Livestock prices are affected seasonally by supply and demand changes in different periods and events of the year. Almost all livestock traders responded to the interview that there were good seasons in the year to buy and sell animals.
Environmental stress and the needs of pastoralists for different goods and services affect supply of livestock by the pastoralists. Thus, supply increases during food, feed and water shortages. Quality of livestock deteriorates during this season, however. Moreover, during the same period the need to sell livestock by pastoralists increases to buy grain and other food items the demand for which is partly shifted upwards due to milk shortage. Consequently, grain prices rise during the same period owing to upward shifts of demand caused by distress sales of livestock.
Several events like X-Mass and Id (religious holidays) both in Somalia and Kenya as well as coffee and crop harvest in the southern highland areas of Ethiopia contribute to the livestock price rises. Some Muslim holidays such as Id, cross-border livestock trade increases and the export of sheep, both official and unofficial, through Kenya and Somalia to the Middle East significantly rises. In the Ethiopian highlands, there are peak demands in September, January and at Easter coinciding with religious feasts and a marked throughput in March and part of April (for about 56 days) with long fasting period of the Orthodox Christians who avoid meat and fat foods.
Although it is difficult to generate a reliable figure for the volume of unofficial export trade of livestock from Ethiopia to Kenya, this study has tried to give some estimates. The estimates are based on personal count in both Moyale-Kenya and Mandera markets, the livestock trucks movement from origin to destination (e.g. Moyale to Nairobi) and the Moyale-Kenya market survey by GTZ/BLPDP. Accordingly, the annual export of livestock through cross-border trade in 1998 was estimated to be 35,000 - 50,000 cattle; 100,000 - 110,000 sheep and goats; and 9,000 - 10,000 camels. Other trekking routes through Ramu, Banissa, Thakaba, Sololo and Dukena were not considered in this estimate. We, however, suggest that a special survey be conducted to look into this matter for a more reliable figure.
Livestock as a tradable good requires more than transportation. The involvement of other input supplies as well as losses affect the final price. All these items can be regarded as transport associated inputs in the broader sense. The Takayama and Judge (1971) spatial price arbitrage model suggests that prices in the two markets be eventually equalised controlling for transport costs. This is not however in the case for cross-border livestock markets as is shown by our findings. Absence of market information on different prices and alternative markets, government controls, animal disease and insecurity are still important factors. Therefore, we still have positive margins after all inputs are considered.
Prices and marketing costs in two important border markets, Negelle and Dubluk that supply to Moyale (Kenya) livestock market are shown in Table-27. The table shows purchase and sale prices for Ethiopian trader and inputs including transaction costs of livestock trade from these two border markets of Ethiopia to one of the major border markets of Kenya, Moyale. In this marketing chain, transaction costs for Negelle market (275 kms from Moyale) account 16.8 percent and 14.1 percent of the buying and the selling prices respectively. Transaction costs for Dubluk market (135 kms from Moyale) account 10.2 percent and 9.7 percent of the buying and the selling prices respectively. The table also shows costs and prices for a Kenyan trader that purchases at Moyale and sells in Nairobi.
