Professional Documents
Culture Documents
Research Report 79
Hailemariam et al
©EIAR, 2009
›=ÓU›=' 2001
Website: http://www.eiar.gov.et
Tel: +251-11-6462633
Fax: +251-11-6461294
P.O.Box: 2003
Addis Ababa, Ethiopia
ISBN 978-99944-53-41-2
Contents
Acknowledgments 2
Executive Summary 3
Introduction 5
Methodology 7
Data and approach 7
Live Animal and Meat 10
Export Economy 10
Responsiveness of Livestock Supply to Prices 12
Socio-economic Profile 16
of Traders 16
Livestock Collection and Distribution Points 25
Marketing Channels 27
Supply patterns of market participants 27
Distribution of costs and margins 29
Attributes to market actors as determinants of price formation 47
Buyer type 47
Type of livestock sellers 47
Buyer's access to market information 47
Occasions 48
Number of markets operated 48
Mode of payment 48
Relationships between buyers and sellers 48
Transaction Frequency 49
Attributes to animal condition and factors influencing them 49
Body condition 49
Age group 49
Seasons 49
Bans by major importing countries 50
Feed Services in Livestock Marketing 51
Strengths, Weakness, Opportunities, and Threats 54
Conclusion and Recommendations 57
References 59
Annexes 60
1
Hailemariam et al
Acknowledgments
The authors gratefully acknowledge the United States Agency for International
Development (USAID) for financing this study in Ethiopia. The whole-hearted support
of EIAR and TAES: SPS–LMM program management during the course of this study is
highly acknowledged. We also recognize the cooperation and assistance provided by
EIAR and ILRI researchers who were involved in the research activities of the project.
We thank the many different traders (small and big livestock traders, representative of
cooperatives, feedlot operators, live animal exporters, export abattoirs, etc) at different
markets in Ethiopia who provide useful information and assistance, without which this
study could have not been completed. We appreciate the different zone and woreda
offices of rural and pastoral/agro-pastoral development, cooperative promotions, and
quarantine station at Adama/Nazareth for providing us the valuable information that
contributed for the completion of the study.
We gratefully acknowledge the contribution of Dr. Hank Fitzhugh and Ato Belachew
Hurissa of TAES SPS–LMM and Dr Asfaw Negassa and Dr. Mohammed Jabbar of
ILRI for their useful comments and suggestions on the survey instruments and earlier
draft of the manuscript. The authors hold responsibility for any remaining errors in the
document.
Market structure and function for live animal and meat exports
Executive Summary
Despite this growth, exports from the livestock sector remain a small fraction of
Ethiopia's overall agricultural sector. It was only 12% of the total agricultural
export in 2006/07 of which 62% came from hides and skins 23% from live
animals and 15% from meat export. To improve the competitiveness of live
animals and meat export from Ethiopia cost-effective marketing channels and
coordinated supply chains, which reduce the transaction costs among different
actors along the supply chain, are crucial.
This will require not only the competitiveness of individual firms but also
improving the efficiency of all its elements from production, to processing,
handling, distribution, and marketing.
The purpose of this study was to conduct analysis on the operation of livestock
marketing system with a view of possible improvements in light of emerging
market opportunities and capacity building needs. From the survey of
marketing systems focusing the major exportable live animals and meat in the
country, the study tries to map the marketing channels and value chains for live
animals and meat exports and estimate the distribution of costs, margins and
prices for the different participants in the identified value chains.
This study is based on the primary data collected from major pastoral markets
of the country supplying livestock to the export market and time series
secondary data collected from these areas. The findings of this could be
summarized as follows:
• Over the last one and half decade, there has been an increasing trend in the number
of animals supplied to the main supply markets. The substantial increase of price in
part is expected as a motive for the positive supply response. Empirical analysis of
the time series data collected from the Borena pastoral markets also suggests the
responsiveness of livestock supply from the rangelands to an increase in market
price.
• The existing export abattoirs are found to operate at less than 50% of their installed
capacity. They unanimously attribute their under capacity operation to supply
shortages of export quality animals. However, over 50% of them were found to
focus on 5 markets as their main sources of shoats. This indicates their limited
penetration of production areas to collect export quality animals which calls for the
review of their marketing strategies,
• In the existing livestock marketing chains, the structure of the livestock market
shows limited participation of market actors in the value addition process. This
shows that beyond transporting and limited fattening operation, relatively few
market services are usually observed in the process. Thus, there is a need for the
private sector to consider investment in slaughtering and further processing of beef
and shoat meet rather than focusing on a mare live animal export.
• Transport cost from production areas to the center are the major cost components
of marketing operations. The size of marketing costs therefore declines as the
3
Hailemariam et al
involvement of transport, handling and other related services by the market
becomes small.
• Analysis of the total marketing costs of each actors participating in different
channels indicated that exporters have the highest costs, followed by feed lot
operators, big traders, small traders and then collectors. Multiple and high tax
payments and buying agent's costs are also important components of marketing
costs almost for all actors participating in live animal and meat export channels.
These cost items indicate a need for targeted policy and development intervention
since they have big impact on the competitiveness of meat export from Ethiopia
through inflated domestic cost of meat production. Thus, the following
recommendations are suggested to improve the competitiveness of Ethiopian
livestock and meat:
o development of cost effective livestock transportation systems,
o policy decisions to cut down the number of taxations on a single animal,
o fixing uniform taxation in a given region,
o enforcing law and order in market places and reducing the power of brokers in
livestock markets are suggested
• The analysis of producers share in the final selling price for the different channels
clearly indicates that if different linkages of producers with end-markets actors are
established, the producers would be in a position to capture a significant share of
the value added in the market channels.
• In addition, as the number of links in the market channel expands, the size of the
marketing margin each market participant enjoyed would decline. Thus, it is
important to encourage shorter channels in order to boost the benefit of producers.
• Prices usually build up toward a peak or down to a certain occasion such as
Christian fasting, Muslim fasting, holidays and other times; time of a situation
whether that specific month falls during ban time or not and season described as
wet or dry season. Age group and body condition of the traded animals are an
important observable attributes of the animal affecting price in the market.
Introduction
Following the adoption of economic liberalization policies in early 90s and the
better access to the international markets, the socio-economic situation of the
livestock industry in Ethiopia has changed considerably. This is because
markets for agricultural products are rapidly changing in the world with
different market participants expanding rapidly and changing consumption
behavior in many developing and developed countries towards high value
agricultural products due to rising per capita income, migration, urbanization
and globalization. These markets demand higher quality products with
consistent supply, which are largely available by large-scale producers and
5
Hailemariam et al
processors and imports. In the face of this challenge, the government of
Ethiopia has embarked on a policy of promotion and strong participation of the
private sector in the livestock industry, which in turn is expected to promote
food security and foreign earnings from the sector.
To improve the competitiveness of live animals and meat export from Ethiopia
cost-effective marketing channels and coordinated supply chains, which reduce
the transaction costs among different actors along the supply chain are crucial.
This will require not only the competitiveness of individual firms but also
improving the efficiency of all its elements from production, to processing,
handling, distribution, and marketing. However, there is little evidence for
growing interests of strategic production of livestock for marketing.
Information on economic aspects of livestock marketing, performance and
structural characteristics of the market and competitive behavior of actors in the
market chain is highly scanty. Hence, there is a need for analyzing the value
chains for live animal and meat exports. Understanding how the export
livestock market works can provide a basis for identifying opportunities to be
exploited and constraints that need to be improved. The purpose of this study
was to conduct analysis on the operation of livestock marketing system with a
view of possible improvements in light of emerging market opportunities and
capacity building needs.
From the survey of marketing systems focusing the major exportable live
animals and meat in the country, the study tries to map the marketing channels
and value chains for live animals and meat exports and estimate the distribution
of costs, margins and prices for the different participants in the identified value
chains.
Market structure and function for live animal and meat exports
Methodology
Data and approach
Conceptual framework
The performance of a market is influenced by the structural characteristics of
the market and the competitive behavior of actors in the market's chain and
dealing with these factors provide a basis for the formulation of interventions
7
Hailemariam et al
(William et al, 2006). The structural characteristics of the market refers to
marketing channels, volume of flows, extent of market concentration and
availability of entry barriers to the market; while the competitive behavior
refers to the strategies of the marketing actors in marketing transactions (Bain,
1959). In recent years, the globe has shown the increased integration of
developing country producers into spatially dispersed supply networks or
commodity chains. These chains link together producers in developing
countries with customers in the other parts of the world. Under such condition,
one way of understanding the opportunities generated by the sector, such as
livestock, has been through the value chain approach.
Value chain analysis (VCA) has been defined as an integrated set of tools and
processes that are used to define current costs and performance, as well as to
assess the potential impact of consumer response improvement across the entire
supply chain for consumer goods product categories. In its original version, as
developed to support the USA Efficient Consumer Response Performance
Measurement Operating Committee years ago, VCA was focused on defining
current costs and estimating cost reduction opportunities. However, as VCA has
matured, its tools haven been expanded to include the assessment of consumer
response impact on business growth in terms of consumer demand and on
market share; and the definition and communication of a shared vision both
internally and with key trading partners regarding the impact of efficient
consumer response on their business. The value chain approach is particularly
helpful in analyzing sectors where global buyers play the leading role in
establishing the parameters of the chain, defining what, how, and under what
conditions a product is produced, as well as who gets included and excluded
from the chain (Gereffi and Kaplinsky, 2001). In this instance, the Ethiopian
live animal and meat export value chain exhibits several characteristics of a
buyer-driven commodity chain.
