Synthesis on Livestock Work

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  • A collaborative effort, involving a large research team and a number of institutionsThanks to Paul Dorosh, Bart Minten, Gashè Alemayehu Seyoum and Emily SchmidtWork in progress
  • Market issues: heterogeneity (breed, sex, age), marketing routesDemand patterns: local, seasonal, related to incomeAccounts for significant share of macro activity: value added and exportsCurrent drought in Southern pastoralist areas emphasises the importance of the shock workBut long standing debates about the role of livestock in income growth of the poor are also particularly relevant to Ethiopia and we want to give some Ethiopia-specific insights on these
  • A roadmap to navigate the livestock work through 5 key, broad questions
  • This growth rates compare very favourably to those very close to zero reported in 702, 80s and 90sAlso the above rates were spread between the intensive and extensive margin. The pctage of farmers engaged in crop agriculture only dropped feom 18 pct in 2000/01 to 9 pct in 200/08Measured growth rates are consistent with the history of disasters in Ethiopia2002 and 2003 saw a prolonged drought. Livestock number quickly picked up after that2008 was characterised by poor belg and deyr rainy seasons, while 2009 also had a poor belg and an erratic performance and early cessation of kremt rainsIf supply side story, we should find further evidence in birth and death ratesHas demand played a role as well?
  • Cattle stock growth from 2 pct in 2003/04 to 10pct in 2006/07 (average 4.9 for 03-09)Economic growth above 10pct consistently and unitary income elasticitiesSo, roughly, for most years demand growth > supply growthHigh births rates may thus also have been the result of increased investment in livestock productivity from livestock holders
  • Avg annual growth rate in stock for 2003-09 is 8.1 pct for goat and 7.9 for sheepMutton and goat meat income elasticity 0.67 (would also need elasticity of live animal purchase)
  • BeefShoatsPoultryDairyFeedXXXXXXXXXXDiseaseXXXXXXXXMarketing, processing, etcXXXXXXXBreed qualityXXXXXXXXOthers: labor, credit, extension . . .XXXX
  • Good news is that proximity (measured as travel time from woreda to the nearest livestock market) improved in the decadeThe maps show, respectively, travel times have gone down (ie have become more brown in the map) between 2000 and 2007Large areas of the country, though, are still characterised by high travel times. Among these, are areas where large number of livestock are found. Lack of market access may still be a problem
  • Consistently with the hypothesis that access or transportation costs are a barrier to livestock development, we find that proximity is correlated with the share of national livestock which a woreda holds
  • Sheep markets are well integrated with Addis: Amhara, Gambella, and Harari showing better integration5 Amhara markets tested for integration with Addis & average adjustment coefficient is basically one, suggesting almost immediate reversion of price differences in the trade regimesMarkets in Tigray and Oromiya Regions are less integrated (especially Nazareth)Modest sheep market integration within region: Harari and Amhara showed relatively less intra-region sheep integrationVery week goat market integration between Addis Ababa and regional marketsMarkets in Afar, Somali, and SNNPR showed weaker integration with Addis; while Gambella and Benishangul showing No IntegrationMost of the regional markets are well integrated to their regional capital and/to others in the regionRelatively weak integration in Afar. Tigray and Oromiya showing fair level of integrationMarkets in Amhara didn’t show evidence of integration Generally, transaction costs (as percentage of average price) declined over time
  • Livestock products account for 4.4% of total household expenditure and 8.7% of food expenditure.Expenditure share larger in urban areasPoorer people tend to have a higher expenditure share on beef and dairyPoorer people tend to have a lower expenditure share of mutton & goat and eggAnnual per capita meat consumption in Ethiopia is very low. The African and East African average for the same period (2004) stand at about 15 kg and 10 kg respectively (Ethiopian is 8 kg) (FAO, 2010 )Improves with income and in urban areas
  • QU-AIDS Two-step procedure to address zero expenditure problem Residuals included to control for expenditure endogeneity
  • Largest livestock population in Africaroughly 1/3 of Ag GDPand 14% of total GDP 6.4% of exportsDiao Pratt (08) conclude that “growth in staples is the priority for poverty reduction”Combining growth in staples and livestock has high economic multipliers & strong poverty reduction gains in food deficit areasDorosh and Thurlow (09)’s poverty-growth elasticitiescereals have highest rural poverty reduction potential
  • Draft powerLivestock investmentMore price elastic demand for meat
  • This reverts the simple logic that tfp growth in a factor significantly owned by the poor should increase poor HHs TFP growth in a factor less initially important in the poor’s income Part of this result comes from the short-run full employment of factors assumed in the model, but its economic logic may force us to reconsider
  • Synthesis on Livestock Work

