Profitability of basic seed production in Ethiopia: the case of private seed companies and seed unions

This study was carried out to examine the profitability of basic seed production by private companies and unions in Ethiopia. Primary data collected using structured questionnaires from purposely selected private companies and unions. Maize, wheat, tef, barley, and faba bean were purposely selected for this study. The data were analyzed using descriptive statistics, profitability analysis, break-even analysis, and sensitivity analysis. With benefit-cost ratios of 1.89 and 1.36 and profit margins of 27.9% and 58%, maize and tef basic seed production, respectively, by private companies was found profitable. Regarding unions, maize and wheat seed production was profitable, but not tef, barley, and faba bean. ETB 51.8 kg−1 and ETB 23.3 kg−1 are the actual break-even prices to cover the total tef and maize basic seed production, respectively, by private seed companies. For unions, the higher break-even price was recorded for tef (ETB 65.6 kg−1). The sensitivity analysis also showed that a reduction in production cost ensures higher profitability than an increase in yield or price in the Ethiopian basic seed business. Private seed companies should consider their production costs regarding rental expenses, transportation costs, and packaging, whereas unions should take maximum care in administration costs and expenses on the maintenance of machines and consumables.