This research was conducted to evaluate the impact of innovations to improve the yield and nutrition of sorghum varieties in Ethiopia. Importantly, we used an economic model to account for the market impacts of the innovation. Household data on the previous adoption of improved varieties were used to assess the likely impact on individual households and on overall poverty reduction. Our study also accounts for trade distortions in the market. Sorghum prices in Ethiopia are depressed by trade policies such as export restrictions, product subsidies and food aid, similar to agricultural commodities in many other developing countries. We considered the example of a current programme focused on sorghum innovation and estimate an expected rate of return of about 21%. Our results also indicate that the benefits of the programme would be larger if trade distortions were eliminated.