Table 27. Marketing Costs and Profits from Unofficial Trade of Cattle (bullock oxen) from Southern and South-eastern Rangelands of Ethiopia to Kenya
Trader Expenditures, Revenue and Profit |
Departure Livestock Markets from Ethiopia | ||||
|
Negelle |
Dubluk | |||
|
Cost per cattle in Birr |
Accumulated cost per cattle in Birr |
Cost per cattle in Birr |
Accumulated cost per cattle in Birr | |
1. Producer Price |
950 |
950 |
979 |
979 | |
2. Brokerage fee at purchase |
10 |
960 |
10 |
989 | |
3. Market fee at purchase |
2 |
962 |
5 |
994 | |
4. Drover fees: Trekking to Moyale, Kenya |
25 |
987 |
14 |
1008 | |
5. Water fees while trekking |
5 |
992 |
2 |
1010 | |
6. Market fee at sell (Moyale, Kenya) |
10 |
1002 |
10 |
1020 | |
7. Brokerage fee at Moyale |
10 |
1012 |
10 |
1030 | |
8. Death/ Loss assuming 5%* of (1) |
48 |
1060 |
49 |
1079 | |
9. Selling Price at Moyale, Kenya |
1131 |
|
1131 |
| |
10. Gross Profit at Moyale (9-1) |
181 |
|
152 |
| |
11. Net Profit (10-2-3-4-5-6-7-8) |
71 |
|
52 |
| |
12. Trucking to Nairobi, Kenya |
355 |
1486 |
355 |
1486 | |
13. Shade, feed and water at Nairobi |
6 |
1492 |
6 |
1492 | |
14. Market fees at Nairobi |
12 |
1504 |
12 |
1504 | |
15. Brokerage fee at Nairobi |
10 |
1514 |
10 |
1514 | |
16. Death/Loss assuming 5%*of (9) |
57 |
1571 |
57 |
1571 | |
17. Selling Price at Nairobi |
2160 |
|
2160 |
| |
18. Gross Profit (17-9) |
1029 |
|
1029 |
| |
19. Net Profit (18-12-13-14-15-16) |
589 |
|
589 |
| |
Data source for 1998 average annual prices of bullock oxen at Negelle, Dubluk and Moyale is Borana Lowland Pastoral Development Programme-GTZ. Other costs and prices are based our study on trader interviews in December 1998.
Notes: Losses 5% are estimated based on a similar study by Shank (1997).
From Table 27, we also recognise that transport, market and brokerage fees are important costs. Controlling for these three items that are not accrued to the trader, we see that there is little margin for Ethiopian traders at Moyale markets. The table shows that, half of the value added for the livestock destined to Nairobi market is made by the Kenyan traders. Percentage shares of income by different agents computed based on Table-27 are presented as follows in Table28.
Table 28. Distribution of Gross Income and Profit from Sale of First Quality Cattle (bullock) for Negelle and Dubluk (Ethiopia) livestock trader's as Percent of Gross Income and Profit from Moyale and Nairobi (Kenya).
|
As % of Moyale Price |
As % of Nairobi Price |
Seller at Negelle Gross Income |
84 |
44 |
Seller at Dubluk Gross Income |
87 |
45 |
Negelle Bullock sold at Moyale Profit |
- |
12 |
Dubluk Bullock sold at Moyale Profit |
- |
9 |
SOURCE: Computed from Table.27
Table 28 summarised trader's gross income and profit distribution by Ethiopian and Kenyan livestock traders. The Table shows that 84 and 87 percent of the Moyale-Kenya price for cattle bought at Negelle and Dubluk markets respectively. The share decreases by 100 percent when the Nairobi price is considered. The disparity increased when profit comparison is made. Thus, the profits made by Ethiopian traders at Moyale is a maximum of 12 percent of the profits made by Kenyan and few other Ethiopian traders profit made at Nairobi.
At a market level of a given catchment, price movements in the supplying or receiving markets also affect prices for a spatially integrated markets. Border markets of Ethiopia are livestock supply markets for border markets of Kenya. Thus, for a vertical spatial integration analysis, markets in Ethiopia are considered as surplus regions and those markets in Kenya (e.g. Moyale) are considered as deficit regions.
Correlations were estimated for bullock (castrated male cattle of 6-8 years) and male goat prices between Negelle and Kenya-Moyale and between Dubluk and Kenya-Moyale based on the GTZ/BLPDP monthly data during July 1997 and March 1999 (Table 29 and 30).
