Analysis of Markets and Household Specific
Transaction Cost Factors in Livestock Input
Markets in Ethiopia
Berhanu Gebremedhin, Moti Jaleta, Samson Jemaneh and Aklilu Bogale
Improving Productivity and Market Success (IPMS) Project, International Livestock Research Institute (ILRI), P.O. Box 5689, Bonn, 2011
Addis Ababa, Ethiopia
FARMER PERCEPTIONS OF CHANCE OF CHEATING ON FARMER PERCEPTIONS OF CHANCE OF CHEATING ON
Background QUALITY AND WEIGHTS OF INPUTS* QUALITY OF INPUTS*
• Ethiopia has the largest livestock population in Africa. Yet, livestock productivity is among the lowest in
•Farmers see problem of cheating on weights
the region.
of inputs by traders. Farmers perceive higher danger of cheating on
• Several factors contribute to the low productivity, including inefficient input and output markets, •Farmers seem confident of the AI service pro‐ quality of input by traders irrespective of the
diseases and traditional management practices. vided by the OoA. Interestingly, participation in input type.
• High transaction costs is a major contributor to inefficiency of livestock input markets in Ethiopia. AI service is, however, very low. Input type Input source Prob. Of cheating on
Quality (0=no,
1=yes)
• Hence, analysis of the determinants of feed market participation and transaction cost factors can Input type Input Prob. Of Prob. Of cheating
source cheating on On weighing scale
provide important insights to the development of strategies to improve the efficiency of livestock Quality (0=no, 1=yes) Mean
(0=no, 1=yes)
input markets. Drug Trader (PIS) 0.47 (0.02)a
Mean Mean
a a WoARD 0.03 (0.01)b
Feed Farmer 0.07 (0.01) 0.05 (0.01)
b b Cooperatives 0.15 (0.04)c
Trader 0.32 (0.02) 0.29 (0.02)
Objectives Method (PIS) Veterinary ser-
vice
Farmer 0.09 (0.03)a
WoARD 0.05 (0.02)a 0.03 (0.01)a Trader (PSP) 0.40 (0.04)b
Cooperatives 0.14 (0.05)a 0.06 (0.03)a
•Characterize livestock input markets and •Results are based on data collected WoARD 0.02 (0.01)c
AI Service OoA 0.02 (0.01)
household input market participation. from 1200 households in 10 districts in Cooperatives 0.10 (0.05)a
4 regions of Ethiopia in 2007. * Different letters show statistical significance.
•Characterize the household specific
transaction cost factors in livestock input •Analysis of descriptive information Marginal effects of Probit regression for determinants of household participation
markets. and econometric analysis are used. in roughages and oil cakes markets
Explanatory variables for roughage Marg. Effect Std. Err.
•Analyze the determinants of household Age of household head (year) -0.00385** 0.00542
feed market participation. Sex of household head (male=1, female=0) -0.10206* 0.14431
Education of household head (literate=1, illiterate=0) -0.01004 0.13388
Operating land (ha) -0.01599 0.03293
• Older and male heads who live in ar‐
Household assets value (Birr) 0.00000 0.00000
eas of relatively larger communal graz‐
Cattle & equine owned (TLU) 0.00290 0.01431
ing lands, are less likely to participate
Results in roughage markets. Pasture land (ha) -0.03262 0.13445
Area covered by communal grazing land per TLU -0.06998** 0.08007
HOUSEHOLD ACCESS TO INPUT MARKETS HOUSEHOLD PARTICIPATION IN LIVESTOCK INPUT MARKETS
• On the other hand, households who Distance from settlement center to nearest market place (km) -0.00820* 0.01348
Market Input type Proportion
live closer to markets, and are en‐ Number of local organization involved -0.06258*** 0.06356
•Highest market ac‐ Input type Proportion of
type of households who gaged in market oriented livestock Involvement in extension program (yes=1, no=0) 0.11563*** 0.11141
cess is observed for Farmers
•Highest input market purchased the
reporting input (N=1192) production and have contact with ex‐
roughages access (N= participation is ob‐ Access to credit (yes=1, no=0) -0.02251 0.13067
(fodder/forage/straw), 1192) tension are more likely to participate
served in veterinary Roughage 0.30 (0.01) Engagement in dairy farm (yes=1, no=0) 0.28771*** 0.23308
salt‐bar, veterinary in roughage markets.
Feed Market Roughages 0.86 (0.01) service, drugs and Engagement in fattening (yes=1, no=0) 0.18022*** 0.15049
Concentrate 0.06 (.01)
service and drugs. Concentrate 0.19 (0.11) slat‐bar.
Oil seed cakes 0.18 (0.01) Crop livestock farming system (yes=1, no=0) 0.33737*** 0.20284
•Interestingly, Cakes from oil 0.48 (0.02) •Modest market partici‐
refineries Perennial crop and livestock system (yes=1, no=0) 0.71277*** 0.24471
reported access to AI pation is observed in Bran 0.24 (0.01)
Bran 0.57 (0.02) roughage feed, oil seed
is high. Urea molasses block 0.03 (0.01)
Constant -1.48405*** 0.38288
Urea Molasses Block 0.06 (0.01) cakes and bran.
•Access to oil seed Salt – bar 0.62 (0.01)
Number of observations 699
cakes and bran is Salt – bar 0.89 (0.01) •Lowest market partici‐
Veterinary service 0.79 (0.01) Wald Chi2 (16) 149.64
modest. Health Veterinary service 0.98 (0.00) pation is observed in
service Prob > Chi2 0.0000
Drugs 0.99 (0.00) concentrates, AI and Drugs 0.82 (0.01)
•Access to concentrate UMB. Pseudo R-squared 0.1927
Artificial Artificial insemination 0.67 (0.02) Artificial insemination 0.09 (0.01)
and UMB is lowest. insemination for heifers/cows for heifers/cows
Note: ***, **, and * show significance at 1%, 5%, and 10% significance levels, respectively.