In value chain analysis, vertical and horizontal integration are the two basic
strategies that groups of farmers can use to improve their incomes. Vertical
integration means taking on additional activities in the value chain: processing
or grading produce, for example. Horizontal integration on the other hand
means becoming more involved in managing the value chain itself – by
farmers’ improving their access to and management of information, their
knowledge of the market, their control over contracts, or their cooperation with
other actors in the chain (KIT, 2006).
9
Hailemariam et al
The live animal and meat exports have contributed US$ 36.8 and 15.5 million,
respectively, to the country’s overall export economy of US$ 1,185.1 million,
the share of 4.41% in aggregate in the year 2006/07. Between 2004/05 and
2005/06, exports of live animals and meat from Ethiopia respectively rose by
27 and 116 percent in value terms. However, while the value of live animal
export has increased by 33.7 percent, the export of meat and meat products has
declined by 16 percent between 2005/06 and 2006/07 due to the slow down in
volume of meat export by 26 percent. This was because of an import ban
imposed on meat from Ethiopia by the United Arab Emirates because of the
outbreak of rift valley fever in Somalia and Kenya and fear of same happening
in Ethiopia. During this period the country's over all export earnings grew by
about 18.5 percent (NBE, 2007). Overall, the live animal and meat export
sector has benefited substantially from the government’s hands-off approach,
enabling the sector to expand from a small trade centered to an extensive trade
that delivers products to overseas markets today.
There are a number of countries exporting meat and Ethiopia's current share in
the global market is very limited. In 2004, the volume of global meat
production was estimated at 260.1 million metric tones and the share of
Ethiopia was only 0.23% of this global figure (FAO, 2005). In the same year,
FAO estimated global meat export at 52.4 billion USD and that of Ethiopia was
14.6 million USD, which is about 0.028% of the global meat trade. Therefore,
Market structure and function for live animal and meat exports
Ethiopia cannot influence the prices of meat in the world market. Hence,
foreign demand for Ethiopian meat can be considered as perfectly elastic at the
given world price. This implies, noting the small country assumption, export
prices are determined exogenously.
There is also wide variability in the export volume of Ethiopian meat, which
may be considered as unreliable supplies, or lack of consistent market shares in
the global meat trade. The limited export of meat was often sold to very few
countries in the Middle East and North African countries, mainly Saudi Arabia,
United Arab Emirates, Bahrain, Egypt, Yemen and Congo. The same situation
is also observed on exports of live animals where the vast majority of this
produce is destined for Egypt, Saudi Arabia, Djibouti, Sudan, Somaliland,
Jordan, UAE and Yemen.
11
Hailemariam et al
Responsiveness of Livestock
Supply to Prices
C onsidering the Ethiopian meat and live animal export products as buyer
driven commodity, it is expected that supply to the external market does
not have a unique relationship with the behavior of prices. So far, no empirical
evidences have been produced to justify the presence of such responsiveness in
the Ethiopian livestock markets. However, it could be hypothesized that
increased export activity brought through the rise in export demand and this
associated with higher prices usually prompt a supply response compared to the
level we would see if no exports were involved. The changes that are occurring
today in the types of livestock, meat and meat products produced and exported
from Ethiopia are a function of end use markets and the development of
different strategies to supply to those end use markets.
Over the last one and half decade, there has been an increasing trend in the
number of animals supplied to the main supply markets. The substantial
increase of price in part is expected as a motive for the positive supply
response. In the cattle markets for instance before and after the introduction of
market liberalization mode, between 1992 to 2006, the price of bullocks and
steers has been respectively increased by 96% and 79% at Negelle; 81% and
67% at Dubuluq; and 113% and 131% at Eleweya markets . In response to this,
as expected, the number of bullocks and steer supplied to the market per month
on average has respectively increased by 110% and 105% at Negelle; 150% and
177% at Dubuluq and 68% and 140% at Eleweya markets (Table 2).
Market structure and function for live animal and meat exports
Table 2. Price change and supply responsiveness in some cattle markets between 1992 and 2006.
Markets Year Price Supply Off-take* % change Average
(% sold) elasticity1
1992 2006 1992 2006 1992 2006 Price Supply
Bullock 650 1842 171 592 57 82 0.96 1.10 1.16
Ox 462 1065 124 102 53 70 0.79 -0.19 -0.24
Negelle
Steer 286 1024 164 527 59 73 1.13 1.05 0.93
All 466 1310 459 1221 56 75 0.95 0.91 0.95
Bullock 842 1998 123 862 78 89 0.81 1.50 1.84
Ox 629 1422 71 28 79 52 0.77 -0.88 -1.13
Dubuluq
Steer 586 1179 169 2767 86 97 0.67 1.77 2.63
All 686 1533 363 3657 81 79 0.76 1.64 2.15
Bullock 556 2010 132 268 75 93 1.13 0.68 0.60
Eleweya Ox 389 1503 62 18 76 61 1.18 -1.11 -0.94
Steer 243 1158 173 972 67 91 1.31 1.40 1.07
All 396 1557 367 1258 73 82 1.19 1.10 0.92
* Off-take refers the proportion of livestock sold in that particular market
Data Source: SORDU
Thus, the growth of cattle supply to the market is relatively higher than the
growth of prices, implying the responsiveness of cattle supply to the change in
prices is somewhat near elastic. However, it has been also observed that the
number of oxen available to these markets are getting decline. Similarly the
price and supply of shoats has shown the positive increasing trend in the main
markets where served as source of shoat for export (Table 3).
Table 3. Price change and supply responsiveness in some shoat markets between 1992 and2006.
Markets Price Supply Off-take* % change Average
1992 2006 1992 2006 1992 2006 Price Supply elasticity
Sheep 55 179 103 405 53 50 1.06 1.19 1.12
Negelle Goat 59 183 257 1963 51 70 1.02 1.54 1.50
Sheep 40 156 28 223 90 93 1.18 1.56 1.32
Eleweya Goat 40 197 259 1106 81 97 1.33 1.24 0.93
Sheep 54 164 59 267 61 89 1.01 1.28 1.27
Yabello Goat 54 207 399 1132 68 90 1.17 0.96 0.82
* Off-take refers the proportion of livestock sold in that particular market
Data Source: SORDU
Between 1992 and 2006, the price of shoat in all the observed markets has been
increasing by more than 100%. As a result, affected by this, the responsiveness
of shoat supply in these markets has been elastic. Because of the relatively
stagnant change in livestock production from a local multipurpose activity to a
more intensive market-oriented and integrated process; and pressure on, and
competition for, common property resources; livestock disease incidence and
1
Note: Elasticity here refers to the average arc elasticity computed taking information about two
points along the supply curve, even if the equation of the given supply curves is not known.
13
Hailemariam et al
other natural and man made calamities that constrained livestock productivity,
the domestic livestock supply has not fully realized as expected.
Despite the efforts for increased and diversified exports, Ethiopia has been
unable to take the full advantage of improved access to foreign markets because
of constraints in the domestic supply chains. These constraints along the supply
chains can be generalized as factors that inhibit production, factors that increase
processing and marketing costs and those factors that reduce export returns.
Poor and unreliable infrastructure in most parts of the livestock producing areas
usually raises unit processing and marketing costs. In view of the significant
changes now taking place in the globe, competitiveness in export markets is
becoming increasingly dependent on a country's capacity to develop effective
and efficient supply chains (FAO, 2005). In Ethiopia, meeting international
sanitary and Phytosanitary (SPS) standards required by importing countries and
their enterprises can be considered as a major challenge. In addition, the
country was not in a position to provide importing countries with evidence that
standards have been met. However, efforts are being made to develop a two-
stage quarantine system and internationally recognized SPS certification system
to meet these stringent world market requirements. The Government of
Ethiopia, in collaboration with different institutions such as Texas A&M is
identifying the major constrains in the live animals and meat export value chain
to take appropriate actions. The establishment of one stop shop in export
processing, creation of Plant and Animal Health Regulatory Department and
National Animal Health Diagnostic Institute are some of the encouraging
measures that have already been taken because of these efforts. This study is
also part of the effort out of which policy decisions could be taken to solve the
problems in the value chain.
levels. In this regard, the meat and live animal exporters associations could also
play significant role. These associations should be strong enough to coordinate
the activity of the business community in the value chain so that they will
complement each other and maximize supply to the export market. These
associations should consider the advantages that could be obtained from being
inclusive of more actors in the value chain in influencing the policy makers and
bring greater impact. For example, mechanisms to link live animal exporters
associations to feed producers, meat exporters, and domestic animals traders
should be carefully examined.
15
Hailemariam et al
Socio-economic Profile
of Traders
I n the livestock-marketing channel serving the export market, different type
of operators with different socio-economic characteristics are usually
involved. These include export abattoirs, live animal exporters, feedlot
operators, big and small livestock traders, collectors, cooperatives, farmer
livestock marketing group and purchasing agents. Livestock producers,
exporters' purchasing agents and brokers are also the other types of market
actors. Livestock producers are usually sellers with occasional purchase of
animals for the purpose of breeding and replacement stock, fattening and
traction. The socio-economic profile of the traders involved in livestock and
meat trading is present in Table 4.