Table 29. Summary of Relationship Between Moyale (Kenya) and Dubluk and Negelle (Ethiopia)Livestock Markets for Export Quality Cattle (July 1997-March 1999).
|
Negelle |
Dubluk |
Distance to Moyale (Kms) |
275 |
135 |
Mean monthly price (Moyale=1069 Birr/unit) |
|
|
Mean monthly price differential (Moyale-Negelle/Dubluk) (in Birr per unit) |
198 |
155 |
Standard deviation of price differential |
73.6 |
81.4 |
Simple correlation of price with Moyale |
0.29 |
0.36 |
P-Value |
0.20 |
0.11 |
Correlation of first differences |
0.019 |
0.25 |
P-Value |
0.94 |
0.285 |
SOURCE: Computed from GTZ/BLPDP (unpublished data)
N=21 (July 1997-March 1999)
Correlation results are found responsive to distance (Table-29). Thus, the correlation result for Dubluk and Moyale is greater than for Negelle and Kenya-Moyale. However, the positive association between the border markets of Ethiopia and Kenya is not supported at conventional levels (p<0.05). Moreover the standard deviations of the price differentials are very high and correlation results on first differences are very low. This is therefore difficult to conclude that there is stable spatial price differential in the area. Similar computations for small stock (male goat) revealed no relationship suggesting that the prices do not co-move in border markets (Table 30).
Table 30. Summary of Relationship Between Moyale (Kenya) and Dubluk and Negelle (Ethiopia) Livestock Markets for Male Goat (July 1997-March 1999).
|
Negelle |
Dubluk |
Distance to Moyale (Kms) |
275 |
135 |
Mean monthly price (Moyale=138 Birr/unit) |
67 |
92 |
Mean monthly price differential (Moyale-Negelle/Arero/Dubluk) (in Birr per unit) |
71 |
46 |
Standard deviation of price differential |
22.58 |
23.85 |
Simple correlation of price with Moyale |
0.219 |
0.151 |
P-Value |
0.340 |
0.513 |
Correlation of first differences |
0.377 |
0.072 |
P-value |
0.101 |
0.762 |
SOURCE: Computed from GTZ/BLPDP (unpublished data)
N=21 ( July 97-March 1999)
The correlation result in general suggests that the border markets during the period July 1997 - March 1999 were not contagious. Price volatility measured for different types of livestock in the three markets (Moyale, Dubluk and Negelle) also supports the absence of stable spatial relationship. The coefficient of variation was found high and different for the same type of livestock in different markets (Annex-1a).
The implication of the absence of spatial integration is that any intervention in one market or area will not induce significant changes in other markets. For instance, improvements in livestock price in neighbouring countries may not be disseminated to supply markets in the southern and southeastern rangelands of Ethiopia. This, therefore, suggests selective intervention for different markets if streamlining of the cross-border trading is deemed necessary.
One of the implied objectives of this research is to look into the link between cross-border livestock trade and food security in the area. As mentioned in earlier sections, the southern and southeastern rangelands of Ethiopia are predominantly inhabited by pastoralists. Food security issues in the border areas, therefore, primarily concern the situation with pastoralists.
The discussion on food security in pastoral areas involves at least two important points. One is the capacity of pastoralists to purchase grain. The other is the availability of livestock and livestock products for own consumption. The importance of livestock in the livelihood of the pastoralists suggests that the food security situation is strongly linked with the price of livestock and livestock products such as milk and butter. The income derived from these sources is used to buy grain. Therefore, relative price movements based on these particular items would indicate the food security situation of pastoral households in southern and southeastern rangelands of Ethiopia (see Annex 1a-1d).
Different groups of pastoral communities face different levels of market risk. Among the Boran groups, milk and related items are sold by poor households whereas richer households sell live animals to buy grain (Helland, 1999). Therefore, the vulnerability of poor pastoral households to price fluctuation is higher than those of the richer pastoral groups.
In terms of food security, instabilities in terms of the caloric terms of trade are higher for animal products to grain than live animals to grain. This is based on the cross-border markets which showed that pastoralists are sellers of animal and animal products and buyers of grain.
To get more insight into the vulnerability of pastoral households in the area, the terms of trade between maize and livestock and livestock product (milk) is calculated from the GTZ/BLPDP market survey. The terms of trade calculated on monthly basis exhibited substantial fluctuations from month to month during July 1997 to September 1999. A similar trend is also captured on annual average values. The fluctuations are induced both by changes in the price of grain and livestock and livestock product.