Explanatory variables for oil cakes Marg. Effect Std. Err.
SUPPLIERS OF LIVESTOCK INPUTS SUPPLIERS OF LIVESTOCK INPUTS (2)
Age of household head (year) 0.00163 0.00779
Sex of household head (yes=1, no=0) -0.07288 0.23794
•Farmers are the •The Office of Agriculture (OoA) is the major sup‐ Education of household head (literate=1, illiterate=0) 0.06882 0.22196
most important Input type % of buyers by types of sellers plier of veterinary services, with some involve‐
sellers of rough‐ Operating land (ha) 0.02250* 0.03282
Farmers Trad- OoA Coop- Others
ment of the private sector.
age feed. ers era-
Household assets value (Birr) 0.00000 0.00000
tives •The office of agriculture is almost the exclusive
Cattle & equine owned (TLU) 0.02565*** 0.02143
Roughages 0.89 0.08 0 0 0.02 supplier of AI.
(0.02) (0.01) Pasture land (ha) 0.00665 0.07281
•Traders are the •Drugs are supplied by the office of agriculture and Households who operate larger size of
Concen- 0.01 0.87 0.03 0.02 0.05
Area covered by communal grazing land per TLU 0.07710** 0.09453
most important trate (0.01) (0.04) (0.02) (0.02) (0.03)
traders. crop land, who have more livestock,
sellers of con‐ Cakes from 0.01 0.95 0.02 0.01 0.01
Distance from settlement center to nearest market place (km) 0.00141 0.01563 who live in areas with larger communal
oil refiner- (0.01) (0.02) (0.01) (0.01)
centrates, oil ies Input % of buyers by type of seller Number of local organization involved 0.04882 0.08571 grazing land, and are engaged in fatten‐
type
cakes, bran, and Involvement in extension program (yes=1, no=0) 0.18743*** 0.18707 ing business are more likely to partici‐
Bran 0.01 0.97 0 0 0.01 Farmers Private OoA Cooperatives Others
salt bar. (0.01) (0.01) (0.01) Access to credit (yes=1, no=0) -0.06132 0.17419 pate in oil cake markets.
Veterinary 0.02 0.08 0.89 0 0
Urea 0.09 0.41 0.15 0 0.35 service (0.00) (0.01) (0.01)
Engagement in dairy farm (yes=1, no=0) 0.08135 0.26261
molasses (0.05) (0.09) (0.06) (0.08)
•The office of block Drugs 0.01 0.34 0.64 0 0 Engagement in fattening (yes=1, no=0) 0.15228* 0.21061
(0.00) (0.01) (0.01)
Agriculture Salt – bar 0.02 0.96 0.01 0 0 Crop livestock farming system (yes=1, no=0) -0.25899 0.62240
(0.00) (0.01) (0.00)
(OoA) is a minor Perennial crop and livestock system (yes=1, no=0) -0.35745* 0.67877
AI for 0.00 0.02 0.97 0.01 0
player in the heifers/ (0.01) (0.01) (0.02) (0.01) Constant -0.94785 0.79410
cows
Number of observations 309
MARKET PLACES FOR LIVESTOCK INPUTS MARKET PLACES FOR LIVESTOCK INPUTS (2) Wald Chi2 (16) 60.25
Prob > Chi2 0.0000
•Most important markets for roughages are farm
gates and local markets. •Veterinary services are supplied at farm gates, Pseudo R-squared 0.1774
Note: ***, **, and * show significance at 1%, 5%, and 10% significance levels, respectively.
• Most important markets for concentrates, oil local and district markets.
cakes, bran, veterinary service and drugs and slat‐ •Drugs are supplied mostly at local and district
bar are local and district markets. markets. Implications
•AI is supplied primarily at local and district mar‐
Places of input purchase (% of buyers) kets, with some farmers receiving it at farm gate. • An interesting result of this analysis is the fact that participation in input markets is very low despite the high
Input type
Farm Local District Regional reported access to the input markets, consistent with the low market orientation of the livestock sector.
gate market market market
Input type Places of input purchase (% of buyers)
Roughages 0.61 0.30 0.09 0
• Another interesting result is the fact that farmers seem concerned about the inputs and services they can buy
Farm Local District Regional
(0.02) (0.02) (0.01)
gate market market market from the private sector.
Concentrates 0.01 0.57 0.40 0.01
(0.01) (0.06) (0.01) (0.01)
Veterinary 0.20 0.47 0.33 0 • Two major implications emerge from the analyses:
Cakes from oil refin- 0 0.36 0.60 0.05 service (0.01) (0.02) (0.02)
eries (0.03) (0.03) (0.01)
1.Efforts should be strengthened to transform the subsistence nature of livestock production into market
Bran 0.01 0.34 0.63 0.02 Drugs 0.07 0.45 0.47 0.01
(0.01) (0.03 (0.03) (0.01) (0.01) (0.02) (0.02) (0.00) orientation.
Urea molasses block 0.35 0.42 0.20 0.03
(0.08) (0.09) (0.07) (0.03) AI for 0.14 0.20 0.66 0 2.Appropriate incentives and regulatory mechanisms should be put in place to encourage the involve‐
heifers/cow (0.03) (0.04) (0.05)
Salt – bar 0.01
(0.00)
0.41 0.54 0.04
(0.01)
ment of the private sector in livestock input supply and services.
(0.02) (0.02)