In terms of marketing operations, the study indicated that all of the export
abattoirs are involved in shoat where as all of the feedlot operators operate on
cattle only. All live animal exporters are involved in cattle exports and of these
about 20% handle export of live shoat. The majority of the big traders (about
68%) are engaged in cattle marketing and about 41% are involved in shoat
transactions. Small traders, collectors, cooperatives and purchasing agents are
mainly involved in shoat marketing activities. The available data showed that,
except in few cases such as export abattoirs, live animal exporter, cooperatives,
livestock marketing group, marketing business in all other market actors' levels
is operated by the owner. In general, in marketing channels from collection to
terminal points, 90% of all the actors are the owners of the business while the
remaining 10% of the marketing actors is represented by the employee. In
terms of the educational status of the market actors, more than 50% of each of
the trader type is at elementary school level. This is especially higher for those
actors such as collectors, small and big traders who operate mostly at the
primary and secondary markets.
The gender balance of the livestock marketing operators is such that, almost all
of businesses were either owned or managed by male workers, while about
17% of the cooperative and all pastoral livestock marketing groups are run by
female workers. The farmers' livestock marketing group is usually established
by some NGOs; for instance, Care International at Negelle whose main
intention is to involve women in shoat collection and marketing activities.
Market structure and function for live animal and meat exports
Type of animal Shoat 100.00 20.00 0.00 41.18 60.98 81.48 83.33 75.00 77.00
used in the Cattle 0.00 100.00 100.00 67.65 41.46 22.22 16.67 25.00 66.00
business Camel 0.00 20.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00
Sex of the Male 100.00 100.00 100.00 100.00 100.00 100.00 83.33 100.00 97.71
respondent Female 0.00 0.00 0.00 0.00 0.00 0.00 16.67 0.00 2.29
Illiterate 0.00 0.00 0.00 9.68 22.50 30.77 27.27 0.00 17.83
Elementary (1-4) 50.00 60.00 81.82 90.32 77.50 69.23 72.73 66.67 77.52
Education level Junior (5-8) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
of the Secondary (9-12) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
respondent Diploma 0.00 0.00 9.09 0.00 0.00 0.00 0.00 33.33 1.55
BSc/BA 0.00 0.00 9.09 0.00 0.00 0.00 0.00 0.00 0.78
MSc/DVM 50.00 40.00 0.00 0.00 0.00 0.00 0.00 0.00 2.33
Owner manager 0.00 60.00 100.00 100.00 100.00 100.00 50.00 0.00 90.00
Hired manager/chairman 100.00 20.00 0.00 0.00 0.00 0.00 8.33 100.00 5.38
Role in
enterprise Veterinarian 0.00 20.00 0.00 0.00 0.00 0.00 0.00 0.00 0.77
Treasurer/secretary 0.00 0.00 0.00 0.00 0.00 0.00 33.33 0.00 3.08
Buying/selling agent 0.00 0.00 0.00 0.00 0.00 0.00 8.33 0.00 0.77
Data Source: SORDU
17
Hailemariam et al
The results of data analysis also indicated the difference in livestock marketing
experience among the different types of traders operating at different market
levels (Table 5). Those traders working at primary and secondary market have
livestock trading experience more than traders operating at tertiary markets.
This implies, for instance, big and small traders and collectors have worked and
stayed in the business for more number of years than that of exporters. It has
also been observed that traders of almost all type have more trading experience
in cattle than in shoat. On the other hand, almost uniform market relationship
has been observed across the different market participants. As far as the trader's
relations with the sellers are concerned, almost all transactions take place with
those whom do not have any kind of relationship (Table 6). In fact, there were
very few who did marketing transactions with which previous acquaintance
already established. This is usually a type of marketing relationship established
between feedlot operators and their sellers at the source markets.
Almost all of the feedlot operators are available at Adama and Dera. Some of
the feedlot operators, in addition to their regular business also try to involve in
livestock trading as big livestock traders. In doing so, while they purchase cattle
from the source market for their fattening operations, they also purchase some
more cattle to be sold to other feedlot operators, with whom they have
acquainted them previously. Even though most of the transactions take place
among those who have no relationship, quite a good proportion of traders
transacted with their long-standing customers. Particularly this is high for
export abattoirs and live animal exporters.
Market structure and function for live animal and meat exports
19
Hailemariam et al
Characteristics of
Traded Livestock
I n general, the Ethiopian shoat export market needs animals having the
following characteristics: animals from lowland origin, male, well-fed young
animals aged between 1 to 2 years and live weight of 13 to 45 kg. In all
livestock markets, however, there is no objective standard for selling and
buying animals, except measuring live weight of animals in some and visual
observation of the animals in most of the markets. In such a situation, the
purchase price of an animal will reflect not only the bargaining skills of both
buyers and sellers but also the buyer’s preference for the characteristics of the
animal and the seller’s willingness to sell, sometimes leading to transaction
failure (Williams et al, 2006). In the absence of stringent and formal standards
and requirements for quality characteristics of the market still considers and
gives weight for some of the quality parameters than the others. In order to
evaluate traders' assessment of the various market quality characteristics shoat
and cattle required for export markets, different traders in the export supply
chains were asked to rank certain quality traits according to their importance,
being 1=most important. These quality attributes were identified by the key
informants during the rapid market appraisal study conducted before the formal
survey was implemented.
The result indicated that in general weight, body condition and skin condition,
which are used as indicator of healthiness of the animal, are the most important
quality parameters used to characterize shoats for export markets (Table 7).
However, there are some preference variations among the different market
actors on the importance of these quality characteristics. For instance, color of
the animal is important for live shoat exporters than export abattoirs. On the
other hand, breed type, body condition and color are the average quality
indicators in determining grades in the current cattle marketing system. There
are also preference variations among the various market players transacting
along the same supply chain. In fact, this might reflect the difficulties in
gathering, ascertaining and distributing the necessary and uniform information
for all market participants along the particular value chain.
Market structure and function for live animal and meat exports
21
Hailemariam et al
Color - 2.0 1.8 1.9 3.7 3.0 4.2 - 2.5
Place of origin - 2.8 2.8 4.5 4.6 1.0 1.5 - 3.0
Breed - 2.0 2.3 3.2 3.3 1.0 1.4 2.0 2.3
Body condition - 2.0 3.0 2.1 2.8 3.0 3.3 4.0 2.8
Weight - 3.0 3.3 2.8 3.3 1.0 3.9 - 3.2
Skin condition - 5.0 2.5 3.4 2.6 - 5.1 5.0 3.3
Height - 5.3 3.6 2.8 3.0 4.0 5.0 3.0 3.8
Horn - 3.0 3.0 6.0 6.0 5.0 - - 4.8
Data Source: own survey
Market structure and function for live animal and meat exports
23
Hailemariam et al
Table 8. Characteristics of recorded shoat transactions major markets of Borena Zone, (March 2006–February 2007)
Young non-castrated shoat 3,271 3,221 98.5 10,439 10,406 99.7 13,710 13,627 99.4
Lamb and kid 789 752 95.3 6,168 6,117 99.2 6,957 6,869 98.7
Male total 6,764 6,625 97.9 21,717 20,664 95.2 28,481 27,289 95.8
Sterile shoat 796 747 93.8 4,528 4,388 96.9 5,324 5,135 96.5
Female
Ewe and adult she-goat 2,978 2,496 83.8 13,504 12,251 90.7 16,482 1,4747 89.5
Weaned ewe and she-goat 2,885 2,289 79.3 6,035 5,612 93.0 8,920 7,901 88.6
Lamb and kid 837 707 84.5 3,223 2,926 90.8 4,060 3,633 89.5
Female total 7,496 6,239 83.2 27,290 25,177 92.3 34,786 31,416 90.3
Total 14,260 12,864 90.2 49,007 45,841 93.5 63,267 58,705 92.8
Miesso, Yabello, Gindhir, Methara and Negelle are important shoat markets for
export abattoirs. To some extent, they have also involved at Konso, Babile,
Jima, Arsi, Wello and Welayta markets (Annex 5). Methara, Wello, Somali and
Afar markets are very important markets where all live shoat exporters
operated. However, Moyale, Adama, Harobeke, Dubuluq and Negelle are the
most important collection points for live cattle exporters (Annex 6). Big traders,
small traders and collectors have been participated in quite a good number of
diverse markets both for shoat and cattle transactions. From 50 potential shoat
markets, 23% of big traders, have operated up to 14 markets while 10% of
small traders and 17% of collectors and 46% of cooperatives have used up to
ten shoat markets. Particularly, the result indicated that shoat collectors have
purchasing links with markets such as Gambo in Kenya. This actually is
governed by the prevailing market price in the two countries. When ever price
is more attractive in Ethiopia, the flow of animals is towards Ethiopia and vise-
versa when the price is more attractive in Kenya.
25
Hailemariam et al
Marketing Channels
T he analysis of livestock and meat marketing channels is assumed to
provide a systematic knowledge of the flow of livestock from their
production areas to their final end-users. Marketing of live animal and meat
generally starts with the collection of livestock from production areas and
village markets moving on to the terminal markets in the cities. In such
marketing chains the livestock passes successively through a number of market
actors, implying the links in the value chains before it reaches to the end-users
(Fig 1 and 2). The main actors in the livestock marketing destined for export
markets include a network of collectors, small traders, big traders, cooperatives,
purchasing agents, feedlot operators, some market groups and exporters of live
animal and meat. The number and type of market participants usually differ
even among the live animal exporters and meat exporters.
