being undermined by macroeconomic instability. Unless input costs, foreign exchange shortages and logistics pressures ease, record harvests may not translate into improved food affordability for consumers.