    1. 1. ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE<br />Synthesis on Livestock Study<br />Presenter<br />Stefano Caria<br />Disaster Risk Management and Food Security Sector<br />Ministry of Agriculture, GoE<br />Ethiopian Economic Association Conference<br />July 21, 2011<br />Addis Ababa<br />1<br />
    2. 2. Research team<br />AyeleGelan (ILRI), SeneshawBeyene, ErmiasEngeda, Ibrahim Hassen, FantuNisraneBachene, KibromTafere, HelinaTilahun (IFPRI-ESSPII-EDRI), Derek Headey (IFPRI) Stefano Caria (DRMFSS)<br />
    3. 3. Why a study on livestock?<br />A growing, dynamic sector<br />Market issues<br />Demand patterns<br />Accounts for significant share of macro activity: value added and exports<br />Policy should address shocks & long term sector development<br />
    4. 4. A roadmap in 5 questions<br />What trends?<br />What supply constraints?<br />What type of markets?<br />What type of demand?<br />What economic importance for the sector?<br />
    5. 5. What trends?<br />
    6. 6. Unprecedented stock growth in 00s<br />
    7. 7. Stock growth in 03-07, then slump<br />
    8. 8. Rising real prices of cattle show sustained demand<br />Real prices rising 03-07: demand grew faster than supply<br />Consistent with elasticities<br />Real prices fell during food price crisis<br />Now picking up again<br />fast rise in international prices in 2010<br />
    9. 9. Real prices of shoats stable or declining<br />Moderate upward trend in real price of sheep<br />Moderate downward trend in goat<br />Notice both sheep and goat achieved very high growth rates<br />& income elasticity of consumption lower <br />
    10. 10. Rising export values of live animals<br />
    11. 11. What supply constraints?<br />
    12. 12. A synthesis of diagnostic studies<br />
    13. 13. What markets?<br />
    14. 14. Proximity to livestock markets improved in 2000-07<br />
    15. 15. Proximity is correlated with woreda share of national livestock<br />
    16. 16. Formally study market integration<br />Threshold auto-regressive model<br />3 trade regimes are specified<br />Transaction costs estimated from the model<br />Time-varying adjustment speed & transaction costs<br />
    17. 17. Different commercialization for sheep and goat?<br />Sheep markets are well integrated with Addis Ababa & less so within regions<br />Goat markets are not as well integrated with Addis, but better integrated within regions<br /><ul><li>Selling to Addis vs selling to local markets?</li></ul>Transaction costs are declining<br />
    18. 18. Fall in transaction cost, but still imperfect integration for cattle<br />Bull and oxen markets often well integrated with regional capital, less so with Addis Ababa<br />No tested market in Afar, Somali and Borana integrated with Addis Ababa<br />Informal exports?<br />Some producer-retail vertical integration, but extremely low for retail-meat<br />Fall in transaction costs confirmed<br />
    19. 19. What demand?<br />
    20. 20. Consumption patterns<br />
    21. 21. QU-AIDS results: all goods normal<br />Beef has unitary income elasticity<br />Income elasticities for other prodcuts lower<br />
    22. 22. Significant price elasticities<br />All own price effects are negative and significant<br />Mutton/goat meat has the highest own price elasticity<br />For beef, mutton/goat meat, and ‘other meat’, rural areas have higher own elasticities<br />Substitution relation between beef and mutton/goat<br />Significant expenditure and price response suggests policies affecting prices will have strong effects on consumption<br />
    23. 23. What macro-economic importance?<br />
    24. 24. TFP shocks within a general equilibrium framework<br />Dynamic, general equilibrium model<br />Adjusted to better capture livestock sector<br />Draft power, elasticities<br />Livestock module to better model livestock investment and stock categories<br />Model total factor productivity (TFP) shocks to agricultural sectors: cereals, cash crops, livestock<br />
    25. 25. Strong economic linkages for livestock<br />
    26. 26. Livestock has pro-poor factor income effects<br />Livestock income share of the poor is limited<br />Poor HHs have a larger share in labour<br />TFP growth in a factor in fixed s-r supply brings its price down<br />Economic linkages reinforce return to other factors<br />
    27. 27. To conclude<br />
    28. 28. What have we learnt about livestock? <br />Significant dynamism in supply and demand<br />A number of supply constraints<br />Decreasing transaction costs & different patterns of market integration<br />Significant expenditure and price elasticities<br />Important macro-linkages & income generation potential for the poor<br />
    29. 29. A roadmap of new questions<br />How do trends differ across geographical areas?<br />What price formation mechanism?<br />What further economic linkages?<br />Better capture links to crop sector through feed <br />Better model endogenous investment decisions<br />What is the economic dyanmics behind livestock sector shocks?<br />
    30. 30. Thank you!<br />

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