In order to depict the distribution of marketing costs and margins, some major
marketing channels linking producers with the end users has been identified
from the overall quite complex livestock marketing systems serving live cattle
exports, live shoat exports and shoat meat exports. These different channels
represent the full range of available outlets through which livestock moves
from the different collection points in major livestock producing areas and
finally to the terminal markets to meet end-users needs in foreign markets.
Major marketing channels for live cattle exports:
• Channel 1: Producers →Big traders →Live cattle exporters
• Channel 2: Producers → Collectors → Big traders→ Live cattle exporters
• Channel 3: Producers →Small traders →Big traders → Live cattle exporters
• Channel 4: Producers→ Small traders→ Feed lot operators→ Live cattle exporters
• Channel 5: Producers → Feed lot operators →Live cattle exporters
27
Hailemariam et al
the flow of cattle in the value chain. Of those who supplied cattle to the big
traders, collectors have the largest share where about 44% of the cattle are
brought through collectors. The major buying markets for big traders are
usually Dubuluq, Harobeke and Eleweya where on average about 60% of these
traders operated. About 32 and 45% of the big traders also respectively
operated at Negelle and Genalle markets. Of course, few big traders bought
cattle at the village markets.
In contrast to cattle trading, there are four major channels used for transaction
of shoat, but with varying share. Out of the total shoat supplied to the markets
by the producers, cooperatives absorb the largest share (about 33%) followed
by small traders, big traders and collectors with a respective share of 28%, 25%
and 14% (Fig 2). In general, of all the shoat supplied by the producers, about
20% is for sheep and the remaining 80% is for goat.
.
Cooperatives purchased from both producers and collectors, where these in turn
sourced animals completely from producers. However, collectors contribute a
good supply share for small traders (46%), big traders (60%) and directly to
live animal exporters (50%) other than their share to cooperatives and
purchasing agents. Other than collectors, and with equal supply contribution,
live animal exporters also sourced animals from their purchasing agents. These
purchasing agents in turn collect animals mainly from cooperatives (63%),
small traders (23%) and collectors (14%). On the other hand, export abattoirs
mainly sourced from big traders (61%) followed by small traders (28%) with
few supplemental contributions through their purchasing agents (8%) and
cooperatives (3%). In shoat marketing system, the composition of sheep and
goat is quite varying among live animal exporters and export abattoirs. In case
of live shoat exporters, 95% of the exported animals were sheep but it was only
11% for export abattoirs.
Market structure and function for live animal and meat exports
Producers
100%
Collectors Cooperatives/Farmer
Marketing Group
44% 36%
Purchasing agents
*Dotted lines show marketing channels known to exist but not investigated)
** Numbers in the diagram represent proportion of cattle flow from the previous channel
Fig. 1: Marketing channels and value chains of cattle
Producers
23%
100%
Collectors Cooperatives
77%
23%
14% 63%
Purchasing agents
8% 28% 61% 3%
50% 50%
*Numbers in the diagram represent proportion of shoat flow from the previous channels
Fig. 2: Marketing channels and value chains of shoat
29
Hailemariam et al
structure of the system is quite complex, major marketing costs, each for cattle
and shoat, starting from the producers and the different end-users has been
identified. At each stage in the chain, the value of the product goes up. The
value of the product goes up because the product becomes more convenient for
the end users.
Cost component Live cattle Export Live shoat Feed lot Big Big Small Small Shoat Cattle Coops Coops
exporters abattoirs exporters operators traders traders traders traders collectors collectors shoat cattle
for shoat for cattle for shoat for cattle
Feed cost 2.8 10.5 7.4 6.0 3.7 0.9 3.9 2.1 6.3 0.5 2.3 -
Veterinary cost 4.2 2.6 15.9 4.7 0.5 0.4 1.8 - - - - -
Barn cost/rent 0.9 1.1 2.6 3.4 0.8 - 1.1 - - - - -
Water and electricity 1.1 - - 3.4 - - - - - - - -
Labor 1.4 - - 2.6 - - - - - - - -
Search cost 1.2 0.9 - 1.0 - - - - - - - -
Transport cost to port 32.2 21.2 48.5 - - - - - - - - -
Veterinary/hazards certificate 0.0 2.4 0.0 - - - - - - - - -
Quarantine charges 2.2 - - - - - - - - - - -
Processing, packaging and - 11.3 - - - - - - - - - -
labeling
Certificate of origin (Birr/head) - 1.0 - - - - - - - - - -
Trekking cost - - 1.1 3.5 8.8 4.8 17.8 7.2 18.6 22.3 9.0 47.1
Trucking cost to center 27.2 22.2 9.0 46.1 40.0 57.8 30.4 56.1 32.0 - 54.9 -
Total Tax payment 2.6 15.7 6.4 6.3 14.7 6.7 15.6 6.3 17.4 33.5 14.2 50.5
Combiner cost 3.2 1.3 0.5 5.6 5.2 10.4 3.3 6.3 - - - -
Loading/unloading 0.7 2.6 1.1 1.7 1.7 3.0 1.5 3.5 - - - -
Payment to buying agent 11.0 - - 5.3 12.7 8.3 18.0 8.7 11.0 38.6 19.3 -
Payment to selling agent 5.5 - - 9.6 - 5.5 - 9.1 - - - -
Payment to guard/grazing 2.2 - 2.6 - 1.8 - - 0.3 6.3 0.5 - 1.6
Other (Inspector, marking, own) 1.6 7.3 4.9 0.9 10.2 2.1 6.6 0.5 8.5 4.7 0.3 0.8
Total Marketing cost (Birr/head) 453.1 38.2 94.5 297.9 24.4 191.0 18.8 142.7 15.9 29.0 18.2 14.9
Table 10: Proportion of major marketing costs (%) for different market participants
Data Source: own survey
31
Hailemariam et al
The marketing costs, margins and producer's share in the final price for
different marketing channels in live cattle exports, live shoat exports and shoat
meat exports are respectively presented in Tables 3, 4 and 5. This information
is generated from analysis of 4178 transactions records out of which producers
were involved in 698, collectors 369, small traders 269, big traders 214, feedlot
operators 471, purchasing agents 18 and live animals exporters 124. The price
data used in this analysis was both the selling and buying prices in order to
balance the distortions from both the buyers and sellers sides. Thus, a total
record of 1246 transactions for sheep, 1577 for goats and 1511 for cattle were
analyzed in this study. On the selling side, 96 transactions for shoat meat, 1025
for live cattle, 659 for live sheep and 892 for live goat were used in the price
analysis. The number of transactions varies for different market participants.
When we look at the total marketing costs of each actors participating in
different channels in the live cattle exports marketing system, exporters have
the highest costs, followed by feedlot operators, big traders, small traders and
then collectors accordingly. The size of marketing costs therefore declines as
the involvement of transport, handling and other related services by the market
decreases. Transport cost from production areas to the center are the major cost
component of marketing operations for live animal and meat exporters,
constituting about 27 and 32 percents of the total marketing costs (Table 10).
Even for feedlot operators, big and small cattle traders, cost of transportation
from the production area to the center comprises about 46, 58 and 56 percents
of their cost of marketing operation respectively. Both in live shoat and shoat
meat exports marketing system, exporters incur higher marketing cost, followed
by big traders, small traders and collectors. Here also, cost of transportation is
Market structure and function for live animal and meat exports
still the major marketing cost component for all market actors with varying
degree. In all cases, cost of transportation is depicted in terms of trekking and
trucking services, where the importance of trekking declines as we move up in
the marketing channels. Hence, trekking cost is relatively higher for collectors
than small and big traders.
In the final price for the different channels of the live cattle export system,
producers capture 61% of the final price in channel-1linking producers and
exporters through big traders; followed by 58% in channel -5 linking producers
and exporters through feedlot operators; and 52% each in channel-3where cattle
flow from producers to exporters through small and big traders; and channel-4
linking producers and exporters through small traders and feedlot operators
(Table 11). The lowest producers' share is 51% in channel-2 where collectors
and big traders are involved in linking producers and exporters. This clearly
indicates that if direct linkages of producers with exporters were established,
the producers would be in a position to capture a significant share of the value
added of the market channels. Among the major market channels serving live
cattle exports, the marketing margin and net margin for the exporters in
channels 1,2 and 3 linking producers with exporters through big traders is
higher than channels 4 and 5 that links producers and exporters through feed lot
operators (Table 11). The prices received by producers and other market actors
vary depending on the outlets used and the type of the next buyers. For big
traders, the highest marketing margin is obtained in market channel-2 that links
with collectors, followed by market channel-4 linking with small traders and
the lowest in channel-1 where the big traders are directly linked with the
producers. For the small traders, the highest marketing margin is realized in
channel-4 where small traders link producers and feed lot operators than
channel-3 where small traders operate between producers and big traders. For
feedlot operators, on the other hand, higher marketing margin is captured in
channel-5 where the feedlot operators directly collect the cattle from producers
than they collect from the small traders, depicted in channel-4.
