Livestock Market and Mortality Risk in East Africa Christopher B. Barrett Vet Med 6723 Guest Lecture February 28, 2014
Feb 23, 2016
Livestock Market and Mortality Risk
in East AfricaChristopher B. Barrett
Vet Med 6723 Guest LectureFebruary 28, 2014
Overview Livestock’s roles in east
African economic development
Wealth accumulation and mortality risk
Market risk Conclusions
Livestock’s roles in development Livestock as production input
Manure: mitigating soil degradation, spatial redistribution of nutrients
Traction services Transport services
Result: Improved productivity of agricultural or non-agricultural enterprises.
Livestock as a production system
Milk and blood (and social prestige): renewable outputs from a single animal
Meat, hides and skins: nonrenewable output from a single animal
Reproduction: dividends from the asset
Result: Income stream generated directly by livestock
Livestock’s roles in development
Livestock as a quasi-financial asset, providing savings and insurance
Store of value (walking bank) Sometimes sold to stabilize
incomes Collateralizable for credit
Result: Livestock can play a valuable role where access to conventional financial products is limited or where such products are unattractive.
Livestock’s roles in development
Wealth accumulation and mortality risk
Not everyone is equally able to acquire or maintain livestock
Agroecological differences (disease, aridity, etc.)
Lumpiness of investment (Dercon, JDE 1998) Threshold effects (Lybbert et al. EJ 2004) Herder ability (Santos and Barrett 2006)
0
10
20
30
40
50
60
70
Year
Med
ian
hous
ehol
d he
rd s
ize Trend line: Herd1980+t = 51.3-1.7t
Wealth accumulation and mortality riskPronounced cattle cycles are common And accumulation dynamics are
often highly nonlinear
Examples from Boran pastoralists, southern Ethiopia, per Lybbert et al. (2004 EJ)
Mortality risk: Resource competition: Is there really a “tragedy of the
commons” in any place lacking private land rights? Rainfall Disease
How idiosyncratic or covariate are these risks (i.e., what’s the best way to deal with them)?
In southern Ethiopia, we find that, rainfall aside, mortality risk is idiosyncratic w/o any significant tragedy of the commons effect (see also McPeak 2005, Human Ecology, similar findings from northern Kenya). But rainfall is a major covariate risk (on which, more later).
Wealth accumulation and mortality risk
Livestock market risk Prices fluctuate dramatically
covary negatively with mortality … so wealth is hyperivariable in livestock systems, unlike cropping systems where market prices covary negatively with yields, thereby stabilizing incomes and wealth.
rainfall, quarantine, seasons affect prices dramatically
limited spatial market integration, i.e., major price disconnects across distinct geographic markets
Nairobi-Marsabit price differentials (“basis”)
Livestock market risk
Estimated Effects of Drought On Livestock Prices(hypothetical drop of 200 and 300 mm over 3 and 12 months, respectively)
Percent Price Change
Males Females
Camels Marsabit -3.1 -4.6
Moyale -8.1 -11.9
Cattle Marsabit -22.1 -52.3
Moyale -33.4 -47.5
Goats Marsabit -14.6 -17.4
Moyale -12.2 -16.3
Sheep Marsabit -21.3 -34.1
Negative correlation exists between price and mortality because rainfall drives both lactation/reproduction and mortality.
- big variation among species
Source: Barrett et al. (2003 J. African Economies)
Livestock market risk
For animals traded long distance, intermarket margins are the source of most livestock price risk. For animals traded locally, local market conditions key:- Auction vs. dyadic exchange- # traders/lorries (partly a function of food aid backhaul capacity)- vet services availability is negatively associated with market price due to vet
care endogeneity in markets (reflects disease problems that drive price down)
Livestock market risk
Animal disease control measures matter to prices (Barrett et al., 2003 J. African Economies)
Estimated Effects of Quarantine On Livestock Prices
Percent Change
Males Females
Camels Marsabit -9.1 -6.4
Moyale -6.2 -3.7
Nairobi 0.2 0.1
Cattle Marsabit -23.7 -12.2
Moyale -16.1 -7.4
Nairobi 2.4 2.2
Goats Marsabit -2.1 -2.4
Moyale -1.1 -1.0
Nairobi 0.4 -0.1
Sheep Marsabit -5.9 -2.7
Nairobi 0.2 0.1
Livestock market and mortality riskRisks are much broader than just livestock, however, and livestock-related risk is minor to many livestock-dependent peoples
- Livestock disease, prices and pasture availability of greatest concern to wealthier men in Ethiopian/Kenyan pastoralists(Smith et al., JDS 2001)
- Poorer households more concerned about food security, human health, (Doss et al. World Dev’t 2008).
- Development priorities among pastoralists are typically related to health, education and security, not livestock production/marketing (McPeak et al. J. Dev’t Studies 2009)
Index-based livestock insurance
Drought-related covariate livestock mortality risk is key. A new, commercial index-based livestock insurance (IBLI) product launched in Marsabit, northern Kenya in Jan 2010.
Subsequently adapted and extended to Ethiopia and to other ASAL areas of Kenya. Also being adapted to other contexts (e.g., hornbills conservation in southern Thailand, Chantarat et al. PNAS 2011)
ConclusionsLivestock play a major role in rural
development in east Africa- as production inputs to ag/non-ag enterprises- as production systems- as quasi-financial asset
But …- not everyone has equal access- mortality and market risk are considerable and tend to be mutually reinforcing, making livestock keeping a high risk-high reward activity.- working on developing viable insurance for livestock assets
Thanks very much for your comments and questions!