Optimizing the malt barley value chain Description
Tsehay Farmers Cooperative Union Ltd is founded in year 2000 with 5 cooperatives and now is a union of 51 cooperatives working at 12 Weredas with a total number of 38,456 smallholder farmers producing mainly barley (malt and consumption barley), chickpea, teff and spices. The union purchases and markets the crops of its members and sells different inputs (fertilizers and herbicides), consumable items and construction materials on discount for its members.

The malt barley is differentiated from the food barley by the different varieties characterized by low protein but high carbohydrate values, yielding a higher extraction rates during processing. Malt Barley is mainly grown in Arsi and West-Arsi production area (Oromia region), and recently introduced in North and South Gondar (Amhara region) to supply the newly constructed factory in Gondar. While the malting varieties where set out as a cash crop in both regions, local population favors the malt barley over food barley for its high extraction rates in flour milling. Consequently, the majority of malt barley grown is kept for own consumption and used as barley flour (milled in local mills or at home) in Injera, the traditional staple food in Ethiopia. Approximately 40% of the malt barley marketed surplus feeds into the malting factory, which offers a premium for quality produce.

With the selling of previous state-owned breweries, foreign private sector (e.g. BCI, Heineken, Diageo) is coming in to invest in the brewery sector, for which the inflow of malt barley is crucial.  The growth potential is enormous with current per capita beer of only a fifth of neighboring Kenya. All breweries set ambitious targets to capture a good share of this high potential market. However, the increased demand for the beer’s main ingredient, malt barley, is not met by local supply. A lot of malt barley is imported from abroad. At sector level development, the introduction of new higher yielding varieties (planned by Heineken) could be discussed with the government. 

Before the malt barley enters the brewer’s gates it needs to be malted. Currently, Ethiopia only has one malting factory, but a competing malting factory is planned to open soon. To meet brewers’ demand, currently 60% of their malt is imported. Paradoxically, while Ethiopia is agro-ecological perfectly suit for malt barley production, it still imports most of its malt barley demand impacting the country’s already skewed trade balance. With imports a real administrative burden in Ethiopia and already more expensive than local supply with global prices only geared to go up, brewers have a keen interest in seeing the local supply chain improve. With stronger unions, increased malting capacity and more involvement of upstream value chain actors, bottled up demand for smallholder barley supply is just waiting to be uncorked.

Tsehay has great potential to contribute to improve the local malt barley value chain and link it’s members to malt barley factories. Gondar Malt Factory is about to sign a malt barley contract with Tsehay. The proposed contracted amount of malt barley from the side of Tsehay is 20-25.000 quintal. This a great opportunity for Tsehay and malt barley farmers in this region. In order to comply with the demand Tsehaye needs to overcome certain challenges, which are addressed in this action plan. Most pressing issue is the finance to purchase malt barley. Gondar Malt Factory pays once the produce is in the storage. This is too late for the farmers. Therefore a pre-finance system for the malt barley value chain needs to be organized with actors involved - Gondar Malt Factory, Dashen, Bank, etc. Other weaknesses in the value chain that Tsehay seeks to address are the quality of the malt barley, weak linkages between PCS and union, outdated financial management system.

Proposal
In order to (1) mobilize finance for malt barley contract, (2) optimize and strengthen malt barley value chain, (3) increase quality and quantity of production and in turn increase output marketing performance Tsehay an action plan is developed, outlining activities needed in order to achieve Tsehays ambitions in malt barley. Some activities have the aim to optimize internal company processes, other relate to enhancing the production and marketing performance of the union. Beneath the activities are presented: 

1. Organisation
1.1	Training for board of directors and the control committee on cooperative governance, collective marketing and supervising and evaluating business performance, human resource management  (what are the HR implications for the malt barley output marketing) and marketing (how to decide the price, contract arrangement) 
1.2	Acquire  and implement peach tree software
1.3	Peach tree training for accountants and  management  
1.4	Store management and purchase & Sales training for purchases and storekeepers
1.5	Select malt barley primary cooperative societies (PCS) where Tsehaye will focus on and will direct interventions to ( training, loans, etc) - Cluster list (contacts)
1.6	Training on malt barley supply chain managemen (purchase, storage, finance, logistics), advantages of collective marketing and cooperative priciples . Gondar Malt Factory to explain the contract arrangement. 
1.7	bi-annual meeting with malt-barley cluster: union, PCS (and others) to discuss challenges, opportinities, implement changes or innovations, discuss contract arrangement and financials
1.8	Expert visit on financial and loan management:
•	analyzing financial flows and systems in relation to PCS
•	analyzing loan management software

2. Production & Supply Management
2.1	Tsehay distributed 4500 quintal of malt barley, based on which in potential of 90.000 quintal (4500*20quintals/hectare) could be acquired. 
2.2	Contract with Gondar Malt Factory signed mid september:estimated at 20-25.000 quintal 
2.3	Translated version of contract share with Agriterra - agreement between Gondar malt factory and Union
2.4	Develop business plan for work capital - of 5 million, including a cost break down of malt barley from farmer to factory (Business plan in Amharic and English)
2.5	2.4 Tsehay collects all documents for loan application:
•	business plan: finance need
•	signed contract
•	letter of support of ACPA
•	minutes of board meetings approving the loan application
•	audited accounts&financial statements
2.6	Agriterra & Tsehay jointly organize / arrange pre-finance loan with actors involved (Dashen, Tiret, local bank)  - value chain finance schemet o be developed and described in business plan
2.7	ToT for 45 DA's on malt barley Good agricultural practices 
2.8	Training for farmers on good agricultural practices and malt barley post-harvest handling. Select and registered 900 farmers (60 farmers per kebele for 15 kebele ) plus 10 DA's and cooperative experts. How to sow, weed etc"
2.9	 Enroll base-line on farmer level and cooperative level in order to gather figures about production, income, profit margin of malt barley 
2.10	Tsehay analyzes the necessity of improving storage at PCS level and develops strategy how to assist PCS with implementing improved storage facilities
2.11	Stationaries for 1200 people (workshops, trainings)

3. Processing
3.1 	Ginger expert assesses feasibility and provides advice on ginger processing and marketing 

4. Marketing and Sales 
4.1	Stakeholders meeting with Factory, some PCS, union, BORD, CPA, Trade &Transportation Buro and local government to strengten the malt barley chain
-identify bottlenecks
-tackle challenges
-share best practices"
4.2	 Training marketing personnel staff

Objectives
•	Mobilize finance for malt barley contract: 5 million ET birr
•	Optimize and strengthen malt barley value chain
•	Increase output marketing performance Tsehay
•	Increase quality and quantity of production