33
Hailemariam et al
Table 11: Average marketing margins for different market participants for live cattle exports
Producers→
Big traders→ Marketing margin - - - 328 - 975
Exporters
Net margin - - - 137 - 522
Producer's share of final price - - - - - 61
Selling price 1685 1830 - 2325 - 3300
Producers→ Marketing cost - 29 - 191 - 453
Channel-2
Collectors→
Big traders→ Marketing margin - 145 - 495 - 975
Exporters. Net margin - 116 - 304 - 522
Producer's share of final price - - - - - 51
Selling price 1727 - 1950 2325 - 3300
Producers→ Marketing cost - - 143 191 - 453
Channel-3
Small traders→
Big traders→ Marketing margin - - 223 375 - 975
Exporters Net margin - - 81 184 - 522
Producer's share of final price - - - - - 52
Producers→ Selling price 1727 - 2019 - 2600 3300
Channel-4
Continued
Marketing Channels Items Market actors
Producers Collectors Small Big- Feed lot Live cattle
traders traders operators exporters
Items Market actors - - - - - 52
Producers Collectors Small Big- Feed lot Live cattle
traders traders operators exporters 3300
Marketing cost - - - - 298 289
Marketing margin - - - - 670 700
Net margin - - - - 372 411
Producer's share of final price - - - - - 58
n= number of transactions
Data Source: own survey
35
Hailemariam et al
60.
Gross
Marketing cost
50.
Net margin
40.
30.
20.
10.
0.
Big traders Exporter Collector Big Exporter Small Big Exporter Small Feed Exporter Feed Exporter
operator operator
Fig 3. Marketing margin and cost as percent of selling price in live cattle exports
In live shoat exports, the major market participants are collectors, small traders
and exporters. Under this scenario, the market link among the market
participants is short. In most cases, the live shoat exporters have a link with
collectors either directly or through small traders. In this instance, the
producers capture about 49% of the final price, which is slightly higher than
market channel that links producers and exporters only through small traders
(Table 12). On the other hand, the gross and net marketing margin of live shoat
exporters is higher in channel-1 where collectors and exporters are the only
players in the market. Interesting enough, the gross and net marketing margin
of small traders is very high in channel-3 than channel-2. In the previous
channel, there are only two market actors, small traders and exporters, while the
latter channel allows the links among collectors and exporters through small
traders. This implies as the number of links in the market channel expands, the
size of the marketing margin each market participants enjoyed would decline.
Market structure and function for live animal and meat exports
Table 12. Marketing margins for different market participants for live shoat exports
Collectors→
Marketing margin - 47 38 111
Small traders→
Exporters Net margin - 31 19 16
Producer's share of final price - - - 61
Selling price 175 - 270 381
Marketing cost - - 19 95
Channel-3
Producers→
Small traders→ Marketing margin - - 95 111
Exporters - - 76 16
Net margin
Producer's share of final price - - - 46
Data Source: own survey
The distribution of marketing margin and costs from the final selling price of
the market participants in different market channel serving the live shoat
exports is shown in Fig. 4. In channel 1 the share of gross margin for the
exporters is 39%, while it is 29% for each channel 2 and 3 respectively, which
is higher than any other actors in the channels. However, in all the three
channels, the exporters' marketing costs constitute the substantial share of the
selling price of the product and in fact higher than the contribution of the net
margin obtained. In both channel 1 and 2 where collectors are respectively
linked with exporters and small traders, about 20% of the collectors' selling
price is their gross margin. Of this amount, only 34% is considered as
marketing cost while the largest proportion of the gross margin, 66% is the
collectors' net margin. Similarly, small traders' marketing operation margin
allocation in channel 3 is substantially higher than their share in channel 2.
About 35% of the small traders' selling price in channel 3 is balanced to their
gross margin and about 80% of this gross margin is their net marketing fringe.
37
Hailemariam et al
45.0
40.0
Gross margin
35.0 Marketing cost
Net margin
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Collectors Exporters Collectors Small traders Exporters Small traders Exporters
Channel-1 Channel-2 Channel-3
Marketing channels
Fig 4: Marketing margin and cost as percent of selling price in live shoat exports
In shoat meat exports marketing system, as opposed to live shoat exports, big
traders and cooperatives are also considered as important market actors in some
of the marketing channels (Table 13). In some major livestock supply areas,
such as Negelle and Yabello, some cooperatives directly collect shoats from
producers either from their members or in their rural community markets and
make available to the export abattoirs directly or through abattoirs' purchasing
agents.
As indicated in Table 13 above, the peak producers' share in the final price is
obtained in channel 1, where the marketing channel is operated by collectors,
small traders and export abattoirs; and channel 3 again linking collectors and
exporters through big traders. In both channels 1 and 3, producers' capture
about 47% of the final price. This is followed by channel 5, 4 and 2, directly
connecting producers with exporters respectively through big traders, small
traders and cooperatives. In channel 1 and 3 where the producers' split is the
highest, collectors pay relatively higher price to the producers than other type of
market actors that purchase shoats directly from the producers. Among the
major marketing channels used in shoat meat exports, the marketing margin for
the export abattoirs in channel 2 is very high followed by channel 5. In these
channels, the export abattoirs sourced animals from producers linked with
cooperatives as in the case of channel 2 and big traders in channel 5. The
important point here is that exporters would enjoy higher marketing margin in
market channels where there is competent market partaker. Comparably, even
for big traders, channel 5 seems advantageous to maximize their marketing
margin as compared to channel 3 where big traders are associated with
collectors. On the other hand, small traders' marketing margin is maximized
when they operate in market channel that directly collects shoat from producers
than any other actors such as collectors in channel 1.
Market structure and function for live animal and meat exports
Fig 5 shows the distribution of marketing margin and costs associated with the
different marketing channels serving the shoat meat exports markets. In all the
major marketing channels identified 27-48% of the exporters' selling price is
the exporters' marketing margin share, which is higher than the share other
market participants received.
Table 13. Marketing margins for different market participants for shoat meat exports
Marketing Channels Items Market actors
Producers Collectors Small Big Coop Export
traders traders abattoirs
Producers→
Marketing margin - - - - 75 190
Cooperative→
Exporters Net margin - - - - 57 152
Producer's share of final - - - - - 33
price
Selling price 185 232 - 290 - 395
Producers→ Marketing cost - 16 - 24 - 38
Channel-3
Producers→
Marketing margin - - 116 - - 125
Small traders→
Exporters Net margin - - 97 - - 87
Producer's share of final - - - - - 39
price
Selling price 163 - - 249 - 395
Marketing cost - - - 24 - 38
Channel-5
Producers→
Marketing margin - - - 86 - 146
Big traders→
Exporters Net margin - - - 61 - 108
Producer's share of final - - - - - 41
price
Data Source: own survey
39
Hailemariam et al
60.0
40.0
30.0
20.0
10.0
0.0
Collectors
Small traders
Exporters
Cooperatives
Exporters
Collectors
Big traders
Exporters
Small traders
Exporters
Big traders
Exporters
Channel-1 Channel-2 Channel-3 Channel-4 Channel-5
Marketing channels
Fig 5: Marketing margin and costs as percent of selling prices in shoat meat exports
Not only the higher the share of the gross marketing margin but also the higher
the proportion of the net marketing margin after letting the marketing cost.
Similarly, small traders' marketing margin share in channel 4 is higher than the
share in channel 1. About 35%, 10% and 25% of the big traders' selling price
in channel 5 is composed of their gross margin, marketing costs and net margin.
Market structure and function for live animal and meat exports
P = f(X, Z) + e;
The summary statistics of the variables used in the price formation model are
provided in Annex 7 and 8. Of the 2,823 recorded shoat transactions used in the
hedonic price formation model, 1,246 were sheep and 1,577 were goat. There
were 1,511 transactions of cattle recorded in the model. Four types of models
are fitted: pooled model for entire shoat and specific models each for sheep,
goat, and cattle. Initially, the entire sample of shoat transactions was analyzed
using sheep and goat as a factor, and significant price differences were
observed between sheep and goat. However, because certain attributes of sheep
and goats are different where their effects could not be properly captured in the
41
Hailemariam et al
overall equation, separate regressions were estimated for sheep and goat. From
the graph of the monthly nominal price data (Figures 6 and 7), it can be
observed that during a given year, there were peaks and troughs with different
amplitude in shoat and cattle price oscillations.
190
Sheep
Goat
185
180
175
Price (Birr/head)
170
165
160
155
150
145
Sept Oct Nov Dec. Jan Feb March April May June July Aug
Transaction time in week
2100
2050
2000
Price (Birr/head)
1950
1900
1850
1800
Sept Oct Nov Dec. Jan Feb March April May June July Aug
Tranaction time in month
Prices usually build up toward a peak or down (Figures 6 and 7) based on the
influence of different factors. In this study, factors influencing the formation of
livestock prices are classified into two major categories, attributes related to
market actors and those related to animal condition and factors influencing
them. The effect of these attributes in the formation of prices for sheep, goat,
and cattle is analyzed using a hedonic price formation model and the result is
presented in Table 14. As indicated in the Table, the explanatory power of the
models was relatively good for the pooled shoat as a whole and separately for
sheep, goat, and cattle. The pooled model for shoat and cattle show that about
55% and 65% of shoat and cattle price variation, respectively, explained by the
respective model variables. The resulting coefficients generally had the
expected signs and in fact, the F-statistics were quite high and significant for all
the models. The combination of the above measures suggests goodness of fit of
the models where price variation in case of sheep, goat and cattle were
explained by the variables specified in the respective models.