Table 31, below, shows the quantity of maize in kilogram that a price of bullock, goat (male and female) and milk (in cup) can buy.
Table 31. Terms of Trade Between Livestock and Livestock Products and Maize (Price of Some Selected Livestock and Milk in Maize for Selected Markets)
Commodities |
|
Moyale-Kenya Market |
|
|
Negelle Market |
|
|
Dubluk Market |
|
|
July-Dec.97 |
Jan-Dec.98 |
Jan. -Sept.99 |
July-Dec. 97 |
Jan-Dec.98 |
Jan. -Sept. 99 |
July-Dec.97 |
Jan-Dec.98 |
Jan. -Sept.99 |
One Bullock |
959 |
1310 |
700 |
576 |
792 |
695 |
869 |
1149 |
807 |
One Male Goat |
105 |
184 |
81 |
52 |
57 |
42 |
102 |
106 |
66 |
One Female Goat |
89 |
155 |
70 |
54 |
62 |
41 |
88 |
92 |
51 |
One Cup of Milk |
n/a |
0.92 |
0.55 |
n/a |
0.63 |
0.6 |
0.79 |
0.7 |
0.56 |
SOURCE: Computed from GTZ/BLPDP, Market Survey (unpublished data)
Note: Values are in kilograms of maize.
In the above three important markets, in 1998, the price of commodities increased compared to the average values of the last second six months of 1997. These values again declined in 1999 in all the markets. In most cases this decline was substantial. For instance, in Moyale-Kenya market, one bullock on average fetched 1310 kg of maize. The same item in 1999 fetched only 700 kg of maize. During the same period, the situation in goat price (in terms of maize) was even much worse.
The situation in Negelle and Dubluk markets is similar to that of Moyale-Kenya. However, it is better when compared to the Moyale-Kenya market. One reason for this could be due to the fact that maize is more expensive in Moyale-Kenya than in Negelle and Dubluk since it is supplied to the area from other parts of Ethiopia found to the north of the southern rangelands. This is also consistent with our result indicated in the use of money from the proceeds of the cross-border trade. Livestock traders exchange the Kenyan shillings for the Ethiopian Birr in order to buy grain in the highlands of Ethiopia.
The Boran, Gabbra and Somalis depend on milk of multi livestock species (cow, camel, etc.) for their diet and income is obtained from the sale of livestock and livestock products. About 40% of the energy requirement are obtained from grain, sugar and others. In this kind of scenario, drought is a cyclical occurrence and affects the production capacity of households. A major drought occurs every 9-10 years and results in the devastation of livestock. There is also localised drought, which occurs every 2-3 years. The failure of the small rains (September-October) followed by the failure of the main rain (March-May), results in severe stress situation where forage will not grow leading to drought and loss of livestock and humans. During the drought and stress periods, emergency assistance in the form of food aid or food for work etc. has been forthcoming to the southern rangelands to fill the food deficit and in a continuous process. In the case of the Boran, father, children and grand children have been relying on food aid for the last 25 years (Gebremariam, 1997).
The southern and southeastern rangelands are in general food insecure areas. Normal food shortages occur in the long dry season, i.e. November to February. The livestock price fluctuations increase the vulnerability of the stockowners, especially the poor pastoralists. Poor households especially have to sell more of their herd products than the large herd owners to obtain food. This accelerates the processes of economic differentiation among the Boran as this trend allows the rich to keep more herds than the poor. The food security of the pastoralists, therefore, is maintained through increased involvement in trade. The amount of grain consumed by pastoralists is increasing. Pastoralists are made vulnerable to the fluctuations in the terms of trade between livestock and grain with variations in the different ecological areas.
The Boran and Somali sell livestock in the dry season, November-February. When they face a food shortage (milk supply declines) but then they receive low price for their stock as the animals are not in good condition. During drought periods agro-pastoralists would be without seeds. When the dry season ceases and the planting season begins they buy the available seed from the market. This is the time when agro-pastoralists are vulnerable to food security.