43
Hailemariam et al
Continued
Factors and covariate Shoat cattle
Overall Sheep Goat
Price SE
Price SE Price SE Price SE
margin
margin margin margin
Age group Immature 0
Mature 71.04 2.00*** 92.04 3.27*** 66.67 2.48*** 1298.83 68.99***
Young 0 0 0 618.73 68.64***
Body condition Thin 0 0 0
Moderate 28.75 9.20*** 12.86 9.75 0 45.25 50.4
Fat 52.02 9.36*** 66.3 9.76*** 7.44 3.74** 192.19 63.66***
Sellers Feed lot operators 0
Pastoralist 5.16 5 -11.93 7.47 17.58 6.42*** -1084.81 76.92***
Collector 6.57 4.82 -8.88 7.21 19.35 6.21*** -1112.73 77.84***
Small trader -0.31 3.63 -12.6 6.15** 4.81 4.3 -1151.51 71.81***
Big trader 0 0 0 -830.6 72.65***
Cooperatives -17.73 3.75*** -32.64 6.17*** -10.73 4.45**
Purchasing agent 6.2 5.38 11.08 7.43 8.35 7.73
*** p<0.01, **p<0.05 and *p<0.
Data Source: own survey
45
Hailemariam et al
…continued
Factors and covariate Shoat cattle
Overall Sheep Goat
Price SE Price SE Price SE Price SE
margin margin margin margin
Access to market No 0 0 0 0
information Yes -6.17 2.29*** -1.86 3.29 -9.71 2.97*** -189.87 46.21***
Relationship Friend/acquaintance 0 0 0 0
No relation -41.1 3.88*** -37.82 5.42*** -40.75 5.21*** -24.79 39.18
Transaction Long standing 0 0 0 0
frequency customer
New customer 4.99 2.07** -1.77 2.86 10.03 2.87*** -68.98 30.14**
Mode of payments Credit/advance 0 0 0 0
Cash -10.46 2.89*** -5.98 4.35 -14.34 3.66*** -12.97 31.74*
Covariate No. of source -2.26 0.40*** -0.73 0.59 -3.48 0.51*** -29.34 8.03***
markets
R2 0.5547 0.6108 0.5691 0.6538
Adjusted R2 0.5506 0.6028 0.5624 0.6479
F-statistic 133.98*** 76.59*** 85.41*** 112.16***
*** p<0.01, **p<0.05 and *p<0.1
Data Source: own survey
Market structure and function for live animal and meat exports
47
Hailemariam et al
have access to domestic market information. Along this, the result indicated
that traders who have access to information about the domestic market paid
(obtained) significantly lower prices in both shoat and cattle markets than those
who do not have any.
Occasions
Occasion refer to whether the transactions take place during Christian or
Muslim fasting, periods of festivals, and normal time of the year. As expected,
the model result shows reverse in price pattern during Christian and Muslim
fasting times in which prices are highest during the later. This is attributed to
the high meat demand in Middle East countries during Muslim fasting times.
The depressed price during Christian fating periods is because of the lent in
which followers are restricted from animal products. Though prices are higher
during holiday festivals, it does not have international implication as that of the
rises during the Muslim fasting periods. The highest prices are observed when
Ramadan fasting overlaps with wet seasons of the year.
Mode of payment
In current livestock marketing system, one serious problem that is negatively
affecting the functioning of the livestock supply is transaction of livestock
among the different actors in the supply chain in credit contract where the terms
are not usually respected in due time. There are cases where complete
defaulting might cause the death of businesses consequently. It might be in this
regard that mode of payments is considered as an important factor for
determining price of livestock. As hypothesized, the results of the regression
model confirm the fact that there is a significant price penalty for transaction
carried out in credit terms than those operated in cash. Prices are higher for
credit transaction than cash payment.
Transaction Frequency
About 60% of shoat and 27% of cattle transactions were handled by traders
having longstanding customers. The balances were transacted with new
customers, indicating the relatively good impersonal nature of cattle markets
relative to the shoat market. Other things being equal, prices are significantly
lower in those transactions carried out with new customers compared to
transactions made with longstanding relationship. This may be an incentive
approach to attract new customers and begin to establish relationship and
develop trusted contracts.
Age group
Prices are highest for matured animals for all the three types of animals (sheep,
goat, and cattle) relative to the immature and young. This is associated with the
live weight of animals, which are the major criteria considered by export
abattoirs for sheep and goat. Young and immature animals cannot attain the
required live weight (15-30 kg in most of the cases). For cattle, it is related to
the feed conversion capacity of animals at this age. Feedlots and live animal
exporters need good finishers that would attain the required live weight with in
a very short time needed for quarantine procedure. Thus, mature animals fetch
higher prices compared to the other two categories.
Seasons
The seasonal patterns in availability of livestock significantly affect the local
prices. In our model, such patterns were captured using different factors with
different categories, representing the supply and demand effects. In the
regression model, the wet season corresponds to the rainy season having
relatively enough supply of feed to the livestock where the dry season to the
contrary is the situation where there is shortage of feed and water and the time
where producers are forced to take their livestock to the market. The result
shows a clear pattern of decreasing prices as one move away from the wet
season. Compared to the wet season, both shoat and cattle prices are
significantly lower during the dry season. These price differences might be
49
Hailemariam et al
expected due to supply feature where shortage of feed and water forces
producer to sell their livestock in dry seasons. This might increase the supply of
livestock in the market; and quality factors where the problem of feed and water
might also be associated with the body condition of the animal.
Year of transaction
One important market trend observed in livestock market is that both shoat and
cattle prices have increased continuously during the last few years. This was
captured using the year the livestock traded as a factor to compare the
prevailing prices during the different years. Hence, compared to the price of
livestock during the year 2007, and keeping other factors constant, the price of
sheep, goat and cattle were significantly lower during the previous years, 2006.
This was quite logical in that the global food prices are dramatically increasing
in general and the demand for meat and its associated prices in particular are
showing the same trend.
51
Hailemariam et al
between Novembers to June (Table 16). Since feed is related with agricultural
production, the duration of feed availability has direct relation with the crop
production schedule. Not only the seasonality of availability also the volume of
feed supply is also related with the productivity and production of crops.
The demand for feed is increasing due to the expansion of fattening operation,
while on the contrary supply of feed is constrained with the increased scarcity
of natural forages, increased competition due to export of raw materials used by
some of the industries that produce agro-industrial feed products (like oil seeds)
and price rise that this may cause. There is an impulsive increase in the price of
feed in general and feeds of industrial byproducts in particular. The high price
of feed due to increased demand and constrained supply has become an
incentive for some unethical traders to deal low quality feed usually blending
with non-useful materials. For instance, some feedlot operators and live animal
exporters have worried to use noug, and linseed cake due to the fear that the
feed might be mixed with rapeseed could be toxic. Practically the feed market
has clearly shown that feed price is significantly higher during scarce season
(Table 17). For some feeds such as hay, linseed and noug cake, the increment
is more than double. Hence, understanding the major socioeconomics factors
affecting the production and marketing of feeds, the major constraints and
opportunities influencing the production and marketing system plays
fundamental role in enhancing efficient utilization of the scarce feed resources
and then promotion of the intended market oriented livestock production.
Market structure and function for live animal and meat exports
53
Hailemariam et al
Strengths, Weakness,
Opportunities, and Threats
A ll the respondents of this survey were asked to comment on the Strengths,
Weaknesses, Opportunities and Threats (SWOT)of their business. A
summary of the key SWOTs faced by traders in live animals and meat export is
summarized in Table 18. The major weaknesses of the traders involved in live
animal and meat export are capital shortage, lack of experts as market agent
mainly involved in periodical market assessment. Low level of education and
gap on entrepreneurship skill are also another aspect of the weak points stifling
the full run of the business. There are also fears that threatened the functioning
of the business. It is very difficult to offset scarcity of capital with credit due to
limited access to credit. In addition to this, it is almost customary that most of
the transactions take place through credit terms where most complaining delays
in repayment and in extreme cases defaulting of terms. Here, whenever
repayments are not due in time, subsequent operations might be disturbed
ending in to the malfunctioning of the livestock supply chains.
Traders’ relation with their livestock suppliers on the one hand and their effort
to satisfy their end customers with their ability of supplying quality products on
Market structure and function for live animal and meat exports
the other end is considered by most as credible quality that maintain them to be
strong in the business. Particularly those who engaged in feedlot operation
considered themselves as strong enough to collect the required animals
traveling even long distance and self engaged in the selection process and later
in the fattening operation with day-to-day follow up and monitoring of the feed
and health condition of the animals. The growing effort to seek up to date
marketing information, looking for high turnover, and their flexibility to the
prevailing situation were stated as indicators of strength for some of the traders.
In fact traders’ knowledge to the local condition where they operated (native to
the area), long year experience, bargaining capacity, trust, dedication,
government’s attention to the export sectors and administrative and technical
advice from the relevant government offices are all important opportunities for
establishing well coordinated value chains.
55
Table 18: SWOT analysis in livestock marketing (% of respondents)
Strengths Response Opportunities Response
(%) (%)
Credibility (good relation with suppliers) 16.7 Native to the area/local knowledge 27.8
Self engagement in purchase and fattening 13.9 Long year experience 13.9
Customer satisfaction 11.1 Good bargaining ability 11.1
Flexibility to the prevailing situation (in selling) 6.9 trust among members 5.6
Ability to export quality standard product 5.6 members give priority to the coops 4.2
Collect animal from long distance 5.6 Dedication 4.2
Better monitoring of animals (feed ration, health) 4.2 Export market access 1.4
Seeking up to date market information 4.2 Attention by the government to 1.4
livestock export
Ability to look for high turnover 2.8 Working under the advice of MoARD 1.4
Ability to supply mutton as demanded 1.4 High scale of operation 1.4
Ability to maintain skin quality 1.4 coop has its own constitution 1.4
Weakness Response Threats Response
(%) (%)
Conclusion and
Recommendations
T here is no doubt for the increasingly importance of live animal and meat
exports in the Ethiopian economy. However, export income from the
livestock sector remains a small fraction of the country's overall agricultural
sector. There is also wide variability in the export volume, which may be
considered as unreliable supplies or lack of consistent market shares in the
global meat trade. Over the last one and half decade, there has been an
increasing trend in the number of animals supplied to the main supply markets.
The substantial increase of price in part is expected as a motive for the positive
supply response. Empirical analysis of the time series data collected from the
Borena pastoral markets also suggests the responsiveness of livestock supply
from the rangelands to an increase in market price.
The existing export abattoirs are found to operate at less than 50% of their
installed capacity. They unanimously attribute their under capacity operation to
supply shortages of export quality animals. However, over 50% of them were
found to focus on 5 markets as their main sources of shoats. This indicates their
limited penetration of production areas to collect export quality animals. This
calls for the private sector to revise their marketing strategy in order to get
ample number of export quality livestock from different pastoral areas of the
country.
In all livestock markets, there is no objective standard for selling and buying
animals, except measuring live weight of animals in some and visual
observation of animals in most of the markets. In the absence of stringent and
formal standards and requirements for quality characteristics, the market still
considers and gives weight for some of the quality parameters than others.
Accordingly, weight, body condition and skin condition, which is used as
indicator of healthiness of the animal, are the most important quality parameters
used to characterize shoats for export markets. Breed type, body condition and
color are the average quality indicators in determining grades in the current
cattle marketing system. Preference variations among the various market
players transacting along the same supply chain might reflect the difficulties in
gathering, ascertaining and distributing the necessary and uniform information
for all market participants along the particular value chain.
In the existing livestock marketing chains, the structure of the livestock market
shows limited participation of market actors in the value addition process. This
shows that beyond transporting and limited fattening operation, relatively few
market services are usually observed in the process. Thus, there is a need for
the private sector to consider investment in slaughtering and further processing
of beef and shoat meet rather than focusing on a mare live animal export.
57
Hailemariam et al
Transport cost from production areas to the center are the major cost
components of marketing operations. The size of marketing costs therefore
declines as the involvement of transport, handling and other related services by
the market becomes small. Accordingly, the total marketing costs of each actors
participating in different channels indicated that exporters have the highest
costs, followed by feedlot operators, big traders, small traders and then
collectors. Multiple and high tax payments and buying agent's costs are also
important components of marketing costs almost for all actors participating in
live animal and meat export channels. These cost items indicate a need for
targeted policy and development intervention since they have big impact on the
competitiveness of meat export from Ethiopia through inflated domestic cost of
meat production. Thus, development of cost effective livestock transportation
systems, policy decisions to cut down the number of taxations on a single
animal, fixing uniform taxation in a given region, enforcing law and order in
market places and reducing the power of brokers in livestock markets are some
of the recommendations suggested to improve the competitiveness of Ethiopian
livestock and meat.
The analysis of producers share in the final selling price for the different
channels clearly indicates that if different linkages of producers with end-
markets actors are established, the producers would be in a position to capture a
significant share of the value added of the market channels. In addition to this,
as the number of links in the market channel expands the size of the marketing
margin each market participant enjoyed would decline. Thus, it is important to
encourage shorter channels in order to boost the benefit of producers.
References
Asfaw Negassa and Jabbar M. 2008. Livestock ownership, Commercial off-take rates
and their determinants in Ethiopia: Research Report 19.. ILRI (International
Livestock Research Institute), Nairobi, Kenya. 52 pp.
Bain JS. 1959. Industrial organization. John Wiley, New York, USA.
Belachew Hurissa and Jemberu Eshetu. 2003. Challenges and opportunities of livestock
trade in Ethiopia . Challenges and opportunities of livestock marketing in Ethiopia
In: Yilma Jobre and Getachew Gebru (eds), Proceedings of 10th annual conference
of the Ethiopian Society of Animal Production (ESAP) held in Addis Ababa ,
Ethiopia , August 22–24, 2002. ESAP, Addis Ababa , Ethiopia . pp. 1–14.
Dolan C and J Humphrey 2000, ‘Governance and Trade in Fresh Vegetables: The
Impact of UK Supermarkets on the African Horticulture Industry’, Journal of
Development Studies 37 (2).
FAO. 2005. Addressing marketing and processing constraints that inhibit agri-food
exports, AGS Bulletin 160, FAO, Rome, 2005
Gabre-Madhin EZ. 2001. Market institutions, transaction costs, and social capital in the
Ethiopian grain market. IFPRI Research Report 124. Washington DC: International
Food Policy Research Institute.
Gereffi G and R Kaplinsky (eds.), 2001, ‘The Value of Commodity chains: Spreading
the Gains from Globalisation’, IDS Bulletin 32(3).
Gezahegne Ayele., Mohammed A. Jabbar, Hailemariam Teklewold, Elias Mulugeta and
Getahun Kebede. 2006. Seasonal and Inter-Market Differences in Prices of Small
Ruminants in Ethiopia. Journal of Food Products Marketing. Volume 12, No. 4. pp.
59-78.
Junior A Davis. 2006. How can the poor benefit from the growing markets for high
value agricultural products? Natural Resource Institute. Enterprise, Trade and
Finance group. http://www.nri.org.
KIT.2006. Chain empowerment: Supporting African farmers to develop markets. Royal
Tropical Institute, Amsterdam; Faida Market Link, Arusha; International Institute
of Rural Reconstruction (IIAR), Nairobi.
Legesse Dadi, Asfaw Negassa, and Steven Franzel, 1992. Marketing Maize and Tef in
Western Ethiopia. Food Policy, Vol 17, No. 3(June): 201-213.
Livestock Marketing Authority (LMA). 2004. Meat exports market study. MoARD,
Addis Ababa, Ethiopia.
Morris M. 2001. Creating Value Chain Co-operation. In: Gereffi G and R Kaplinsky
(eds.), IDS Bulletin, Vol. 32, No. 3.
National Bank of Ethiopia (NBE). 200. Annual Report, 2005/06.
NBE. 2007. Quarterly Bulletin, Second Quarter 2006/07. Volume 22. N. 2.
Parker DD and D Zilberman. 1993. Hedonic estimation of quality factors affecting the
farm-retail margin. American J. Agric. Econ., 75:458-466.
Staal S, C Delgado and C Nicholson. 1997. Smallholder dairy under transactions costs
in East Africa. World Development 25(5):779–794.
Williams TO, B Spycher and I Okike. 2006. Improving livestock marketing and intra-
regional trade in West Africa: Determining appropriate economic incentives and
policy framework. ILRI (International Livestock Research Institute), Nairobi,
Kenya. 122 pp.
59
Hailemariam et al
Annexes
Annex 1. Supply of Cattle at Different periods (1992 and 2006)
Supply 2006
Steer Supply 1992
Eleweya
Ox
Bullock
All
Steer
Dubuluq
Markets
Ox
Bullock
All
Steer
egelle
Annex 2. Cattle prices at some selected markets for Different Periods (1992 and 2006)
Ox Price 1992
Yabello
Supply_2006
Bullock
Supply_1992
Sheep
A All
Markets
Steer
Dubuluq
Goat
Ox
Locations
Eleweya
Bullock
AllSheep
Steer
Negelle
Ox Goat
Negelle
Bullock
Annex 4. Shoat prices for different periods in some selected markets (1992 and 2006)
Goat
Yabello Sheep
Price_2006
Price_1992
Goat
Locations
Eleweya
Sheep
Goat
Negelle
Sheep
61
Hailemariam et al
Annex 5. Source market for shoat and traders response in the participation of the markets (%)
Export abattoirs Live animal exporter Big traders Small trader Collector Coop Purchasing agent
Market % Market % Market % Market % Market % Market % Market % Market % Market % Market %
Miesso 80.0 Methara 100.0 Bordedi 28.6 Gelemso 5.7 Dubuluq 29.6 Sewena 4.8 Dubuluq 26.9 Takaba 5.6 Harekelo 30.8 Moyale 76.5
Yabello Bekolboma/1 Bekolboma/1
80.0 Wello 100.0 Bedessa 28.4 Chero 5.7 Hidilola 20.3 Butu 4.8
47
22.3 Gader 5.6
47
27.7 Yabello 76.5
Ginir 73.3 Somali 100.0 Miesso 27.9 Adaitu 5.7 Mega 19.1 Shakisa 2.4 Yabello 20.0 Yara 5.6 Borbore 27.7 Dubuluq 70.6
Methara Bekolboma/14
66.1 Afar 100.0 Dubuluq 27.5 Gewane 5.7
7
19.1 Ime 2.4 Mega 16.7 Raitu 2.8 Negelle 27.7 Mega 70.6
Negelle 57.8 Methara 22.7 Awash 5.7 Yabello 17.7 Goraye 2.4 Borbore 16.7 Mecha 2.8 Wadera 21.5 Eleweya 70.6
Konso 42.2 Melkaye 22.4 Shewarobit 5.7 Eleweya 17.7 Dillo 2.4 Arero 15.8 Shakisa 2.8 Jedola 21.5 Teltele 70.6
Babile 18.3 Yabello 22.0 Harekelo 5.5 Moyale 15.5 Baret 2.4 Didera 15.8 Ime 2.8 Calago 18.5 Harekelo 23.5
Jima 11.3 Eleweya 22.0 Jedola 5.5 Harobeke 13.1 Didera 2.2 Eleweya 14.4 Baret 2.8 Genale 18.5 Negelle 23.5
Arsi 11.3 Surupa 21.1 Mecha 5.5 Werer 10.9 Methara 1.5 Moyale 13.9 Genale 2.8 Tufa 18.5 Bitata 23.5
Goro 11.1 Finichwa 21.1 Hada 5.5 Raitu 9.5 Bedesa 0.1 Harobeke 11.1 Chiereti 2.8 Melkaoda 18.5 Kiliwe 23.5
Bati 10.8 Werer 17.4 Baradimtu 5.5 Bole 9.5 Miesso 0.1 Harekelo 11.1 Abomsa 2.1 Miyo 18.5 Shishu 23.5
Kemesse 10.8 Babile 17.2 Sofumer 5.5 Tufa 9.5 Endufo 0.1 Soko 11.1 Sabure 2.1 Lae 18.5
Welayta 4.1 Raitu 16.5 Gindhir 5.5 Gedamitu 9.5 Gambo 11.1 Gof 18.5
Melkaoda 16.5 Harawa 5.5 Fentale 9.5 Bitata 8.4 Okigu 18.5
Harobeke 11.9 Raso 5.5 Jedola 8.3 Methara 7.7 Dubuluq 9.2
Burga 11.4 Salat 5.5 Melkaoda 7.1 Hidilola 5.6 Mega 9.2
Tafe 11.4 Shakisa 5.5 Harekelo 7.1 Wadera 5.6 Moyale 9.2
Fedis 11.4 Ime 5.5 Arero 7.0 Hada 5.6 Bitata 9.2
Garamulet
11.4 Hirna 5.5 Borbore 6.0 Goraye 5.6 Hidilola 9.2
a
Gursum 11.4 Bole 5.5 Wadera 6.0 Dillo 5.6 Raitu 9.2
Fiq 11.4 Negelle 4.8 Finichwa 5.6 Baradimtu 9.2
Market structure and function for live animal and meat exports
Continued
Export abattoirs Live animal exporter Big traders Small trader Collector Coop Purchasing agent
Market % Market % Market % Market % Market % Market % Market % Market % Market % Market %
Midhega 11.4 Mecha 4.8 Teltele 5.6 Salat 9.2
Negelle 11.0 Hada 4.8 Das 5.6 Butu 9.2
Genale 11.0 Baradimtu 4.8 Weyebi 5.6 Genale 9.2
Mega 11.0 Sofumer 4.8 Bilo 5.6 Obiso 9.2
Teltele 11.0 Salat 4.8 Anchero 5.6 Wer 9.2
Filtu 11.0 Somali 4.8 Ego 5.6 Harbucka 9.2
Tadecha-
Kole 11.0 Miyo 4.8 Kotelo 5.6 9.2
Baldha
Hagremaria
Dolomena 11.0 Elkora 4.8 5.6 Hada 4.6
m
Konso 10.1 Eler 4.8 Calago 5.6 Mecha 4.6
Aba-
Debeso 5.9 4.8 Chilanko 5.6 Beltu 4.6
Geremew
Bati 5.7 Beltu 4.8 Hawaan 5.6 Adele 4.6
Mille 5.7 Adele 4.8 Banes 5.6
Data Source: own survey
63
Hailemariam et al
Annex 6. Source market for cattle and traders response in the participation of the markets (%)
Live animal exporter Big traders Feed lot operator Small trader Collector Coop Purchasing agent Livestock marketing
group
Market % Market % Market % Market % Market % Market % Market % Market %
Moyale 71.0 Harobeke 61.6 Dubuluq 100.0 Dubuluq 46.3 Borbore 55.6 Dubuluq 100.0 Dubuluq 100.0 Negelle 100.0
Adama 71.0 Eleweya 61.6 Harobeke 100.0 Harobeke 39.8 Das 55.6 Harobeke 30.0 Harobeke 100.0
Dubuluq 47.0 Dubuluq 57.5 Moyale 86.4 Eleweya 35.2 Harobeke 33.3 Eleweya 30.0 Eleweya 100.0
Harobeke 47.0 Negelle 44.5 Dera 50.0 Harekelo 18.5 Eleweya 33.3 Moyale 100.0
Negelle 38.0 Genale 32.4 Eleweya 39.5 Jedola 18.5 Mega 33.3
Yabello 38.0 Moyale 12.1 Surupa 21.9 Negelle 14.8 Weyebi 33.3
Somali 18.0 Surupa 8.9 Yabello 17.5 Surupa 14.8 Bilo 33.3
Kersa-denba 8.1 Negelle 17.4 Melkaoda 11.1 Anchero 33.3
Didera 8.1 Finichwa 7.9 Genale 7.4 Okole 33.3
Bitata 8.1 Genale 6.1 Mega 7.4 Melbena 33.3
Bidre 8.1 Gambo 7.4 Bekolboma/147 33.3
Mega 7.8 Dembi 7.4 Ego 33.3
Teltele 5.7 Sevente 7.4 Chewebet 33.3
Gambo 4.0 Harale 7.4 Kotelo 33.3
Filtu 4.0 Toqa mazoria 7.4 Negelle 22.2
Finichwa 3.7 Moyale_Somali 7.4 Melkaoda 22.2
Melkaoda 2.0 Gindhir 7.4 Harekelo 11.1
Harawa 2.0 Moyale 3.7
Delosebro 2.0 Bidre 3.7
Harawa 3.7
Delosebro 3.7
Market structure and function for live animal and meat exports
Live animal exporter Big traders Feed lot operator Small trader Collector Coop Purchasing agent Livestock marketing
group
% Market % Market % Market % Market % Market % Market % Market %
Borbore 3.7
Hidilola 3.7
Wadera 3.7
Shanaka 3.7
Chiereti 1.9
Data Source: own survey
65
Hailemariam et al
Annex 7. Distribution of parameters in the price formation model for shoat (aggregated) and individually for sheep and
goat(%)
Annex 8. Distribution of parameters in the price formation model for cattle (%)
67
Hailemariam et al
Strengths Total Export Live animal Feed lot Big traders Small Collector Coop Purchasing Farmer
response ( abattoirs exporter operators trader agent marketing
%) group
Ability to export quality standard product 5.6 √ √ - - - - - - -
Ability to supply mutton as demanded 1.4 √ - - - - - - - -
Customer satisfaction 11.1 √ √ - √ - - - - -
Ability to maintain skin quality 1.4 √ - - - - - - - -
Credibility (good relation with suppliers) 16.7 - √ √ √ √ √ - √ -
Flexibility to the prevailing situation (in 6.9 - √ - √ √ - - - -
selling)
Ability to look for high turnover 2.8 - √ - √ - - - - -
Financial capacity 1.4 - √ - - - - - - -
Self engagement in purchase and fattening 13.9 - √ √ √ - - - - -
Better monitoring of animals (feed ration, 4.2 - - √ √ - - - - -
health)
Seeking up to date market information 4.2 - - √ √ √ - - - -
Collect animal from long distance 5.6 - - - √ √ √ - - -
Weakness
Poor export market assessment 2.5 √ √ √ - - - - - -
lack of qualified market agent 1.7 √ √ - - - - - - -
Unable to monitor cost of production 0.8 √ - - - - - - - -
Lack of record keeping 1.7 √ - √ - - - - - -
Capital shortage 26.4 - √ √ √ √ √ √ - -
Not strict in credit mgt 1.7 - √ - - √ - - - -
Lack of mgt ability 1.7 - √ - - - - √ - -
Market structure and function for live animal and meat exports
69
Hailemariam et al
Total Export Live animal Feed lot Big Small Collector Coop Purchasing Farmer
response(%) abattoir exporter operator trader trader agent marketing
group
Threats
Expansion of illegal cross boarder trade 2.5 - - - √ - - - - -
Disease problem and lack of veterinary service 10.0 - - - √ √ √ √ - -
Lack of technical advice 2.5 - - √ √ √ - - - -
Frequent change in demand and price 24.7 √ - - √ √ √ √ - -
Tax problem (multiple and high taxation; payment for 4.1 - √ - √ - - - - -
unsold animal)
Clan conflict 3.3 - - - √ √ - √ - -
Poor road network andlack of transportation 14.0 √ - - √ √ - √ - -
Feed shortage and high cost 14.0 - - √ √ √ √ - - √
Credit problem (access, defaulting) 39.3 √ √ √ √ √ √ - √ -
Lack of sustainable animal supply 6.6 √ - - √ √ √ - √ -
Market problem (market information, clan based 9.1 - - √ √ √ √ √ - -
system, coordination, role of government, competition
with foreign traders)
Lack of waiting grounds 12.4 √ √ √ √ √ √ - - √
Water shortage 13.2 - - - √ √ √ √ - -
No reliable buyer (contract) 25.6 - - - √ √ √ √ - √